Monday Morning Huddle – 4 March 2024

Monday Morning Huddle – 4 March 2024

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CME Spot Blocks Take Two Steps Forward, Two Steps Back: The block market had good momentum for the first part of last week before dropping off on Thursday and Friday. Friday’s close of $1.55/lb. matched the prior week’s settlement, i.e., all the gains were lost, and continues to suggest that cheese is locked in a range of $1.50-$1.65/lb. This wave pattern will persist until blocks meaningfully test and exceed a new high. The Cold Storage report provided little new information to cheese market participants, with Dec to Jan changes in inventories following typical trends. Further, the market remains in a bearish formation. Barrels fared slightly better than blocks, rising $0.055/lb. on Monday and holding their increase through Wednesday before giving up two cents on Thursday, with the Friday-to-Friday change UP $0.035/lb. For the third week in a row, barrels are at a premium to blocks, but this seems odd and unlikely to continue, as barrel demand is not overly strong and production is occurring at a normal clip.

The whey market tumbled last week, closing last Friday at $0.4250/lb., DOWN almost a dime from the prior Friday (-19%!), which is unheard of for this commodity. This is the lowest price since mid-January when the market began to stage its rally to over $0.50/lb. While processors have been diverting the whey stream away from sweet whey powder into higher protein products, exports have been pretty dismal, which may be causing prices to tank. A rumor about a manufacturer needing to abruptly shift production back into dry whey from higher proteins started the slide.

Cold Storage Released – Much Ado About Nothing: USDA released January’s Cold Storage on Monday, February 26, after initially delaying it by a business day due to “technical issues”. The highly anticipated report wound up being not much to write home about. Cheese stocks followed their usual December to January patterns, and butter levels grew within their normal range, totaling 249 million pounds at the end of January, rising 49 million pounds from Dec. While smaller than 2023, the monthly build helps put inventories in a decent, albeit not heavy, place to begin the year. The spot butter market held its nearby high of $2.85/lb. ahead of the report’s release but fell Tuesday to Friday last week as nervousness in the market eased. It seems likely that anxiety will quickly return to butter prices at any news that indicates fat is tight or production is lagging, but a post-Easter demand downward correction in prices is likely.

Massive Wildfires Burn in Texas: Over 1,000,000 acres blazed in the Texas Panhandle north and east of Amarillo, and the fire continues into this week. Just 15% is contained, and while snow last Thursday helped to slow its spread, warm temperatures and gusty winds over the weekend made it difficult to fight. Cooler temperatures are forecasted for today (March 4) and tomorrow, aiding firefighters. The area consumed by the Smokehouse Creek Fire is not a heavy dairy region but is home to ranches and beef cows. The beef cow herd is at its lowest level since 1961 (over 60 year low), and the fire has caused livestock deaths and euthanizations. Loss of beef animals could drive prices higher and increase the competition for dairy as beef, further compounding the tight heifer and dairy cow herds. Pastures have burned, and that will have an impact on feed and expenses to ranchers in the region.

Last Week’s Reports & Analysis

January 2024 US Cold Storage Report Analysis
The highly anticipated and delayed January Cold Storage report was a bit of a letdown, as butter stocks, the wild card, grew 49 million pounds from December…Full Report

Asia Dairy Import Volume Analysis
Skim milk powder imports declined from November to December for the first time since 2018 primarily due to a 7,046MT (-72% YoY) loss from the United States. Weak demand from Southeast Asia continues to weigh on US nonfat dry milk prices even as inventories…Full Report

Reports This Week

  • US Jan ’24 US Dairy Products Production & Dry Stocks Report – Monday, March 4
  • Global Dairy Trade Auction – Tuesday, March 5
  • Weekly EU Dairy Commodity Prices – Wednesday, March 6
  • National Dairy Products Sales Report (NDPSR) – Wednesday, March 6
  • Jan ’24 US Trade Data – Thursday, March 7
  • USDA Dairy Market News Weekly Midpoint Prices – Thursday, March 7
  • USDA Upper Midwest Spot Milk Basis – Thursday, March 7
  • US Weekly Dairy Cow Slaughter Report – Thursday, March 7


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