Dairy market news at a glance (Feb. 15-19)

View the complete USDA Dairy Market News for Feb. 15-19

CME GROUP CASH MARKETS (2/19)

BUTTER: Grade AA closed at $1.5500. The weekly average for Grade AA is $1.4988 (+0.1853).

CHEESE: Barrels closed at $1.4125 and 40# blocks at $1.5375. The weekly average for barrels is $1.4419 (-0.0561) and blocks, $1.5338 (- 0.0687).

NONFAT DRY MILK: Grade A closed at $1.0925. The weekly average for Grade A is $1.1031 (-0.0169).

DRY WHEY: Extra grade dry whey closed at $0.5475. The weekly average for dry whey is $0.5475 (+0.0075).

CHEESE HIGHLIGHTS: Milk remains ample for cheese production across all regions. However, this week's low end of the spot milk price range shored up from $8.50 to $6.50 under Class, but spot milk trading was quieter in general. Cheese production rates are somewhat busy. That said, contacts in the Midwest and West reported varying weekly schedules. In the West, some cheesemakers are undergoing pre-spring flush maintenance. Cheese demand notes are somewhat steady. Food service sales are mixed, as they have been. That said, some easing of restrictions in restaurants/bars has curd producers reporting heartier orders in recent weeks. Eastern contacts relayed inventories of fresh supplies are edging higher. Cheese market tones are somewhat vulnerable in recent weeks. As market impacts from COVID-19 near their first anniversary, food service purchasing has not fully recovered. Additionally, questions regarding governmental awards and ample milk availability are weaving a thread of uncertainty throughout the cheese narrative.

BUTTER HIGHLIGHTS: Coming up on the last week of "old crop" butter trading on the CME, market tones rallied last week and early this week. Market prices saw a bullish push of over a quarter from the first day of the month to Thursday. Butter production, nationwide, is very busy. There is a lot of cream moving throughout the U.S. and more cream has been dispersed from the southern portion of the country, where contacts say weather has wreaked widespread havoc throughout the dairy system: from farms to hauling to plants. Positive butter demand reports have been passed along. Western contacts say customers are looking for Q2 and Q3 coverage, and bulk butter sales have increased. Still, butter stocks are noted as readily available.

FLUID MILK: Milk production is steady to rising across much of the country. However, major winter storms wreaked havoc across parts of the United States; hardest hit were Texas and the Pacific Northwest. Milk production and manufacturing demand are unbalanced as frigid temperatures, heavy snows, and freezing rains resulted in power outages, staff shortages, and hauling delays. Industry contacts report milk dumping in the South Central part of the United States and Pacific Northwest. Milk is plentiful, and despite weather disruptions, processing facilities are staying busy. Condensed skim markets are steady. There is plenty of condensed skim milk available for drying. With an abundance of cream, butter production remains robust and some cream cheese and ice cream makers are increasing production. F.O.B. cream multiples are 1.00-1.24 in both the East and Midwest and 1.00-1.21 in the West.

DRY PRODUCTS: Nonfat dry milk prices are steady to lower across the country. Production is strong as processors are running heavy amounts of condensed skim through the dryers. Prices for dry buttermilk are mixed in the Central and East, but steady in the West. Buttermilk powder production is sporadic, with nonfat dry milk taking most of the dryer time. Dry whole milk production is focused on contractual needs, and prices are steady to higher. Dry whey prices in both the West and Central regions increased, while dropping slightly in the East. Whey producers suggest they do not have much extra whey to offer on the spot market. Export buyers remain interested. The price range for whey protein concentrate 34% is unchanged. Production remains steady but falls short of industry demand for whey proteins. Industry contacts report that sourcing available WPC 34% is becoming a challenge. The lactose price range kept steady, although spot market prices trended upward. The low range prices increased for both acid casein and rennet casein, with market participants anticipating both markets to remain firm.

INTERNATIONAL DAIRY MARKET NEWS: WESTERN EUROPEAN OVERVIEW: Siberian winds blowing through Germany, France, Italy and other countries brought extremely cold weather, lots of snow, and ice. Some milk was dumped because milk haulers could not move it from farms to plants. Being assessed for exceeding quota levels has prompted some dairy producers to take steps to curtail production increases. In the immediate future this is expected to lead to tighter supplies of butter, SMP, and WMP. COVID-19 control measures are cited for recent slowing of dairy product cross border movements within the EU.

