Ring the Bell: CME spot Cheddar barrels made two new record-highs last week. The first came on Tuesday, as the market bested the previous mark of $2.53/lb., settling at $2.565/lb. on eight trades. The following day, the record was broken again, this time at $2.6225/lb. For the remainder of the week, markets retreated, settling at $2.59/lb. on Friday. Very tight supplies of barrels have pushed prices to these sky-high levels. Additionally, value deals at fast food burger outlets, which feature cheeseburgers, have provided a small bump in demand, further elevating prices. The team at HighGround anticipates that markets will correct but remain supported at $2.00-$2.20/lb. and that the block-barrel inversion will persist for a couple of months.
Red Elsewhere: The weekly averages of all other CME spot commodities fell, however. Butter dropped below $3.00/lb., for the first time since the end of April. While domestic product utilization has been substantial throughout 2024, production has kept up, and stocks have been decent, the market may finally be getting this message, explaining the downward price momentum experienced this past week. Cream availability has increased, allowing for more churning and less need for bulk butter. CME spot Block Cheddar fell to $2.2375/lb. on Friday, cooling from Monday’s high of $2.30/lb.
GDT Muted: Global Dairy Trade completed its September events last week, and the overall index increased 0.8% compared to the auction two weeks prior. A gain is a gain, but many expected a more significant increase as Oceania prices raced to catch up with European and US dairy commodities. That was not the case, though. Fats, i.e., butter and anhydrous milkfat, dropped, and while powder prices increased, the gains were smaller than traders expected.
Butter and Cheese Utilization Rise in July: Cheese and butter usage rose in July (+1.4% YoY and +5.8% YoY), while the remainder of dairy commodities, powders, fell. Within the total cheese category, other cheese climbed 3.9% versus July 2023, but American cheese dropped 2.3% YoY on smaller domestic and export sales. Domestic utilization of nonfat dry milk, dry whey, whey protein concentrates, and lactose all fell versus the prior year, keeping the total disappearance numbers below July 2023’s numbers.
European Milk Production Falls in July: EU-27 and United Kingdom milk production decreased by 0.8% compared to July 2023. Germany, the bloc’s top milk-producing country, produced 1.3% less milk in July 2024 than in the prior year. The Netherlands, ranked in the top-five milk producing nations on the continent, saw its milk collections fall 3.1%. Both places have been impacted by Bluetongue, which has significantly impacted milk volumes across the pond, pushing commodity prices to all-time highs, e.g., butter at $4.00/lb. or more.
August Milk Production Logs 14th Month in a Row of Decrease: USDA released August’s milk production data late Friday afternoon, with August posting a 0.1% decline against the prior year. This was the smallest YoY decrease during the 14th-month downturn and hints that volumes may return to growth soon. The US herd is 9.325 million head, unchanged from July and down 40,000 cows from August 2023. Milk per cow rose eight pounds YoY, though, limiting losses. Of note, California’s output climbed 2% YoY, while Wisconsin was down 2.3% YoY, a change from just a few months ago when Western milk volumes were slowing while the Midwest was growing. Additionally, Texas and Kansas have posted two strong months of growth, which will help fill the new capacity that will begin production later this year or early next.
Last Week’s Reports & Analysis
August 2024 US Milk Production Report Analysis
US milk production has declined versus prior year for the 14th month in a row. The story of Midwest versus Western production has flip-flopped, though, with Upper Midwest states showing decreases… Full Report
July 2024 EU-27+UK Dairy/Milk Production Analysis
July’s cumulative decline highlights the impact of Bluetongue on European milk production – especially when considering the scale of the impact on the largest European producer, Germany, along with the… Full Report
Reports/Events This Week
- Crop Progress Report – Monday, September 23
- Aug ’24 China Dairy Trade Report – Monday, September 23
- Aug ’24 New Zealand Dairy Trade & Milk Production Report – Monday, September 23
- GDT Pulse Auction – Tuesday, September 24
- Weekly EU Dairy Commodity Prices – Wednesday, September 25
- National Dairy Products Sales Report (NDPSR) – Wednesday, September 25
- Pre-GDT Fonterra Offer Volume Forecast – Thursday, September 26
- USDA Dairy Market News Weekly Midpoint Prices – Thursday, September 26
- USDA Upper Midwest Spot Milk Basis – Thursday, September 26
- USDA Weekly Dairy Cow Slaughter Report – Thursday, September 26
- Aug ’24 US Cold Storage Report – Thursday, September 26
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