Archive for the ‘Jerry Dryer’ Category

Cheese Will be Choppy

June 6, 2014 — Look for “choppiness for the next several weeks” in the cheese market, according to Jerry Dryer, Editor of the Dairy and Food Market Analyst. Speaking in Friday’s

Jerry Dryer Dairy Market Analyst

Jerry Dryer
Dairy & Food Market Analyst

DairyLine, Dryer said the market is “trying to figure itself out.” He adds that the outlook is that supplies are going to be relatively tight however we’re working through the spring flush right now and, while milk has peaked in the Upper Midwest, you still have cheese coming out of the vat and cheese coming out of the cooler as it has to sit in the cooler 10-15 days before it’s eligible to come to the CME or the market. “So you have a little extra product hanging around the edges,” Dryer said, but he believes prices will hover about 2 cents below or above $2 per pound.

First Quarter 2014 commercial disappearance of milk and dairy products was up 3.3% from a year ago, according to USDA’s latest estimates. The data closely matches Dryer’s numbers however Dryer used data from this week’s Dairy Products report to project disappearance through April. Doing so, Dryer reports that disappearance has likely eased some from that 3.3 percent but is still “very strong.”

For the three months ending in April, Dryer reports American cheese disappearance was up 2.4 percent and other cheese was up 3.5 percent. The total cheese category was up about 3 percent and he noted that, interestingly, U.S. cheese sales were down 2.5 percent in that period. All of the increase was attributed to exports, he said, and he reported that he had just got off the phone with a cheese exporter who told him that he was “optimistic about the future and is writing orders as we speak.”

First Quarter butter disappearance was down, according to Dryer, but has since popped sharply higher, up 6.2 percent, in the most recent three months.

“Demand and usage of dairy products has remained relatively strong,” Dryer concluded, but he warned that “Higher prices are going to keep taking a toll on those consumption numbers as we move through the next three or four months.”

High Cost Cheese Hurt April Demand and Sent Prices Plunging

 May 9, 2014 — Cash cheese prices, while trying another rally currently, have plummeted from their recent highs again, but are still well above historic levels for this time of year.

Jerry Dryer Dairy Market Analyst

Jerry Dryer
Dairy Market Analyst

When asked in Friday’s DairyLine, what was behind the downfall and was there a drop in commercial disappearance, Jerry Dryer, Editor of the Dairy & Food Market Analyst, answered; “Not through the First Quarter.”    Through March, American cheese disappearance was up 2.7 percent and other cheese disappearance was up 4.2 percent, he said, and he credited “very strong exports and pretty good domestic use,” but blamed the recent correction in the cheese price to “more recent history, the month of April,” due to push back from the higher prices. That combined with seasonal increases in milk production and a small bump up in the solids content of milk, he said, and “the market is trying to find a new level.” Dryer believes the market will put in a floor at current levels for the near term.    Dryer doesn’t put a lot of stock in the Global Dairy Trade (GDT) and when I asked him if the GDT cheese price downfall may have contributed to the domestic price falling, he said “I doubt it.” He believes it was “Probably things happening right here in this market.” Most of the product available from Oceania is pretty well committed, Dryer said, “And is pretty thinly traded in the GDT.”

When asked about butter at an unseasonable $2.1550 per pound, he credited strong exports, adding that “Commercial disappearance hasn’t been a pretty picture.” Domestic sales have been “sluggish,” he said, but exports have been strong and “Is a poster child for the way prices swing.”

Commercial disappearance for butter was up double digits for the three months ending in January and flat for the three months ending in March, according to Dryer’s data, “And now we got a pop again in April,” which he attributes to “Strong exports given tight supplies in Europe and tight supplies here for a whole host of reasons.”

Cheese/Powder Prices Softening but Dryer Still Bullish

March 28, 2014 —   Buyers are in hand-to-mouth mode,  according to Jerry Dryer, editor of the Dairy and Food Market Analyst. Speaking  in Friday’s DairyLine, Dryer said,  there’s push back as they contemplate the spring flush and the additional milk  that will becoming available. The Class III price is quite a bit higher than the  Class IV price, so that has moved some milk from powder to cheese, from  Mozzarella to Cheddar in the Upper Midwest. Cheese is coming to the market, he  said, in response to the higher prices.

