Mother Nature Impacting Spot Markets

July 23, 2013 — BillBrooksThe cash cheese market continues its upward climb thanks in part to Mother Nature. CME block cheese shot up another 4 ½-cents Wednesday to $1.7725, while the barrels increased 1 ½-cent to $1.72.

“I believe a lot of it has to do with the weather that we’re seeing across the country,” Bill Brooks, FC Stone dairy economist told DairyLine. It’s been hot in the Pacific Northwest and a typical July in the Midwest with average temperatures.

“In the area where I live in (near Kansas City), we’re slowly getting dry again as the drought works its way from the Southwest,” he said. That’s having an impact on dairy cow comfort and milk production, especially on the cheese side of it.

“That probably is getting a little bit tight, or if it isn’t, folks are hanging on to it because of the heat and the fact they are seeing lower milk receipts come in from farms and components are lower so the yields are less as well and buyers are trying to get ahead of that,” he said.

This is despite the fact that we continue to see heavy inventories of cheese in our cold storage facilities, but Brooks said it doesn’t fit the category that we would trade at the exchange.

“I’m not positive that (these prices) are completely sustainable given our inventories out there, but at least at the moment it’s a positive for dairy producers to move up above last year’s levels.”

June’s milk production showed an increase of 1.6 percent over a year ago for the 23 reporting states, and an estimated increase of 1.5 percent for the U.S. This marks the third straight month of high milk production compared to the same month year earlier. However a year ago increases in milk production began to decline in May due to a widespread drought.

“From a historical standpoint…we see the biggest reduction in month-to-month milk production in July and then the reductions start to get a little bit smaller as we go towards October,” Brooks said. “By November, we’re back into the situation where milk production is increasing over the previous month and sometimes that happens in October…and that might be the case this year, especially if the forecast holds up and we see a little bit cooler temperatures over the next couple of weeks.”

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