Monday Morning Huddle
3 April 2023
CME Spot Cheese Roller Coaster Heads Down:
After rallying for two weeks, CME spot cheese fell apart last week as blocks posted a 25 cent decline on three loads traded, a 12% drop from the nearby high of $2.10/lb. from last Monday. Barrels DECREASED 15 1/2 cents from Friday to Friday with just eight loads exchanging hands, the smallest weekly volume since the final week of 2022. The drop in cheese is not surprising given present fundamentals indicating cheese production is more than enough to cover current demand. Notably, both commodities posted no price changes or traded volume last Monday, meaning the markets eroded in just four days. The limited trading volume suggests that buyers and sellers are not anticipating a bounce and are waiting to re-enter the market when prices have stabilized at a lower level.
Butter Finds Strength, and Whey and Nonfat Dry Milk (NFDM) Creep Lower:
Butter was the most heavily traded commodity in the CME spot markets last week (18 loads), the highest sum since early February. On the week, butter prices strengthened over a nickel from Monday. However, USDA is reporting that cream supplies are available in most parts of the US, and domestic butter prices are not competitive on the export market, leaving little upside. NFDM and whey’s weekly averages were DOWN a modest 0.3% and 0.2%, respectively, with NFDM trading as low as $1.1475/lb. last week, a two-year low. Demand for the powder complex is not particularly strong. Whey prices have persisted above 40 cents since early February, which has been surprising given that stocks have grown despite decreased production. These fundamentals indicate there is room for further price declines.
Spot Milk Basis Improves, But Below Historical Average:
Upper Midwest spot basis improved for the second week in a row. Loads of milk went for $11 to $3 below Class III pricing last week, with a midpoint of $7 under Class. Dairy Market News reports that more loads are going toward the “upper” end of that range, $5 to $4 less than Class III, a change from previous weeks when $11 to $10 under was more common. However, current spot prices are still much cheaper than the historical average of $3 under class, and ample milk supplies remain in the Central part of the country, with much of the excess going to cheese plants.
USDA Releases Prospective Plantings and Quarterly Grain Stocks:
USDA issued its annual Prospective Plantings report on Friday, with corn acreage up 4% from 2022, and soybean acres forecasted at almost flat to last season. March 1 soybean stocks were nearly 13% below last year’s levels, with futures rallying on the reports. March 1 corn inventories of 7.4 billion bushels were 4.6% below last year. CBOT corn futures responded by rallying in the nearby months.
More Winter Weather For the Upper Midwest and Plains:
With cold weather, snow, and blizzard conditions continuing and forecasted in the upper Midwest and Plains states, farmers may be late to get into fields in that region, which could change acreage amounts. Livestock farmers may be impacted by an impending storm this week that could cause a loss of animals.
Last Week’s Reports & Analysis
Weekly EU Dairy Commodity Prices
After weeks of increased production and a drawdown on warehouse stocks, demand has begun to ease allowing the market to find a stable balance. While retail purchases continue, the Easter holiday pipeline has mostly been fulfilled and food service orders are currently satisfied. Export opportunities remain plentiful as EU cheese carries a discount to U.S. prices and are…Full Report
Pre-GDT Forecast Volume Analysis
Following a month of drastic price declines, Fonterra has removed 300MT of Cheddar from the GDT 12-month forecast, with 100MT removed from next week’s auction, 100MT from the following auction and then 50MT from both events in May. To put next week’s 100MT reduction in perspective, it is a 25% decrease from the previously forecast…Full Report
Reports This Week
- Feb ’23 US Dairy Products Production & Dry Stocks Report – Monday, April 3
- Global Dairy Trade Auction – Tuesday, April 4
- Weekly EU Dairy Commodity Prices – Wednesday, April 5
- Feb ’23 US Import/Export Data – Wednesday, April 5
- Weekly National Dairy Products Sales Report (NDPSR) – Wednesday, April 5
- Mar ’23 USDA Announced Class & Component Prices – Wednesday, April 5
- USDA Dairy Market News Weekly Midpoint Prices – Thursday, April 6
- USDA Weekly Dairy Cow Slaughter – Thursday, April 6
- Markets Closed for Good Friday Holiday – Friday, April 7