Dryer believes commercial disappearance may be higher than USDA’s latest  data suggests, citing butter as an example. Dryer said USDA did not revise an  inventory number in their calculation and, while Dryer prefers three-month  rolling averages as opposed to monthly numbers, his data suggests January butter  disappearance was up  16.7 percent,  but more significantly, over the most recent three months, it was up 17.9  percent, he said.

American cheese wasn’t real strong  in January, according to Dryer, and was only up about 0.8 percent in the last  three months, but other-than-American cheese, like Mozzarella, Gouda, and some  of the cheese being exported, was strong, up more than 3 percent for the most  recent three months and for January.

“Cheese has continued to move  well,” Dryer said, “And disappearance was probably very good in February and  even in March as these prices haven’t pushed through to retail quite as fast as  they frequently do.”    While USDA data suggests nonfat dry milk disappearance was down in  January, Dryer reiterated that one month doesn’t make a trend. His data has it  up almost 4 percent during January and up 10 percent for the most recent three  months. Furthermore, USDA data doesn’t include skim milk powder, as Dryer’s  does, and “that’s the big mover in exports,” he said.

Dryer sees “relatively high  prices” for the next month or so. “We will come off those record highs on cheese  and powder, although butter appears to be moving higher at this point,” he  concluded,  “But, continued good  strength although not as high as we’ve seen in recent  weeks.”

$2 Cheese Will Stick Around Awhile

march 7, 2014 — Cheese prices hit record highs last month, then slumped, but are climbing back up again. Speaking in Friday’s DairyLine, Jerry

Jerry Dryer Dairy Market Analyst

Jerry Dryer
Dairy Market Analyst

Dryer, editor of the Dairy and Food Market Analyst, said “It’s called supply and demand and demand is very strong both here and around the world and supply is a little bit snug.”   

He cited this week’s Dairy Products report showing Cheddar production, which is primarily block cheese, below a year ago again and total American-type cheese was only up modestly. And demand is strong.   

He believes we could see $2 cheese through the end of March and said it’s looking more likely to be here well into the Second Quarter. International buyers who took a lot of cheese out of the U.S. last year, and in October and November, before the markets starting advancing, hedged their purchases through the first half of the year, Dryer said. He speculates that it sold in the $1.85 per pound range “so that’s what they’re paying for the cheese despite these higher prices at the Exchange.”  

Switching to commercial disappearance data, Dryer said he has pulled 2013 data together in both the domestic and export side of the business. Commercial cheese disappearance was around 11.5 billion pounds, according to Dryer, up 3 percent. U.S. sales were up 2 percent, he said, and up 22 percent on the export side, ?a very significant force and price driver.”   

Commercial butter disappearance was up about 5 percent, Dryer reported, actually a bit lower in the U.S., he said, but up about 90 percent on exports.   

Ditto on nonfat dry milk, which is very important to this current market, he concluded, as “The higher nonfat dry milk price is helping support other milk prices.”

Dairy Commercial Disappearance “Very Strong”

Jerry Dryer Dairy Market Analyst

Jerry Dryer
Dairy Market Analyst

February 7, 2014 — USDA reported November dairy product commercial disappearance was up 5.4% from a year ago but Jerry Dryer, editor of the Dairy and Food Market Analyst, is a step ahead, working on December, according to Friday’s DairyLine interview.

“December disappearance, driven primarily by exports, were very strong,” Dryer said, adding that he likes to look at three month numbers instead of single month data. Fourth Quarter was very good, according to Dryer, and while American cheese disappearance was only up about a half percent, other than American cheese was up almost 4 percent, “so the total cheese category was up 2.6 in the last three months of 2013,” he said.

Butter was up about 11 percent, according to Dryer’s data, nonfat dry milk/skim milk powder was up almost 16 percent, and dry whey was up from a year ago for the first time in over a year, up about 1 percent in the Fourth Quarter. He has also started to track whole milk powder and it was up almost 40 percent, he reported, “as the U.S. wades into that export market.”

The “dark cloud” moving in may be the record high prices but Dryer says not in the near term. “Much of these exports were hedged,” he said. “The Cheddar cheese that left U.S. ports in December had an average price of $1.86 per pound so those customers overseas had hedged themselves against $2 plus cheese.” Orders are typically placed well in advance, Dryer said, and manufacturers have told him they have cheese exports sold through Second Quarter and almost all of that is hedged “so those exports will keep moving.”

