Archive for the ‘Dave Kurzawski’ Category

We’re “Kinda Divorced” From World Market

July 18, 2014 — U.S. dairy product prices appear to amaze traders but clouds are appearing on the “price horizon.” Jerry Dryer’s recent Dairy and Food Market Analyst warned
that global milk production will overwhelm demand for the next five years, according to a recent analysis by Goldman Sachs.

We talked about those clouds in Friday’s DairyLine with FC Stone dairy broker, Dave Kurzawski. Kurzawski explained the jump in butter to a “tight market” and said cheese was

Dave Kurzawski, FC Stone

Dave Kurzawski, FC Stone

“acquiescing to that.” He explained that cream is very tight in the country as ice cream sales are good.

“We’re pretty much divorced from the world market,” Kurzawski stated, “But we are still alive and well on the butter market and probably aiming at that $2.50 (per pound) mark.”    Regarding the prediction on milk production, Kurzawski argued that it’s hard enough to look three or four months ahead as to what will happen to milk supply and demand but “They’re (Goldman Sachs) probably not too far off in the fact that we should expect more milk production in 2015 and probably more still in 2016. Without question, that’s the trend that we’re going to be on,” he said, “But right now I still think we’re going to be hovering around 1 1/2 percent for the balance of the year.”

Kurzawski doesn’t see any big moves in the U.S. milk supply but globally, New Zealand coming back strong and will come back strong in the new season “so we have to expect that but more than that is the demand out of China.”

Kurzawski said “It’s hard to believe when you see butter over $2.40 per pound and cheese over $2, at sustaining levels, so it’s easy to become complacent but reality is that China is currently overstocked on powder and anhydrous milkfat and that will eventually make its way through the global market chain and it’s going to come back to roost here in the U.S. with probably lower prices some time by the Fourth Quarter.”

No Crash in Cash Cheese or Butter

June 13, 2014 –  No crash in cash cheese or butter….That’s  the read of FC  Stone dairy broker Dave Kurzawski. Speaking in

Dave Kurzawski, FC Stone

Dave Kurzawski, FC Stone

Friday’s DairyLine, Kurzawski said the cheese  market seems more stable right now and he credited pipeline refilling as buyers  try to replenish supply from previous sales. But, he admits that we’re putting  more milk into the cheese vat right now and he sees that continuing for awhile  and more cheese will be made over the next 30-60 days than less. That will  result in continued pressure on spot prices, he warned, and he expects lows in  the $1.85-$1.90/lb. range.

Butter wise, Kurzawski says the market is tighter right now and he  pointed to strong ice cream sales as cream demand is strong. He doesn’t see much  downside for butter, in fact the “pricing skew,” he said, is directing milk out  of the churn and more into the vat as “manufacturers don’t want to make a ton of  excess butter at these price levels.” He looks for “inflated butter prices” for  at least the next 30-45 days.

DairyBusiness Update editor Lee Mielke asked him how he, as a long time dairy broker, views the Farm Bill’s  new safety net for dairy farmers, the “Margin Protection Program.” Do you, in  any way, see it as a threat or competition to using dairy options and futures  for risk management?

He admitted that there’s a lot of talk of that potentially cannibalizing some of the sell side interest on the futures and options market but he doesn’t quite agree. He called the program “a good tool, a progressive tool as far as from a government perspective, a government program that has been put out.” He said it’s a “real advancement in that sense,” but believes it will be used to “augment a producer’s risk management plan, not replace it.”

Cheese Could Lose Another 5-10 Cents/Butter Will Stay Lofty

May 15, 2014 — The cash block cheese price fell below $2/lb. this week, first time since December 19, 2013, and now even butter may get caught up in the down draft. After reaching

Dave Kurzawski, FC Stone

Dave Kurzawski, FC Stone

the highest level since May 2011, butter dropped Wednesday but was unchanged Thursday. What’s behind the fall and how low will prices go?

