Monday Morning Huddle
19 October 2020
Highlights From Last Week
More Strength on Cheese, Nonfat Hits $1.14 per Pound Again
Both cheese markets found additional strength last week as prices continued their increase to historic highs. However, limited activity in the second half of the week could indicate that a price decline is imminent. There were no block Cheddar bids at the session close on Tuesday through Friday last week, while the price stalled at $2.7200 per pound after reaching that mark on Wednesday. Just four block loads traded hands last week. Still, the Friday settlement was the highest block price since July 15, immediately after the block market set a record high price just two days prior. The block Cheddar weekly average has increased for nine consecutive weeks. Barrel market activity was almost equally as quiet, with the price also unchanged at the end of the week versus the Wednesday settlement, which was the highest price since July 31. Even fewer barrels loads were exchanged as buyers stayed quiet. It was the fourth consecutive barrel Cheddar weekly average increase, with the past three weeks seeing more than a 15 cent increase each week.
Nonfat dry milk hit the $1.14 per pound level once again, a high not seen since February but one that was achieved the prior week as well, unable to surpass. If the market is able to move to fresh highs this week, the market would suspect that Asian demand remains strong and that the US continues to obtain solid market share given that this is still globally competitive. Butter also caught a bid, settling over $1.50 per pound and gaining nearly 10 cents on the week but sellers came back at that point and the market lost ground. At present, the cheapest way for buyers to lock in a fixed price is to buy physical and sit on it. There will be a lot of reports out this week to help steer markets through the next couple weeks, from US milk production to a Global Dairy Trade event.
Senate Votes on Stimulus Bill Wednesday, Retail Sales Provide Hope
The Senate will vote on a $500 billion coronavirus stimulus bill on Wednesday, Senate Majority Leader Mitch McConnell said Saturday, as a larger bipartisan deal remains elusive despite continued talks between top Democrats and the Trump administration. The chances of Congress passing new aid before the Nov. 3 presidential election have dimmed as the Senate GOP plan is more limited than what the Trump administration or Democrats have proposed. The GOP bill will include funding for schools, expanded unemployment benefits and a second round of the Paycheck Protection Program, McConnell said. The Senate will vote on the bill a day after a standalone vote on more PPP funds on Tuesday (Source).
Consumers spent at a much faster pace than expected in September, with retail sales rising 1.9% in a sign that the U.S. economy’s biggest driver remains healthy but concerns are rising that the fourth quarter could see a marked slowdown as coronavirus cases continue to rise. The holiday shopping season will be a key for what kind of momentum the U.S. sees as the calendar turns into 2021 (Source).
Last Week’s Reports & Analysis
Dairy Commodity Price Forecast
The CME Block Cheddar Cheese monthly average for October is shaping up to be an all-time high near $2.65 per pound, a 28% increase on prior year as prices are at three-month highs. Support has been primarily achieved through government-induced demand that should soon fall away… Full Report
Commercial Disappearance (Aug ’20)
Total cheese disappearance declined slightly versus prior year after three consecutive months of growth. While exports were strong and have been higher for four consecutive months, domestic cheese demand dipped lower to the lowest August domestic demand since 2017… Full Report
Reports This Week
USDA Crop Progress – Monday, October 19
GDT Auction – Tuesday, October 20
Milk Production (Sep ’20) – Tuesday, October 20
Weekly EU Dairy Commodity Prices – Wednesday, October 21
National Dairy Products Sales Report (NDPSR) – Wednesday, October 21
Announcement of Advanced Prices and Pricing Factors – Wednesday, October 21
Cold Storage (Sep ’20) – Thursday, October 22
USDA Biweekly International Prices – Thursday, October 22
Livestock Slaughter – Thursday, October 22
USDA Weekly Dairy Cow Slaughter – Thursday, October 22
USDA Dairy Market News Midpoint Prices – Thursday, October 22
Cattle on Feed – Friday, October 23