The high prices will eventually come home to roost and affect retail sales, according to Dryer. He pointed to pizza makers who are probably already trimming cheese use here but he quickly adds “There’s still good hedging opportunities in the futures market for the second half and there’s been quite a bit of trading activity there. It looks like some of our customers overseas are protecting themselves again higher prices in the second half of the year,” he concluded.

Current Cheese Prices: Day of Correction Coming

 

Jerry Dryer Dairy Market Analyst

Jerry Dryer
Dairy Market Analyst

January 17, 2014 — We have seen cheese prices soar since the first of the year. Block cheese is up almost 23 cents since the first of the year and butter is up over 27 cents, what is going on?

“It’s called supply and demand,” said Jerry Dyer, editor of the Dairy and Food Market Analyst. “Demand is very strong with the cheese price. I was reasonably comfortable with the $2.20 price, but the spike late this week has hastened the day of a correction, because it probably won’t be the only spike over the next week or two, and that’s going to start putting a dinger in demand.”

Dryer reported that the market is also being supported in large part by strong exports, and those exports are by and large hedged and sold out well into the second quarter.

“So $2.25 or $2.30 cheese doesn’t make any difference to that buyer,” he said. “They bought it at $1.75 or $1.85. So there’s still some support for the market, but these higher prices will hasten a correction lower, although it still could be a month or two out.”

How soon will we see the downfall?

“That’s a question I don’t have a good answer for, but, my take-away is first quarter exporters are pretty much sold out, and second quarter, almost sold out on the cheese side,” he said.

There is good support and additional support comes from strong powder exports which are moving some milk away from cheese and strong Mozzarella exports, which are moving some milk away from Cheddar.

It’s not just China that is behind all this. Pacific Rim countries are big buyers of our powder. Mexico is a big buyer of milk powders and of cheese. The Middle East is buying butter.

“The Russians are buying butter and cheese from Europe, taking them out of play in some of the markets where we are exporting. The international demand is broad based,” Dryer concluded.

Butter Continues Decline

 

Jerry Dryer Dairy Market Analyst

Jerry Dryer
Dairy Market Analyst

December 27, 2013 — Jerry Dryer, editor of the Dairy and Food Market Analyst, doesn’t put much stock into Tuesday’s drop in the cash butter price. Speaking in Friday’s DairyLine, Dryer said “One day does not a trend make.”  

He said he doesn’t see butter “doing its typical seasonal crash,” and credits strength in butter markets in the rest of the world. He reports that “The Russians seem to have an insatiable appetite and the butter price in Europe is over $2 per pound because they’re supplying that Russian market.” He adds that they’re even here buying butter so he sees “solid footing for at least for a couple more months.” 

Dryer concurs with Natzke’s view on October commercial disappearance possibly being at record levels. I asked about the questions raised over last month’s USDA commercial disappearance data and Dryer replied, “The USDA numbers are a little bit goofy on occasion. They apparently have invented some new math.”  

But he admits his own tracking and numbers agree that October disappearance was very strong. He reported that almost 19 billion pounds of milk and dairy products were used on a milk equvilent basis, up about 4.6 percent from a year ago when October 2012 disappearance was up 4.3 percent from 2011. 

Dryer said he “doesn’t put a whole lot of stock in the monthly numbers because there can be little glitches in the data and commercial disappearance is a residual number, but you step back and it’s still very impressive.” And, commercial disappearance was up 3.9 percent over the most recent three months, according to Dryer’s data, “so sales, dairy usage has been very strong.” 

When asked what this means for prices and how long we’ll see $2 cheese, Dryer answered, “I can’t answer the $2 cheese number but I can tell you that I think prices are going to remain elevated, well above historic levels, well into the First Quarter, maybe all the way through the First Quarter driven by strong commercial disappearance, which includes both good sales here in the U.S. and very very strong exports.” 

Global Prices Strengthen, But Not In Chicago

August 23, 2013 — Prices for most products in Tuesday’s Global Dairy Trade (GDT) auction may have strengthened but that’s not the case in Chicago. U.S. cheese and butter prices lag world prices

Jerry Dryer Dairy Market Analyst

Jerry Dryer
Dairy Market Analyst

significantly, according to Jerry Dryer, editor of the Dairy and Food Market Analyst. He reports in tomorrow’s DairyLine broadcast that Dairy Market News shows Europe and Oceania cheese is in the $2/lb. range and has edged a little higher the last couple months. Butter prices are $1.80-$1.90/lb. in Oceania and $2.50/lb. in Europe, according to Dryer.