FC Stone dairy broker Dave Kurzawski, said in Friday’s DairyLine that the market is “Still trying to figure itself out or trying to fix some of the problems that we had earlier in the “Demand has dropped,” he said, “Courtesy in part to weaker prices internationally and it’s starting to spread into the U.S. market.” “That’s the concern, going forward,” he said, although he still believes there’s “good underpinning demand that we have to work through.”

How low will cheese prices go? Kurzawski looks for “equilibrium within the next 5 to 10 cents to the downside potentially.” “But, as we get into the hot weather in the next 30-60 days, that will become more of the talk of the town and if that happens it’s going to be hard for this market to fall off a tremendous amount from where we currently are.”           Kurzawski doesn’t see a whole lot more down side for the short term, in other words the next several months, “but as we go into the latter part of the year, depending on how New Zealand and Australia start back up their season and how European milk production and sales go, things could slow down more as we close out 2014.”

Will ice cream sales prop up the butter price? Kurzawski said ice cream sales have been really strong so far this year and has been a good boom for butterfat demand. He said a lot of people were caught off guard coming out of the Easter holiday expecting to see cream demand drop off but that hasn’t happened yet.

“And, since we haven’t seen a real heavy flush of milk production in the Midwest, the Upper Midwest in particular, it remains to be seen if that milk goes into butter production or cream production. Going forward, butter prices in particular, are going to stay lofty for longer than I think people can see at this point,” he concluded.

Was it a Late “April Fools” Thursday at the CME?

April 4, 2014 — The Global Dairy Trade (GDT) auction has dropped three sessions in a row and product prices have plummeted. GDT Cheddar, for example,  on Tuesday finished at

Dave Kurzawski, FC Stone

Dave Kurzawski, FC Stone

$2.0130 per pound, while the CME price, Thursday, jumped 3.75 cents, to $2.4225, almost 41 cents above the GDT price and remains the highest priced cheese in the world. Was this a delayed April Fool’s?    FC Stone dairy broker Dave Kurzawski, speaking in Friday’s DairyLine, said it certainly seems that way. The CME block market is a “fresh block market, a young cheese between 4 and 30 days old” Kurzawski explained. “It’s a small sliver of what’s really going on and that market still seems to be very tight.”    That said, Kurzawski  expects to see some pushback, both domestically and internationally, plus, he warned that having the world’s highest priced cheese has “put a target on our back” and could potentially attract cheese imports. He adds that barrels are “sluggish” but “a bid could come along just to tighten up the spread,” which is now at  19.25 cents.

When asked how significant the GDT auction is, as some suggest it’s too thinly traded to give much credence to, Kurzawski shot back, “We don’t have a global price index outside of the GDT. That’s our best guess for what’s happening globally.”  “You can say what you want about the liquidity on it but, at the end of the day we are looking at the best price discovery mechanism that we have for a global dairy price.”

When asked about butter and powder, Kurzawski pointed out that “powder led the Class III up and powder led the whole dairy complex up but you’re starting to see real weakness on the GDT which was down  in both those areas.” Butter was down 11%, he said, skim milk powder was down 9.6%, and whole milk powder was off 8.6%.

“These are some big numbers and the GDT was down 4%, two events ago, then 5.2% in the next event, and down 8.9% on Tuesday. The market is trending lower,” he said. “That doesn’t mean it will always trend lower but it does mean that we have to find a price where buyers are willing to come back in.”

He views the GDT as “the canary in the coal mine” for U.S. prices and he believes U.S. prices will ultimately follow “to some degree.” However, he does not see block cheese plunging to $1.70 but suggests “They’ll come down at some point, perhaps $2, $1.90, or $1.95.”

How Low Will Cheese Prices Go?

Dave Kurzawski, FC Stone

Dave Kurzawski, FC Stone

February 14, 2014 — Cash cheese prices set new record highs at the end of January but plunged last week, although they’re still unseasonably high and still above $2 per pound.

