Monday Morning Huddle
26 October 2020

Highlights From Last Week

Class III Milk and CME Spot Cheese Prices Get Another Boost

November and December Class III Milk prices are lifting higher this morning following Friday’s Breaking News from the USDA that they will extend the Farmers to Families Food Box Program with an additional $500 million in spending. Prior to the announcement, there was some belief that government-induced buying would ease into November, allowing cheese prices to decline, but the announcement caused futures markets to rally to higher on Friday afternoon. It is likely that cheese prices will be supported for a few more weeks, but ultimately bearish factors remain, and values could see a steep descent by year end. USDA described cheese production as “robust” with ample milk available for processing. Retail demand is stronger and inventories are tight, providing some level of market support, but with cheese prices at historic highs there is not enough fundamental strength to keep values at current levels for an extended time period.

Last week, cheese price strength persisted in this seemingly relentless bull market. Both block and barrel Cheddar markets increased yet again, with the block price up 5.25 cents versus the prior week on Friday and the barrel price surging a quarter in the five-day period. Friday’s barrel settlement is just 3.5 cents shy of the all-time record high barrel price set in September 2014. It marked the tenth consecutive week that the block cheese weekly average price increased, with the current average the highest since the week ending July 17. It was the fifth consecutive barrel cheese weekly average gain.

Record September Imports Reported From China

China’s dairy imports zipped higher versus prior year again in September, setting an all-time high for the month. Though volumes were lower from New Zealand – primarily driven by less skim milk powder availability – imports were robust from the EU, US and Australia. From the EU, the largest gain was shown from Germany due to an uptick in demand for fluid milk & cream, while whey and infant formula imports were notable from the Netherlands. Gains from the US were derived from an increase in whey imports, as well as skim milk powder. HighGround Dairy’s full analysis will be out later today!

Last Week’s Reports & Analysis

Milk Production (Sep ’20)
Milk output was strong in September as farmers in most regions of the country spent government CFAP payments to drive production and components higher and take advantage of a profitable milk price. It was the first time since March that… Full Report

Cold Storage (Sep ’20)
The butter price outlook through year end has largely been finalized with strong production and heavy stocks persistent in recent months with plenty of available product to meet seasonally high Q4 demand. This cold storage data will… Full Report

Reports This Week

USDA Crop Progress – Monday, October 26
Weekly EU Dairy Commodity Prices – Wednesday, October 28
National Dairy Products Sales Report (NDPSR) – Wednesday, October 28
Fonterra Pre-GDT Offer Analysis – Thursday, October 29
USDA Weekly Dairy Cow Slaughter – Thursday, October 29
USDA Dairy Market News Midpoint Prices – Thursday, October 29
Agricultural Prices – Thursday, October 30

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