Tuesday Morning Huddle – 27 December 2022

Tuesday Morning Huddle – 27 December 2022

CME Spot Block Cheese Hits One Month High; Butter Collapses to 2022 Low
The CME spot block Cheddar price found consistent strength this week, climbing almost every day until settling on Friday at $2.1250 per pound, the highest price since November 28. Volume was extremely light last week heading into the holidays. In barrels, the market met some initial weakness, with the lower price on Tuesday opposite the higher block price creating a significant 34.5 cent spread. Barrels found strength into the back half of the week though, climbing 14 cents in three days as 16 loads traded throughout the week, with nine on Friday alone. While the spread was slightly narrower Tuesday, there remained a more than 30 cent price gap throughout the end of the week.

Meanwhile, the expected seasonal collapse in butter prices has commenced with a 46 cent decline on CME spot from Friday to Friday, setting a 2022 calendar year low at $2.3950 on December 23rd. While HighGround had been expecting this decline to come a little sooner in December, the Nov ’22 US Cold Storage report release may prompt even further declines given its less-than-expected monthly drawdown during high demand season. CME spot dry whey also plummeted, declining seven cents (or -15%) to $0.3850/lb as manufacturers aggressively unload inventory at the end of the year.

While milk is available throughout the country as volume increases seasonally towards the Spring Flush period, there are some reports of weather issues, labor availability, and plant maintenance that are contributing to slightly less cheese output than would typically be expected. USDA reported that domestic cheese demand is “steady to lighter” while export needs are mixed. While the holiday period sometimes skews markets and overall supply and demand, seasonal cheese price weakness is expected to materialize into January.

China Ends COVID Quarantine for Travelers in January
China will scrap quarantine for travelers from 8 January, officials said, marking the last major shift from the country’s zero-COVID policy. After almost three years of closed borders, this will reopen the country to those with work and study visas, or seeking to visit family. Chinese citizens will also be able to travel overseas, the immigration authority said on Tuesday. COVID has spread ferociously in the wake of restrictions being lifted. Reports say hospitals are overwhelmed and elderly people are dying. The true toll – daily case counts and deaths – is currently unknown because officials have stopped releasing COVID data. Beijing had reported about 4,000 new Covid infections each day last week and few deaths. On Sunday it said it would stop publishing case numbers altogether. But British health data firm Airfinity estimated China was experiencing more than a million infections and 5,000 deaths a day. China is the last major economy in the world to move to “living with Covid” after three years of lockdowns, closed borders and mandatory quarantine for Covid cases and contacts. Source: BBC

Lifting additional COVID restrictions is a step in the right direction for China, but it may take some time for the country to deal with the rapid rise of infection and for herd immunity to kick in before they can truly kickstart their economy.

Last Week’s Reports & Analysis

November 2022 US Milk Production Analysis
US milk production continued its growth streak into November, climbing versus prior year for the fifth consecutive month. The year over year gain was slightly lower versus HighGround… Full Report

November 2022 US Cold Storage Report Analysis 
For the second consecutive month, butter stocks declined at a lower than expected rate. Just 40 million pounds of butter left storage in November, below the five-year 61 million pound average in the month… Full Report

Reports This Week

  • GDT Pulse – Tuesday, December 27
  • National Dairy Products Sales Report (NDPSR) – Thursday, December 29
  • USDA Dairy Market News Midpoint Prices – Thursday, December 29
  • USDA Weekly Dairy Cow Slaughter – Thursday, December 29

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