On Friday’s DairyLine, Lee Mielke asked FC Stone dairy broker Dave Kurzawski how low they would go. Kurzawski said there are two camps out there, one that believes we’re settling into a stabilized price at $2.1050 per pound on the blocks and $2.06-$2.07 on the barrels.
The other camp believes that the market clearing price is somewhere below $2, perhaps $1.90 or $1.85 per pound and the split between the camps is 50/50.

He thinks there is cheese that is coming to the CME but there’ll be buyers stepping in although end users are still in a “wait and see mode.”
Export prospects for 2014 are still good, according to Kurzawski, but will “ebb and flow like any other year.”

“We’ve spent the better part of 8 to 12 months looking at burgeoning export prospects,” he explained, “And they will ebb and flow and if that’s so we could be at a period now where things start to slow down as milk production comes on, pretty strong out there in Europe.

He adds that there’s a “very competitive atmosphere” right now on butter and cheese out of Europe where “they’re taking some of our business.” As that happens, he warns that “our price has to adjust to be competitive.”

As to his read on butter overall, salted butter in the U.S. is largely tight, he said, but exports have slowed some. He said we may be entering a period now of “quiet trading, sideways, in the mid $1.70s” until we get to the Easter holiday.

Hot Cheese Market Takes a Breather

FCstoneJanuary 10 — The  cash cheese markets have been quiet the past couple of days - after some impressive gains earlier in the week. FC Stone’s Dave Kurzawski shares his insight with DairyBusiness Update’s Lee Mielke.



Whey Price Dip is Substantial

December 13, 2013 — FC dairy broker Dave Kurzawski said on this morning’s DairyLine that the large spread between block and barrel cheese will eventually come back in line and “the pattern the past several months is that when the spread gets out of whack the barrels rise to meet the blocks and that patterns seems to still be in people’s minds as we enter the second half of December.”

The big issue Thursday was the future’s response to the cash bidding. The response was relatively negative, he said, steady to about 8 cents lower. Class IV, nonfat, and butter futures were down as well, he said, and indications to him are that this is a short-lived scenario we’re seeing.

When asked if the failure to pass a Farm Bill was having any effect on the markets, Kurzawski replied, “Not really. The market hasn’t focused on the fact that Congress can’t get it together,” and commenting on Land-O-Lakes joining the Global Dairy Trade auction, Kurzawski said it was a “step in the right direction.” He believes there’s going to be more and more of the large U.S. dairy based processors getting involved with global export and certainly global pricing.”

The 3.4¢ fall in the AMS-surveyed dry whey price is also weighing on trader’s minds, according to Kurzawski. “The questions are coming fast and furious as to why this is going on,” he said, but he is also hearing that dry whey has been trading slightly below the AMS prices anyway. “It is a substantial drop,” he said, “And we’re not sure why that is but there’s been talk that there’s some supply out there that’s starting to make its way to the market.”

Domestic Cheese Prices Strengthen

August 27, 2013 –  Cheese prices at the Chicago Mercantile Exchange have seen a correction after taking a dive early last week. FC Stone’s Dave DaveKurzawskiKurzawski joined us on Tuesday’s DairyLine to discuss.

“When we were south of $1.70 that seemed to be a little too cheap relative to the world prices,” he said. “There’s no question there is product available on the fat side.”

We are seeing some large inventories to work through for both for butter and cheese, he said.

“Also, we have ho-hum milk production growth right now pegged against international demand that is more robust than domestic demand has been for the month of August, which is pretty typical.”

Domestic demand for U.S. product really starts to pick up past the Labor Day Holiday, so Kurzawski cheese prices to strengthen back up to the mid $1.70’s or low $1.80’s as we move into the month of September.

He’s also keeping an eye on the grain markets after the recent heat dome over the Midwest.

