Dairy Product Spot Call Reporter

Cheese hit the street today as buyers and sellers came together to move Cheese higher. Brokers frequently known to represent Kraft and Nabisco pushed 20 loads of barrel cheese into the hands of eager buyers today, pushing the price up a penny. Interestingly, an offer was placed outside of the spot auction for a load of 30 day aged barrels. The Kraft affiliated broker also sold 6 loads of blocks to various buyers and pushed up that market up a half cent. The market action was intense enough to have an extended session, and there would certainly seem to be support for cheese around these prices. Butter was offered a half cent lower to no avail.

Class III Milk, Cheese, and Whey

It would appear that volume went into the spot auction and out of everything else. Although there was much sound and fury in the spot market, futures were not compelled to send prices higher as spot cheese ended the week where it started. Feb lazily increased 6¢/cwt to $16.64/cwt on the spot cheese rally. However, such a large volume of cheese getting purged on the open market is a sign that cheese producers are relatively content with the price level. Whey on the other hand was crushed with revelations of huge volumes looking for buyers in the mid-term as central inventories move west for export. Consequently, futures from Mar to Jul fell slightly Mar was down 9¢/cwt to $16.72/cwt as the whey value of milk deflated. The cheese itself was up or unchanged across the term structure.

Milk Margin

Brazilian and Argentinean yields continued to fall today sending corn upward. In less important, but more interesting news, several ethanol plants have rejected shipments of Ohio corn for high levels of vomitoxin. The fungal byproduct was primarily found in late harvest corn makes the byproducts unsuitable for feed. Soy meal was down from yesterday, but unchanged from the open. In technical circles this is a strong indication of trend reversal. We expect soy prices to decrease as yield estimates from South American crops improve and technical traders assert their will. Corn’s dominant effect on the feed bill added to the descent of March milk to squeeze production profitability. We expect many dairymen to plow under some pasture for corn in the coming season.

The Physical Flow

Is the whey market peaking?  Rumors of spot loads coming to market below premiums are growing.  Futures are weakening and traders are wondering what effect this will have on the firm WPC 80 and WPI market.  Is it temporary, or has high protein WPC decoupled from SWP?

Mexico cheese buyers seem to have vanished as expectations for lower prices are rampant.

Global fat, frozen cream, and AMF are backing up as weaker prices are emanating from Oceania.  Domestic manufacturers comment that higher protein products such as WPC and WPI are holding their values and that interest remains firm in sports nutrition and functional sectors. Conversions to MPC and MPI remain popular even at current, albeit tenuously supported, levels.

The Weekly NASS Survey and California

For the week ending in January 21^st, NASS butter price rose by 0.95¢ to $1.5923/lb. After a period of depressed sales volume from late December to early January, butter is experiencing strong sales of over 6 million lbs. for the second week. Block cheese price rose by 1.75¢ to $1.5899/lb. and lost over 500,000lb. sales volume compared to the previous week. Barrel sales declined by almost 2 million lb., and barrel price is down 0.28¢ to $1.6053/lb. The price of whey continues to rise, up 0.93¢ to 71.13¢/lb. with almost 800,000 fewer pounds sold. The surprising mover this week is NFDM: its price dropped an astounding 4.95¢ to $1.3654/lb., which could be explained by its massive sales volume surge of 8.8 million lb. Barring cataclysmic changes in next week’s NASS survey, the January Class III contract will most likely settle between $17.10/cwt. to $17.15/cwt.

For the week ending in January 21^st, calculated California Class 4b price continues to suffer from falling CME spot block cheese and butter prices while gaining no benefits from the still rising average Mostly West Dry Whey price.  So, while the weekly NASS Class III price recovered, the California Class 4b price is diverging from its NASS counterpart and is down 0.38¢ to $14.16/cwt.

Upcoming Reports

In addition to next Friday’s NASS survey and the January USDA milk price release, ERS is releasing its Monthly Milk Cost of Product report next Monday, January 30^th; NASS is releasing its comprehensive monthly Agricultural Prices report on Tuesday, January 31^st, and its monthly Dairy Products report on Wednesday, February 1^st.

Questions? Ask the Dairy Division today at 312-264-4373