Tuesday Morning Huddle
19 January 2021

Highlights From Last Week

CME Spot Cheese Races Higher After Food Box Announcement

CME spot block values increased last Monday but lost steam into the remainder of the week with both block and barrel Cheddar prices declining as questions arose regarding how much cheese would actually be used in the food boxes. Friday’s block settlement was $0.0875 per pound lower versus the prior week while barrels were down $0.08. 13 loads traded hands in each market as buyers bought some product, but purchases were lower versus total trading volume in the week prior. The weekly average price in both markets was the highest since the week ending November 13, 2020. Volatility could return this week as contracts for Round Five of the food box program are expected to be announced today.

CME spot dry whey increased to its highest value since October 2018 as export purchases keep the market tight. Burdensome butter production and stocks pushed the market into the $1.20s for the first time since May 2020 with little chance for price strength before March. Spot nonfat dry milk climbed to $1.20 per pound for the first time since February 2020 as global demand drives values higher; US exports are expected to be stronger throughout Q1 due to a weaker US dollar and US prices that remain lower versus those in New Zealand and the EU.

NOTE: USDA-NASS will publish both the December US Milk Production and December Cold Storage reports later than usual this month. Both reports will be released NEXT week on Monday, January 25.

USDA Announces Additional 2021 Section 32 Purchases

Government funding in dairy markets did not cease with the food box program, with USDA announcing on January 13 that it would purchase $40 million in Cheddar and Process Cheese and $40 million in Butter for distribution to various food nutrition assistance programs via Section 32 funding. USDA did NOT publish set timeframes for the actual bid solicitations and delivery window like it did with the butter and fluid milk solicitation announcement in December. An AMS contact anticipated the purchases for 2021 will be similar to the 2020 Section 32 purchases and spread out over the rest of this year. The announcement spurred futures higher on Friday, but gains failed to materialize at the spot market.

Last Week’s Reports & Analysis

November 2020 US Dairy Commercial Disappearance
Total cheese disappearance was DOWN versus prior year for the second consecutive month as both domestic and export demand slipped. Butter disappearance eked out a gain after weaker demand in October but remained DOWN versus two years ago… Full Report

Pre-GDT Auction Volume Analysis
Last month, Chinese virologists told state media that cautious New Year travel could still be carried out without risking a new surge. However, that now looks different as China reported the first new COVID-19 death since May on Wednesday (Jan 13th) as 22 million citizens are placed back on lockdown… Full Report

Reports This Week

Global Dairy Trade Event – Tuesday, January 19
Weekly EU Dairy Commodity Prices – Wednesday, January 20
National Dairy Products Sales Report (NDPSR) – Thursday, January 21
Announcement of Advanced Prices and Pricing Factors – Thursday, January 21
USDA Dairy Market News Midpoint Prices – Thursday, January 21
USDA Weekly Dairy Cow Slaughter – Thursday, January 21
USDA Biweekly International Prices – Thursday, January 21
Livestock Slaughter – Thursday, January 21
Cattle on Feed – Friday, January 22

Back to Latest