When asked why the difference, particularly on butter, Dryer explained that U.S. manufacturers are reluctant to serve the international market because buyers demand 82% butterfat versus 80% in the U.S. and it’s usually unsalted for the world market “so it’s a little more difficult to make.” “They are starting to make it,” he concludes, “So we may see some reconciliation of prices but we need to be making that product day in and day out so we know how to do it and do it well and have it in inventory when the order comes.”

Product inventory indeed hangs over the markets. USDA’s latest Cold Storage data released this afternoon shows July 31butter stocks at 295.8 million lbs., down 23.1 million lbs. or 7% from June but 61.4 million lbs. or 26% above those a year ago.

American type cheese, at 704.5 million lbs., was down 1% from June but 5% above a year ago. The total cheese inventory stood at 1.152 billion lbs., unchanged from June but 5% above July 2012.

Looking to next week, USDA issues its August Ag Prices report on Friday August 30th which will include the latest milk feed price ratio.

MPC’s – Give and Take Products

Jerry Dryer, editor of the Dairy & Food Market Analyst and chief market analyst for Rice Dairy in Chicago, admitted in Friday’s DairyLine that MPC imports are “occasionally displacing domestically produced product in the U.S.” but “occasionally we need them. There’s a deficit on some of these products.”

MPC is a product the U.S. didn’t even manufacture until the late 1990s because of the dairy price support program which provided manufacturers the option to make nonfat dry milk and sell it to the government as a market of last resort.

A fair amount of MPC is used by food companies for various applications, according to Dryer, because it has a lot of the lactose removed from it, whereas nonfat dry milk does not, “so MPC has a specific application and specific uses so it is sought after by some food manufacturers.”

U.S. MPC output last year amounted to about 88 million pounds, according to Dryer, who also reported that MPC imports in 2008 amounted to about 109 million pounds and the U.S. actually exported about 62 million pounds “so it’s one of those give and take products.”

Dryer said there is talk in the industry that MPC is being used in cheese manufacturing and displacing milk and while some of that may be true, he said, much of the ultra filtered milk that is used in cheese making is produced right in the plant, that is some of the water and lactose is removed before the milk goes into the vat so it does some replacing, he admitted, but “it’s a product that we need and just isn’t manufactured in an adequate supply in this country right now.”

When asked about the legality of using this as a food ingredient in the eyes of the Food and Drug Administration, Dryer was unsure but said it should be legal. “It’s milk with a little water and lactose removed,” he concluded. “It’s certainly a pure and wholesome product. There should not be any health issue related to it.”

Reducing Milk Supply Raises Concern

Too much emphasis may be focused on reducing the milk supply and that may lead to milk shortages ahead, according to Jerry Dryer, editor of the Dairy and Food Market Analyst and chief market analyst for Rice Dairy in Chicago.

Speaking in Wednesday’s DairyLine broadcast, Dryer said a drop in demand is “what got us into this pickle, in terms of the economic crisis that consumed markets around the world and put a dinger in demand.”

But, domestic demand is very good, according to Dryer, based on the latest retail sales data covering March, April, and May.

Natural cheese sales were up 7-8 percent from a year ago, he said, there’s been a lot of promotion at retail, and people are eating at home more so that’s helped retail cheese sales. And, sales over the past year were up 3 percent, accordingto Dryer, “so sales have been strengthening the last few months.”

Food service cheese sales are also good, according to Dryer, as “the value menu is still important and it’s very cheese friendly at the McDonalds and Burger Kings of the world,” although high end restaurant sales may not be as good.

Dryer also says the dairy export side of the business is stronger than many expected, though it’s running about two thirds below a year ago but it didn’t absolutely fall apart and he’s optimistic that exports will improve as we progress through the year.

“Then why are dairy prices so low?” I asked. “Because we’re making more than the markets will absorb right now,” answered Dryer. Inventories were built late last year and were added to early this year, he said, “when demand wasn’t as robust as the numbers I’m showing you right now and it’s going to take us a while to chew through those inventories and it’s going to take a while to get demand back internationally at the level it was a year and even two years ago.”

So, yes it does come back to supply and Dryer said some production capacity needs to be “wrung out” but he’s concerned that too much will be lost because “We’ve been in this situation for so long that we may lose a big chunk of productive capacity and that would be tragic because, just about the time we lose a large chunk of it, we’re going to need it because demand will have recovered.”

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