Hemorrhaging in the cash cheese market appeared to have come to an end the final week of September, as traders awaited the August Dairy Products report issued Oct. 3 and impeachment drums resounded in Washington.
Midwestern cheesemakers continue to express concern over the ongoing “market correction,” says Dairy Market News, and warned: “A large price gap between blocks and barrels has a tendency to increase buyers’ hesitation.”
Central cheesemakers say spot milk is generally tight and spot milk prices ranged from 25 cents to $1.75 over Class. Cheesemakers are increasing their condensed skim and nonfat dry milk usage for fortification, according to DMN. Production rates are steady, with most cheesemakers on five-or six-day workweeks. Cheese inventories are “somewhat balanced in the region.”
Western cheese output is active with plenty of milk available. Vats are running at or near capacity. Barrel inventories are heavy but block supplies are tighter. Stockpiles of mozzarella are substantial but contacts suggest seasonal pizza demand will take much of it. Market observers speculate the tightness on blocks nationwide was behind the rise in prices on the CME, however the precipitous fall is harder to explain. Cheese demand has cooled, especially in export markets.
FC Stone stated in its Sept. 25 Early Morning Update: “We’ve said that a block price somewhere around $2.00 per pound seems to make sense to us. We think stocks have been drawn down more significantly here in September than back in August, relegating that Cold Storage report to the ‘old news pile’ rapidly. Still, in the wake of last year’s slower fall holiday sales, it’s hard not to remind ourselves and our customers that cheese tends to peak out this time of year.
“We think there are still a number of supply/demand fundamental factors that ought to be supportive of cheese prices moving forward, but for now we’re in correction mode.”
American cheese stocks totaled 768.2 million pounds, down 6.6 million pounds or 0.8% from July, well below the 5-year average drawdown of 20 million pounds, and were 19.2 million or 2.4% below a year ago.
The total cheese inventory was virtually unchanged from July and up slightly from a year ago, coming in at 1.363 billion pounds, up 705,000 pounds or 0.1% from July and 2.6 million pounds or 0.2% above August 2018.
While all eyes have been on the roller coaster cheese prices, FC Stone reported in its Sept. 20 Early Morning Update that “Replacement heifers have also been getting some attention.
“A frequently quoted price is $1,400, up from $1,100 just a couple of months ago. Heifers are still far away from the $2,000-plus price associated with $20 milk. In general, the heifer market is tightening up. That said, slaughter in August was still strong enough to suggest a decline in the herd, but the pace has certainly slowed down in recent months. The weekly numbers are staying below year ago, but not by enough to argue that the herd is starting to rebuild yet,” concludes FC Stone.
The U.S. and Japan have signed a trade deal that U.S. Secretary of Agriculture Sonny Perdue says is “a better deal for the entire U.S. economy, but is a particularly big win for our farmers and ranchers.”
The signing drew praise from the U.S. Dairy Export Council and National Milk Producers Federation, stating that the interim agreement will “deliver improvements in market access for the U.S. dairy industry, while noting that the work to secure a sufficient competitive landscape in Japan for dairy is not finished.”
The two groups stated that they “look forward to reviewing with their members the details of this first stage of a trade agreement with Japan to take advantage of the new opportunities it will provide on a near-term basis while continuing to work with the Administration to secure the additional elements that are still needed to ensure a strong final dairy package in a comprehensive agreement.”
The announcement also drew praise from the International Dairy Foods Association, stating: “The dairy industry is pleased to see that the U.S. and Japan have reached an agreement that will reduce tariffs on U.S. exports of certain food and agricultural goods to Japan’s growing market. Although full details of the agreement have not been released, we are confident this is a step in the right direction and help improve our current market position with Japan.”
In other trade news we got a look at China’s August dairy imports. HighGround Dairy reports that the strongest growth area was in fluid milk and cream, which was up 13,368 metric tons from a year ago, with Germany holding on to the No. 1 supplier position for the third month in a row.
China’s skim milk powder imports were up 8,602 metric tons YoY, says HGD, and “While volumes were higher, New Zealand’s market share fell slightly to 30% (versus 32% last year) and the EU lifted to 44% (versus 42.7% last year).
Cooperatives Working Together member cooperatives accepted 16 offers of export assistance this week to help capture sales of 220,462 pounds of butter, 608,476 pounds of Cheddar and Monterey Jack cheese, 297,624 pounds of cream cheese and 2.05 million pounds of whole milk powder.
As the dairy industry battles plant-based beverages in the arena of public opinion, leading health experts have applauded dairy cow produced milk in a newly released “Healthy Eating Research Report.”
The International Dairy Foods Association’s Cary Frye stated that “Dairy milk is one of the healthiest things we can serve our kids, according to a panel of leading health experts who strongly recommend parents make dairy milk a key part of their child’s diet beginning at 1 year of age. In fact, the panel composed of experts from the Academy of Nutrition and Dietetics, the American Academy of Pediatric Dentistry, the American Academy of Pediatrics, and the American Heart Association believe children ages 1-5 should consume only cow’s milk or water.”
“The experts conclude that cow’s milk, whole, low fat and skim milk, offers a host of essential nutrients that young kids need to be healthy, while recommending parents strictly limit or eliminate all other beverages.”
Sadly I report that the dairy industry has lost one of its biggest contributors and I lost a good friend and mentor in the Sept. 19 passing of Jerry Dryer after a hard fought battle with cancer.
Jerry was the founder and editor of the Dairy and Food Market Analyst newsletter, he worked at the National Milk Producers Federation, USDA, Dairy Foods, Cheese Reporter, and served as the chief market analyst at Rice Dairy. He founded Cheese Market News and JDG Consulting and was a regular guest on my radio program DairyLine for many years and a frequent voice on the Monday shows of Dairy Radio Now.
In our last broadcast together on May 27, he predicted cheese would hit $2 per pound and he was right. Fellow analyst and partner, Matt Gould, paid tribute to Jerry’s keen market abilities in our September 30 DRN broadcast.
Gould said Jerry had a huge network across the industry, was very in tune with trends, and was well known for what he called “looking into his crystal ball.” He said that Jerry had been in the industry for more than 40 years but the thing he will likely be most remembered for was his mentoring. Gould said he doesn’t think there’s a single leader in the dairy industry that hasn’t been touched by Jerry at some time or in some way or hadn’t sought Jerry’s counsel. We salute you Jerry Dryer and thank you for giving your time and talents to this industry.