April 18, 2014 — Last Friday’s small cheese price rally turned into a sustained recovery this week and reversed 3 weeks of declines. The cash blocks tacked on another 5.75¢ this morning on 4 sales, ending the Good Friday holiday-shortened week at $2.28/lb. The 1st 3 sales were at $2.2325/lb., with the 4th sale at $2.28/lb. An unfilled bid again rolled the barrels higher, this time 7¢, following yesterday’s 2¢ rise, and closed today and the week at $2.2575/lb., 2.25¢ below the blocks.
The blocks are up 11¢ on the week, 40¢ above a year ago, but 15.25¢ below their record March 24 peak. The barrels are up 17.75¢ on the week, 48.75¢ above a year ago, but 12¢ shy of their record high.
Four cars of block traded hands this week and none of barrel, the barrel price gains all came on unfilled bids so someone must be breaking out the barbecue grill and needs some cheese. The still climbing NDPSR-surveyed block price hit $2.4149/lb., up 1.6¢, while the barrels averaged $2.3440/lb., down 1.5¢.
FC Stone market analyst Ryan Cox wrote in this morning’s Insider Opening Bell that “International prices have weakened, but demand is decent. Retailers were reluctant to bump up prices.”
Cash butter was unchanged, after 3 days of loss, and closed at $1.89/lb. An offer at $1.90/lb. was again left on the board. Cash butter resumed its decline this week, after holding all last week at $1.97/lb. It is down 8¢ this week but still 10.25¢ above a year ago. Seven carloads traded hands this week. NDPSR butter averaged $1.9839/lb., up 2.5¢.
Cash nonfat dry milk dropped 2.5¢ this morning on an offer, and closed the day and the week at $1.8650/lb., down4.25¢ on the week. Twelve carloads found new homes this week in the spot market.
Cox says “The nonfat market has been weak and buyers have been stepping aside, expecting prices to weaken further based on international markets.”
Dairy Margins Deteriorating
Dairy margins deteriorated since the end of March due to both weaker milk prices and higher feed costs, according to the latest Margin Watch from Chicago-based Commodity & Ingredient Hedging LLC.
Margins remain strong in nearby Q2 at the 96th percentile of the previous 10 years, while deferred margins are at or near the 90th percentile through the first quarter of 2015. While still very high from a historical perspective, milk prices have started to slip recently following weakness in dairy product values.
Both block and barrel cheese prices have generally been in retreat since late March while cash butter prices on the CME have similarly experienced weakness after flirting with $2.00/lb. recently.
The latest results of the Global Dairy Trade auction reflected the fifth consecutive drop in price, with all products declining except anhydrous milk fat.
Corn prices meanwhile have firmed recently in response to tighter stocks reflected in the April WASDE report along with slow planting progress. USDA reported corn ending stocks down 125 million bushels from March due to a similar increase in the export forecast, with the figure falling on the low end of trade expectations. USDA also released the first crop progress report of the season, with corn plantings at 3% complete through April 13 vs. 6% on average for this point.
Soybean meal prices are also drawing support from USDA reporting soybean ending stocks down 10 million bushels from March, suggesting a continued tight supply of soybean meal through the remainder of the season. For more details, log on to www.cihmarginwatch.com