The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The May 12 Daily Dairy Report said "Weather has been improving across much of the Corn Belt, which should have allowed farmers the opportunity to get back into their fields this week." Planting is not the only challenge, according to the DDR. "Purdue University reported that 26 percent of farmers surveyed were having difficulty purchasing fertilizer and 30 percent were having trouble buying herbicides."
Dairy cow culling has slowed in the U.S., with high milk prices providing the incentive. In the week ending April 30, 51,600 dairy cows were sent to slaughter, down 4,800 head from the previous week, and 4,100, or 7.4 percent, below a year ago.
CME block Cheddar sunk to $2.2625 per pound last Tuesday, lowest since March 31, but rallied Wednesday and closed "Friday the 13th" at $2.3075, down 4.25 cents on the week, third week of decline, but 58.25 cents above a year ago.
The barrels rolled to $2.34 per pound last Tuesday but finished at $2.3950, up 1.50 cents on the week, 66.50 cents above a year ago, and 8.75 cents above the blocks. Sales numbered 14 blocks and only two barrels on the week at the CME.
Spot milk trading was busier at Midwest cheese plants last week, according to Dairy Market News. Class I intakes have slowed as schools begin to curb orders, and seasonal milking patterns are putting more milk into the market. The previous week's market was particularly busy, and although last week was slower, at midweek, discounts and overages remained in the same ballpark as a week ago. Milk availability growth is timely, as cheese demand, particularly in the upper Midwest, remains somewhat strong. In some cases, loads made available by one customer's cancellation or slowdown moved to another customer, reports DMN. StoneX informs us that component production has been on the rise thanks to the cool weather lending itself to cattle comfort.
Western contacts report that cheese export demand remains strong. Retail sales reportedly slid lower but the decrease was countered by an increase in food service demand. Inventories of blocks are becoming more available, as port congestion is causing some exporters to sell loads intended for export. Barrel inventories tightened this week. Milk is available, as cheese producers are running busy schedules in the region, but labor shortages and delayed deliveries of production supplies continue to cause some plants to run below capacity.
Cash butter dropped to $2.61 per pound last Tuesday, then reversed direction and headed to a Friday finish at $2.7050, up 6.50 cents on the week and 83 cents above a year ago. There were 18 carloads that found new homes on the week.
Food service butter demand remains steady while retail orders are in a seasonally quieter phase, says DMN. Plant managers continue to say they are using this time to churn in preparation for fall demand. Cream is less available, regionally. Some plants were looking west for similarly priced loads when compared to previous weeks, but local handlers are slowing offers, as busier churning and ice cream production has begun to thin the pool. Market tones are uncertain, says DMN, as global butterfat values have begun to shift lower after a sustained bullish run starting since the summer of 2021.
Grade A nonfat dry milk fell to $1.7225 last Wednesday but closed Friday at $1.73, down a penny on the week and 43 cents above a year ago, on six sales.
Dry whey closed last Friday at 53.25 cents per pound, down 5.25 cents on the week and 10.75 cents below a year ago, on nine sales reported on the week at the CME.
Domestic consumption of cheese and dairy exports in March remained strong, according to StoneX May 6 Early Morning Update. Domestic disappearance on cheese in March was 5 percent above year ago and year- to-date was up 4.8 percent.
"American cheese exports have been a driving force in the first quarter and up 44 percent year to date," said StoneX, "while Australia's exports for March were reported to be up 15.5 percent from last year."
Speaking in the May 16 Dairy Radio Now broadcast, broker Dave Kurzawski said overall U.S. commercial disappearance, on a milk-equivalent basis, was down about .7 percent in March, led in large part by butter and high value protein powder.
Butter was down 10.7 percent, he said, but with the high prices that butter and cheese are at, "it almost doesn't matter what the disappearance numbers say, as these are bullish markets, though they do feel like they're coming off a bit."
"Many underestimated the ability of the market to go up," Kurzawski said, "and maybe underestimated inflation, the story that got started in 2021 but probably had too little coverage." Nerves were triggered as the market started to go higher, he said, "then got really nervous when Putin went into Ukraine and that sent a surge for all commodity prices, including dairy." "Our nerves are dulled now," he said. "Buyers have calmed down, and may step back a bit from aggressive buying."
He predicted the May17 GDT would be down again, following the 8.5 percent plunge on May 3, and said it's reminiscent of the large drops in 2015. He warned the GDT may be down another 8 percent to 10 percent and while some think the bottom is in, "history will prove otherwise," he concluded.
Meanwhile, fluid milk sales took another hit. The latest USDA data shows sales of packaged fluid products in March at 3.8 billion pounds, down 3.4 percent from March 2021. Conventional product sales totaled 3.5 billion, down 3.3 percent from a year ago.
Organic products, at 253 million pounds, were down 4.3 percent, and represented 6.7 percent of total sales for the month.
Whole milk sales totaled 1.3 billion pounds, up 1.6 percent from a year ago, up .1 percent year to date, and represented 33.4 percent of total milk sales in the three months.
Skim milk sales, at 205 million pounds, were down 8.5 percent from a year ago and down 8 percent YTD.
Total packaged fluid sales for the first three months of 2022 amounted to 11.1 billion pounds, down 2.7 percent from 2021. Conventional product sales totaled 10.4 billion pounds, down 2.5 percent. Organic products, at 724 million, were down 4.6 percent, and represented 6.5 percent of total milk sales for the period.
The figures represent consumption in Federal milk marketing order areas, which account for approximately 92 percent of total fluid milk sales in the U.S.
Lastly, the U.S. is not the only country calling on Canada to live up to its trade obligations in trade agreements they have signed. You'll recall the U.S. has complained about Canada's application of its dairy tariff rate quotas (TRQ) under the U.S. Mexico, Canadian agreement (USMCA).
Now, New Zealand has initiated dispute proceedings regarding Canada's TRQs under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The Canadian supply management program has come under increasing pressure as the country seeks to be a player in the global dairy marketplace.
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