Monday Morning Huddle
25 January 2021

Highlights From Last Week

CME Spot Cheese Prices Decline Further

CME spot block Cheddar prices posted four consecutive daily declines in the holiday-shortened trading week as cheese purchases for the food box program fall short of original expectations. Barrels declined on Tuesday through Thursday but posted a quarter cent gain on Friday; the block price is 22 cents lower versus the prior week while barrels are down 18 cents. While still wide based on the historical average, the block/barrel spread at $0.2175 on Friday was the smallest since January 6.

Opposite a smaller than expected contractor announcement last Tuesday for the USDA Farmers to Families Food Box program, milk and cheese production are climbing quickly in all regions of the country. USDA reported that spot milk could be found for as much as $8.50 per hundredweight lower than Class. Cheese stocks are climbing and cheese plants are taking larger milk volume as the fluid draw remains weaker due to school closings from the pandemic. Bearish tones have taken hold in the market as higher supply is expected in the coming months.

All Eyes on This Afternoon’s Cold Storage and Milk Production Reports

Milk production expectations for this afternoon project another month of bearish gains as herd size growth and milk per cow increases drive output gains that will likely exceed 3% in the coming months. Components will be strong as well, increasing product yield in addition to heavier volume. April and May gains could mark the largest year over year gains the US has seen in decades, as output will be compared with reduced volume due to cooperative production restrictions in 2020.

Last Week’s Reports & Analysis

Comprehensive GDT Auction Analysis
While Global Dairy Trade values already kicked off the New Year at seven-year highs across key commodities, further strength was noted at the second January auction with China a key demand driver. Overall volume expanded… Full Report

December 2020 China Dairy Import Volume Analysis
Turmoil between China and Australia remains intact, and while the industry continues to toss around the idea of dairy demand taking a hit, that did not seem to be the case through the end of 2020 as Q4 dairy imports from Australia were the highest on record for any quarter. Fluid… Full Report

Reports This Week

Milk Production (Dec ’20) – Monday, January 25
Cold Storage (Dec ’20) – Monday, January 25
Weekly EU Dairy Commodity Prices – Wednesday, January 27
National Dairy Products Sales Report (NDPSR) – Wednesday, January 27
Fonterra Pre-GDT Offer Volume Analysis – Thursday, January 28
USDA Dairy Market News Midpoint Prices – Thursday, January 28
USDA Weekly Dairy Cow Slaughter – Thursday, January 28
Agricultural Prices – Friday, January 29

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