An 11-day rally had put cheese prices 24 cents higher at $1.50/lb on the CME last Thursday... but this week, CME cheese dropped like a stone down to $1.3975/lb on blocks and $1.3650/lb on barrels. During the run up, the higher bids were mostly unfilled by sellers. In contrast, this week's lower offers met little buying interest. Few blocks were traded on the way up... and none so far have traded on the way down. Some barrels did trade this week at levels substantially below last week's.
Consequently, the milk futures crashed around midweek, with June 2010 contracts setting new lows at $13.12/cwt. and then recovering a dime or so to $13.35 by Friday after a nickel leap in the CME butter price on Wednesday.
The butter price jumped to $1.56/lb on Wednesday where it remained through the end of the week. This is the highest level since Nov. 2008. Butter production continues to run well below previous year's levels, which has been the case since midway through 2009. USDA Dairy Market News reports churing schedules are currently active and dependent upon cream supplies, which are receiving seasonal demand from ice cream and mix makers. Worldwide, reports indicate less milk is going into butter / powder production and both markets are showing it, although the U.S. price for both butter and powder is well below the world price. U.S. butter exports (mainly to Saudi Arabia) were 36% higher than year ago in the Jan-Feb period. We'll see next Friday which manufacturing class will determine May's Class I "mover."
The CME price level for nonfat dry milk also advanced late in the week to $1.2925/lb. Although this is still well below the world price for powder. According to USDA's biweekly international overview on April 15, the end of the milk production season has quickly deteriorated in New Zealand, and most manufacturers and handlers are very concerned about fulfilling end of season commitments.
Incidentally, the CME cheese price (even at last week's higher level before the plunge this week) is well below the world price (world price is more than $1.75/lb). Go figure...
The U.S. exported 16% more cheese and curd in the Jan-Feb time period compared with a year ago. The exports represented 2.6% of U.S. cheese production. USDA FAS also reported that total cheese imports were down 42% in first quarter 2010 compared with a year ago.
For the first two months of 2010, USDA FAS reports total exports in the dairy and egg category--in dollars--are up $90 million (+34%) and total dairy and egg category imports--in dollars--are down $62 million (-21%).