Pressure On Cheese Market May Not Go Away

Monday’s March Milk Production report is bearish but may not necessarily impact cheese prices, according to Downes-O’Neill dairy broker, Dave Kurzawski. Speaking in Wednesday’s broadcast, Kurzawski said there’s been pressure on the cheese market in the past six or seven trading sessions and while, that pressure “may not go away today,” he believes demand will respond to a price that’s now “south of $1.40.”  

Pointing to the January and February downward revisions of milk output, Kurzawski said “We’re starting from a little bit lower point of total production than we initially thought but that number is relatively bearish for the market right now.”  Weather is also improving and the spring flush is occurring around the country so there’s not much worry of a shortage of milk production right now he acknowledged, but “The caveat here is that Wisconsin, Washington, Michigan, and Idaho (states registering sizable increases) are not the only places that we need to be producing milk.

The world needs milk to make their products so while we have a bearish report here I tend to think that the bubbling of demand from butter, nonfat powders, and the dry whey powder markets will ultimately supersede this milk production report.”  Oceania is struggling with low milk production, according to Kurzawski. New Zealand is in a two month draught and didn’t have a great flush a few months back and output is 2 1/2-3 percent below that of a year ago. Australia is down 5-6 percent, he said, “So we have to look at the supply of milk from a worldwide standpoint, not just what’s going on here domestically.”  Kurzawski suggests producers lock in a floor price, admitting that “today may not be the day to do that but they should be shopping around for the best possible/worst case scenario price.”  

He remains relatively bullish for milk prices for the next 60-90 days and believes futures prices will “give these guys a good opportunity to lock in that floor price to potentially market milk outright and lock in a profitable level to bring to the dairy.” Looking ahead on our week; the Agriculture Department’s monthly Livestock Dairy and Poultry Outlook is issued this morning. the March Cold Storage report is out tomorrow afternoon, and Friday morning USDA issues its monthly Livestock Slaughter report and the May Federal order Class I base milk price is announced.