Monday Morning Huddle
8 May 2023
CME Spot Blocks Go Low:
CME Cheddar blocks set a 2023 and 18-month low in Friday’s trading, settling at $1.6125/lb. on 19 loads traded, with buyers snapping up the cheaper cheese. HighGround believes that demand is poor for cheese, particularly in the international market. Fundamentally, American cheese inventories and production were historically high in March. Given that milk production is not going gangbusters (+0.5% YoY in March), the big production volumes, types of cheeses manufactured, and significant stock numbers suggest weak demand.
NFDM Goes High, Despite Lower NDPSR Price and Record Volume:
CME spot NFDM continued its quiet but steady rally, ending the week at $1.1975/lb., a price not seen since late February. Since setting a 2023 low on April 17, prices have moved up 7.5 cents. With robust NFDM production, and stocks building, it will be difficult for markets to maintain this price. Nearly 54.5 million pounds of NFDM was sold the week ending April 29, 2023, at a weighted price of $1.1219, $0.047/lb. lower than the previous week, according to the National Dairy Products Sales Report (NDPSR). Manufacturers may be cleaning out warehouses to keep product moving and clear balance sheets.
Trade Numbers Point to Lower Demand:
Trade data for March was released by US Census last Wednesday. Overall, dairy exports fell from March 2022 to March 2023, which was not surprising, given the US was not price competitive on all dairy commodities when those sales were booked in late 2022 or early 2023. Whey exports rose on increased demand from China, likely for hog feed. Notably, cheese and NFDM exports to Mexico were UP vs. March 2022, filling most of the gap left by slower buying from Asian markets.
A Mostly Neutral Dairy Products Report:
Except for dry whey and NFDM, which were slightly bullish and bearish, respectively, the other significant commodities, butter, cheese, WPC/WPI, and lactose, in USDA’s Dairy Product report were neutral to HighGround’s expectations. Dry whey stocks declined, as did production, indicating possible improved demand. NFDM production and reserves grew amidst a storyline of poor international buying.
Planting Progress as of April 30 is Average for Corn:
Planting progress amongst the 18 tracked states shows 26% of the corn crop was planted as of April 30, compared to the 2018-2022 average of 26%. Illinois and Indiana are ahead of schedule, while states in the upper Midwest, such as Minnesota and Iowa, are trailing. Through April 30, 6% of the corn crop emerged in selected states, slightly more than the 2018-2022 median of 5%. Soybean planting is rolling with 19% of the crop in the ground, compared to the typical 11%.
Quieter Week Report-wise:
Just GDT Pulse this week for notable dairy reports/events, as HighGround digests all the March data and watches to see where fundamentals and market sentiments drive prices next. USDA will release the monthly World Ag Supply & Demand Estimates (WASDE) on Friday @ 11:00AM CDT which could provide the grain markets with new direction.
Last Week’s Reports & Analysis
Comprehensive GDT Auction Analysis
Two positive auctions will undoubtably have the markets attention, especially considering the bounce in prices both of the milk powders have managed to complete over the same period. Obviously, questions arise about the legs of this rally, and if this could be a technical bounce…Full Report
March & Q1 2023 US Dairy Export & Import Volume Analysis
US butter exports tanked (again) in March 2023, down 36% vs. prior year, as the US was a net butter importer by 5.8 million pounds. Pricey butter at the end of 2022 killed demand, and exports to…Full Report
March 2023 Dairy Products Report Analysis
Total cheese production fell in March 2023 compared to last year, which was a little surprising considering the heavy milk flows reported. However, the decline was driven by smaller cheese production in key…Full Report
Reports This Week
- Crop Progress Report – Monday, May 8
- GDT Pulse – Tuesday, May 9
- Weekly EU Dairy Commodity Prices – Wednesday, May 10
- Weekly National Dairy Products Sales Report (NDPSR) – Wednesday, May 10
- USDA Dairy Market News Weekly Midpoint Prices – Thursday, May 11
- USDA Weekly Dairy Cow Slaughter – Thursday, May 11
- World Agricultural Supply & Demand Estimates – Friday, May 12