EASTERN EUROPEAN OVERVIEW: During calendar year 2020 Russian imports of butter increased 6 percent according to Trade Data Monitor as reported by Eucolait. Imports of cheese increased 15 percent. Dairy powder imports decreased, SMP -31 percent. WMP -33 percent, and whey -17 percent.

OCEANIA OVERVIEW: AUSTRALIA: July - December 2020 seasonal milk production in Australia, increased 0.7 percent from July - December 2019, according to Dairy Australia. December 2020 milk production, 846 million liters, decreased 2.0 percent from December 2019. Calendar year 2020 milk production increased 2.8 percent from calendar year 2019. NEW ZEALAND: The New Zealand dairy industry has recently increased efforts to export fluid packaged milk to China. This upends the expectation that dairy exports are typically manufactured dairy products. While China continues to make efforts to increase dairy production internally, the demand in China for fluid milk has expanded. The profitability of exporting fluid milk for New Zealand dairy producers is very attractive.

SOUTH AMERICA OVERVIEW: In the main agricultural regions of Brazil, Argentina, Paraguay, and Uruguay, summer weather continues to affect cow comfort. Milk output is seasonally lower off farms. Some dairy operations are decreasing cattle numbers. Market participants report that due to current drought conditions in some areas, farmers are not producing as much silage as usual for the winter season. In addition, there are reports corn and soybean feed prices have increased. Manufacturers continue to receive seasonally lower milk volumes. Butterfat demands are healthy in the cream-based dairy markets, especially from ice cream/frozen dessert processors.

NATIONAL RETAIL REPORT (DMN): Dairy retail advertisement totals decreased 5 percent in the conventional sector, although organic dairy ad totals increased 42 percent this reporting week. Conventional ice cream, in 48-64oz containers, was the most advertised dairy item this week, with an average price of $3.17, up 18 cents from last week. Organic milk, in half gallon containers, was the most advertised organic item. The national weighted average advertised price for conventional butter in 1-pound packaging is $3.27, up 4 cents from last week. The weighted average price of conventional 8 oz block cheese is $2.41, compared to $2.61 last week. In half gallon containers, the weighted average price of conventional milk was $2.64, compared to $3.59 for organic milk, an organic premium of $0.95.

ANNUAL 2020 MARKET SUMMARY AND UTILIZATION REPORT (FMMO): During 2020, 137.8 billion pounds of milk were received from Federally pooled producers. This volume of milk is 12.2 percent lower than the 2019 pooled volume. Regulated handlers pooled 43.8 billion pounds of producer milk as Class I products, down 0.5 percent when compared to the previous year. The all-market average Class utilization percentages were: Class I = 32%, Class II = 14%, Class III = 24%, and Class IV = 30%. The weighted average statistical uniform price was $16.12 per cwt, $1.23 lower than 2019's $17.35. DECEMBER 2020 MILK SALES (FMMO): 4.0 billion pounds of packaged fluid milk products were shipped by milk handlers in December 2020. This was 1.5 percent higher than a year earlier. Estimated sales of total conventional fluid milk products increased 1.1 percent from December 2019 and estimated sales of total organic fluid milk products increased 8.9 percent from a year earlier.

MARCH 2021 ADVANCED CLASS PRICES REPORT (FMMO): Base Class I Price: The base Class I price for March 2021 is $15.20 per cwt, a decrease of $0.34 per cwt when compared to February 2021. A Class I differential for each order's principle pricing point (county) is added to the base price to determine the Class I Price. Class II Price Information: For March 2021, the advanced Class IV skim milk pricing factor is $8.66 per cwt, the Class II skim milk price is $9.36 per cwt, and the Class II nonfat solids price is $1.0400 per pound. Product Price Averages: The two-week product price averages for March 2021 are: butter $1.3387, nonfat dry milk $1.1395, cheese $1.5910, and dry whey $0.4992.

JANUARY PRODUCER PRICE INDEX (BLS): In January 2021, the Producer Price Index (PPI) for the all food manufacturing is 205.5, up 1.5 percent from 2020. The PPI index for manufactured dairy products is 199.9, down 3.4 percent from a year ago. The following are the January 2020 to January 2021 changes for selected products: fresh whole milk is -8.0 percent; cheese, -1.4 percent; butter, -28.7 percent; and dry milk products and mixtures, up 6.8 percent.