“There is some question whether that’s going to hamper the bean market, more so than corn,” he said. “With the Pro Farmer tour underway and trimming estimates from July on already corn and beans, I think that lends support to the 2014 contracts for milk.”

He says for producers looking to hedge, – “Certainly let the market come up a little bit as we get into the holiday demand time frame,” he concluded.

Listen to Podcast:

CME Cheese Priced Out of the Market

(August 21, 2012) USDA’s July milk production came in “more bearish than expectations,” according to Dave Kurzawski, FC Stone dairy broker. “I think the wide variety of market participants were looking for a negative number when actually it came in at 0.8%,” he said.  

He said the seeds were already sown for declining cheese prices prior to the milk production report as prices have been priced out of the market. Recent cheese prices have been ranging from $1.80 to $1.90, and Kurzawski said, “that really priced us out of the market from an export perspective, and the summer doldrums has put demand domestically lower, and any export business that we hoped to have, we kind of shut the door on that when we got over $1.80.” 

Also, just because feed prices are up, doesn’t necessarily mean the cheese or milk price is going to follow. Kurzawsk said we have to weigh the supply versus the demand. And demand is pretty quiet, but he doesn’t expect to see a big drop in the cheese price, although it could be pushed back down into the $1.70’s . “At that point you start to see the buyers step out of the woodwork and try to get some cheese coverage.” 

As far as Class III is concerned, you have a pull back that is now starting, a corrective pullback that doesn’t necessarily mean that the “on farm economics are repaired or there’s anything that is real bearish out there from that standpoint.” 

Don’t expect the Class III price to go up just because we are in a bull market. There will be periods of setbacks, and Kurzawski believes we are in one of those periods right now.

“The reality is, we have gone from $14 in May to $20 in the middle of August for Class III futures, and there ought to be some kind of correction here to the downside.” 

“The weather has been baked-in, but what has not been baked-in is the poor on dairy farm economics, and that’s something we are going to have to be wrestling with not for another 30 to 45 days but probably the next 3-6 months, and maybe longer ” he said.

Cheese Market: Buy The Rumor, Sell The Facts

(June 21, 2012) It’s been a roller coaster ride for CME block cheese the past couple of weeks. The blocks were trading at $1.70 last week but then dropped to $1.6250, a quarter-cent below the barrels as of June 21.

“Maybe it’s buy the rumor, sell the facts scenario,” FC Stone dairy broker Dave Kurzawski told DairyLine. “The rumor being…there’s been a real worry for some milk supply to slow up here as we go forward.”

He cited good first half reports of export demand that could have attributed to the rise in prices. “The first part of the year, demand wasn’t expected to be quite as strong as it has turned out to be for cheese.”

The $1.70 mark appears to be the threshold for block cheese. “I think that’s where people start saying this is going to shut off exports that we do have,” he said. “This is going to slow things down because we do have cheese available, there is some fresh product out there and so we saw that start to come to market last week.”

Butter and cheese performed stronger than expected recently, but Kurzawski believes we are probably running out of steam on both. Although the latest milk production report will help.

“We’re not in a situation of dire straits with milk supply yet, the questions are what kind of July, August and September type weather are we going to have, and what is that going to do to milk supply.”

It is already pretty hot in certain areas of the country, we have had some reprieve but so far we are on track for what looks like a hot, dry summer. Kurzawski said for the dairy complex over the past month as been like, “Let’s shoot first and ask questions later. Let’s make sure we are prepared, we have the product bought and put away and we’re not guessing about moving forward.”

The markets breathed a collective sigh of relief after the much-awaited Greek elections Sunday saw the new democracy party winning by a thin margin.

“It does speak towards a unification there for Greece. At least a staving off of what could have been a currency debacle…away from the Euro Zone…that would have been a very deflationary event for commodities globally as well as U-S commodity markets.”

Moving forward, perhaps kicking the can down the road a little longer here with the problems in Greece. Now the focus is more on Spain