Cheese market crashes

After showing glimmers of strength the first two days this week, the spot cheese market on the Chicago Mercantile Exchange (CME) crashed Wednesday (Nov. 30), with barrel cheddar falling nearly a dime per pound lower to $1.72/lb; blocks off almost a nickel at $1.77/lb. This put blocks back over barrels for the first time in five weeks.

The fall came on the heels of USDA’s commercial disappearance report showing American cheese usage was off 4.3% in the third quarter of 2011 compared with 2010, the worst quarter in four years.

Meanwhile, disappearance of other cheese was up 1.8% above 2010. Total cheese usage was off 0.6% compared with last year. This compares poorly with the first half of 2011, when total cheese usage was 5% higher.

However, it should be noted that U.S. third quarter cheese production was also 0.6% lower compared with 2010, ending the 13-quarter stretch of higher-trending cheese production. Obviously, this is pushing whey prices higher as the reduced cheese production has tightened the resultant whey supplies.

So, if there is 0.6% less cheese produced, it stands to reason that 0.6% less cheese will “disappear” or show up as “usage.” When USDA reported the third quarter cheese production reduction on November 4, the CME rallied over $1.80 for the first time in months. When USDA reported the third quarter cheese usage reduction (of equal measure), the CME crashed back into the $1.70s on Nov. 30.

Big week for butter

Butter prices-on a whopping 32 CME loads traded this week, the most to trade at the Merc for any week in almost two years-were also pegged lower at $1.6575/lb Wednesday.

Together, the spot losses on both commodities sent the closeup CME Class III milk future contracts into a nosedive during midweek trading. December contracts closed 37 cents lower at $18.43, after being as much as 50 cents lower in early trading. January 2012 contracts closed 33 cents lower at $17.19. February contracts closed 12 cents lower, dipping under the $17 mark at $16.90 Wednesday (Nov. 30).

Far-off contracts managed to gain two to six cents, ranging $16.84 to $17.10 for March through October 2012.

Powder weakens, Whey rallies 

Reports indicate that the California powder price also took a 7-cent beating, valued last week at $1.3894/lb, the lowest price for California nonfat dry milk (NFDM) since February. Meanwhile the spot CME price on Grade A NFDM is $1.45/lb, as is the NASS price from last Friday (Nov. 25) reflecting trade for the week ending Nov. 19. USDA reported earlier this week that commercial use of butter and powder is surpassing year ago.

The Oceania and EU skim milk powder (SMP) prices averaged $1.52/lb for trading Nov. 19-25, according to USDA Dairy Market News. Whey is the bright spot, rallying to new highs. The U.S. price stands at 64 cents/lb.

Profits fall fourth straight month

Income over feed cost declined in November for the fourth straight month. November’s income over feed costs, or IOFC, is estimated at $8.84 per hundredweight (cwt), down 13 cents from October and 25 cents below the 10-year average of $9.09/cwt, based on USDA’s Ag Prices released Nov. 30.

The report pegged the all-milk price at $19.90/cwt, unchanged from October. Feed costs were driven higher by corn, up 29 cents/bu. to $6.00. Soybeans were down 20 cents/bu. at $11.50, and alfalfa hay was off $5/ton at $198.00, yielding a feed cost of $11.06/cwt.

Seriously? Outrageous 

Mooove-over potato starch fillers. Wood pulp? Yum! This outrageous news crossed my desk this week. According to articles in the Wall Street Journal and street.com, use of processed wood pulp (cellulose) is on the rise in food products, many of them dairy items from ice cream and milk shakes to cheese and pudding. This includes some grocery items, but primarily products made for fast food and pizza chains. The additive is used as an extender; and to cut fat and boost fiber, without sacrificing ‘creamy.’ Cellulose gels when combined with water.  The articles note cellulose is virgin wood pulp that has been processed and manufactured to different lengths for functionality. Use of it and its forms (cellulose gum, powdered cellulose, microcrystalline cellulose, etc.) is deemed safe for human consumption by FDA.

Over 80% of the products using the additive are branded foodservice dairy products, including cheeses made by Kraft and Organic Valley.

Maybe that’s why McDonalds’ milkshakes don’t sit well lately! They’re on the list too.