Monday Morning Huddle – 9 January 2023

CME Block Prices Flirt With Both Sides of $2.00, NFDM Dips Below $1.30
The first week of 2023 was also holiday-shortened (closed Monday) which brought weakness, then strength to the CME spot block Cheddar market, dropping from $2.1350 the Friday before to $1.9725, then back up to $2.0550 per pound to close out last week. Industry chatter suggests that 40 pound blocks remain tight, but demand tends to back off during Q1 so we could see some volatility in the coming weeks. However, a fire at AMPI’s Portage, Wisconsin process cheese plant last Monday may temporarily make more barrel Cheddar available as the coop works to re-open the facility. CME spot nonfat dry milk dipped below $1.30 per pound for the first time since August 27, 2021 after a bearish Global Dairy Trade auction to start out the year. International buyers remain extremely quiet in procuring skim milk powder and with Northern Hemisphere milk production on the rise along with New Zealand likely turning positive vs. prior year this month, the trend remains bearish in the short term.

China Borders Officially Open Over Weekend
Even as the virus continues to spread in China amid what critics say is a lack of transparency from Beijing, China officially opened their borders and citizens have started to travel cross-border, to either Hong Kong or Russia, and flights from overseas flights started to trickle in. Authorities say they expect domestic rail and air journeys will double over the same period last year, bringing overall numbers close to those of the 2019 holiday period before the pandemic hit. Oil prices are on the rise as a result of the travel and spending optimism but the spread of COVID and other viruses during a ramp up in holiday travel with millions set to travel from big cities to visit vulnerable older relatives in the countryside remains concerning throughout Q1. 

Last Week’s Reports & Analysis

Comprehensive GDT Auction Analysis
The New Year started the same way 2022 came to a close – with China (North Asia) very much an active buyer, though buyers from the region did not need to be aggressive in order to secure impressive volume as Southeast Asian demand was subdued on key commodities. As a result, prices just limped along… Full Report

November 2022 US Dairy Trade Analysis
The US sustained an impressive discount on cheese throughout Q3 versus the rest of the world, which continued to push export volumes into Q4. It makes sense to see Australia look to the US to fill their production gaps… Full Report

Reports This Week

• GDT Pulse – Tuesday, January 10
• Weekly EU Dairy Commodity Prices – Wednesday, January 11
• National Dairy Products Sales Report (NDPSR) – Wednesday, January 11
• Fonterra Pre-GDT Offer Volume Analysis – Thursday, January 12
• USDA Dairy Market News Midpoint Prices – Thursday, January 12
• USDA Weekly Dairy Cow Slaughter – Thursday, January 12
• USDA Crop Production Report – Thursday, January 12
• World Agricultural Supply & Demand Estimates (WASDE) – Thursday, January 12
• USDA Quarterly Grain Stocks Report – Thursday, January 12