Dairy Has Been a ‘Weather Market’ This Summer

Dairy traders extended the weekend as there was little activity on Monday. Block cheese held at $1.62 per pound and barrel at $1.5850, with no activity. Butter held at $1.9175 with one offer AT $1.92 going uncovered. Market analyst Alan Levitt, editor of the CME’s Daily Dairy Report, said in Tuesday’s DairyLine that dairy has been a “weather market” this summer as cheese and butter price are up 10-15 percent since July 1 and there’s a sense that butter could move higher but he’s not sure that cheese can go much higher.

Levitt said cheese continues to move at retail and the promotions we have seen on pizza has helped revitalize that category, boosting demand for Mozzarella in particular. Schools are starting again, he said, another avenue for Mozzarella cheese to move but cheese buyers do not need to go panic and build inventory, he said, because there’s plenty of inventory on hand and buyers are comfortable with the pipeline stocks that are already there.

I mentioned USDA raising its 2010 milk production estimate by over 1 billion pounds and Levitt pointed out that cow numbers are coming back and he expects  July numbers, issued Wednesday, to be up 2.1 percent from a year ago in the 50 states. Cow numbers might be down a little due to the CWT culling, he said, but the trend is for more cows and production per cow “has been going gangbusters.”

“Everybody is revising their forecast,” Levitt said, “And sexed semen may have something to do with that as well because there seems to be plenty of heifers waiting in the wings.”

On the other hand; hot weather and humidity are doing a number of milk production and component levels. Milk production continues to decline seasonally and will until November, according to Levitt, “So we’re on the downswing of that although cheese production seasonally starts picking up in August and butter production starts picking up in September.” “The yields are definitely a concern,” he concluded. “Fat tests are running at 20 year lows so that’s definitely a concern.”