Monday Morning Huddle
4 January 2021

Highlights From Last Week

CME Block and Barrel Cheddar Averages Lowest in Seven Months

CME block cheddar cheese settled the month of December at an average price of $1.6249 per pound, the lowest monthly average in seven months. The same can be said for barrel values during the month at $1.4609 per pound, both of which dropped 21% from November given the lack of government purchases and strong milk production throughout the US. At the beginning of last week, the futures market found temporary support in Class III milk and cash-settled cheese due to the COVID-19 Relief and Government Spending Bill that was officially signed by President Trump the prior weekend, but prices sold off as the New Year approached as widespread uncertainty remains around the stimulus program’s food and agricultural spending.

Corn, Soybean Prices See Year-End Rally

Both corn and soybeans ended 2020 on a high note, with corn settling at levels not observed since May 2014 and soybeans since July 2014 (utilizing monthly data). A combination of strong Chinese demand, South American weather hiccups, port strikes in Argentina and a weak US dollar have propelled grain prices higher into the New Year. Class III Milk values have done the opposite during the final two months of 2020, bringing Income Over Feed Costs into concerning territory. Feed costs are increasing for dairy farmers for the first time in several years, pressuring expected margins throughout this year. However, market forces that are pushing grain and other non-dairy commodity prices higher could eventually spill into the dairy complex and keep milk prices supported in the coming months regardless of burdensome milk output.

Last Week’s Reports & Analysis

November 2020 China Dairy Import Volume Analysis
The only notable losses by volume were on whole milk powder and infant formula imports. Whole milk powder imports at the end of 2019 had been historically strong and China did not… Full Report

Pre-GDT Forecast Volume Analysis
Q1 whole milk powder offer volumes are identical to prior year, with Fonterra leaving them unchanged yet again heading into the New Year. NZX futures are indicating further strength in January, settling at $3,240/MT, which would be a rise of 1.9% or +$60/MT from the last December event. Given that China is dealing with… Full Report

Reports This Week

Global Dairy Trade Auction – Tuesday, January 5
Weekly EU Dairy Commodity Prices – Wednesday, January 6
Dairy Products (Nov ’20) – Wednesday, January 6
National Dairy Products Sales Report (NDPSR) – Wednesday, January 6
US Dairy Export/Import Data (Nov ’20) – Thursday, January 7
USDA Dairy Market News Midpoint Prices – Thursday, January 7
USDA Weekly Dairy Cow Slaughter – Thursday, January 7

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