MD_DA950 Dairy Markets at a Glance Report 3 - Released on January 17, 2020 MD_DA950 CME GROUP CASH MARKETS (1/17) BUTTER: Grade AA closed at $1.8800. The weekly average for Grade AA is $1.8990 (+.0035). CHEESE: Barrels closed at $1.5625 and 40# blocks at $1.9625. The weekly average for barrels is $1.5145 (-.0665) and blocks, $1.9060 (+.0465). NONFAT DRY MILK: Grade A closed at $1.2900. The weekly average for Grade A is $1.2805 (+.0230). DRY WHEY: Extra grade dry whey closed at $.3675. The weekly average for dry whey is $.3615 (+.0320). CHEESE HIGHLIGHTS: Cheese markets have created some anxiety for cheese producers and contacts in the region. The elephant (or bear) in the room is the $.40+ price gap between blocks and barrels on the CME. Contacts are acutely aware that this price gap is assuredly going to correct, and history shows the correction may end up being a block price plummet. Milk availability for cheese producers is ample nationwide. Some Midwestern producers say cheesemaking is a 7-day/week process currently. Western contacts say the abundance of milk has led to shifts in barrels, which is a potential factor in the current bearishness on the barrel side of the market. Central spot milk prices ranged from $3.50 under to $1 under Class. All said though, even with markets in flux, on-the-ground cheese buying is holding its own. Undoubtedly, playoff football season is helping out in the retail sector and food service sector, particularly for mozzarella and provolone makers. BUTTER HIGHLIGHTS: Currently, cream is widely available in the U.S. Still, freight costs in the West have some butter plant managers keeping cream intakes in check. Butter contacts in the Midwest expect readily available cream supplies to last at least another two weeks. Some buyers/producers are still working through contractual coverage for Q1 2020. In general, butter makers in all regions are taking advantage of the current cream accessibility to store for the spring holiday uptick in ordering. This week, bulk butter pricing varies by regions: East, 4.0 cents to 7.0 cents over the market; Central, even to 3.00 cents above the market; West, 2.0 cents to 7.5 cents over the market, with various periods and averages used. FLUID MILK: At a national level, farm milk production is generally steady to increasing. Protein/butterfat components are at or near to their higher levels. Higher milk/cream volumes are keeping processing facilities running at full schedules. With most educational institutions open, bottlers are back, taking considerable intakes of milk, easing some pressure for milk handlers. Large volumes of condensed skim milk continue clearing into dryers, while cream supplies are readily available for Class II and butter makers. This week, cream multiples for all Classes are 1.05-1.22 in the East, 1.10-1.25 in the Midwest, and 1.00-1.18 in the West. DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) spot prices are mostly steady to higher, mainly boosted by bullish milk protein values. The market seems to be in balance as the supply/demand ratio is in proportion. High heat NDM cash prices are mixed in the East/Central regions, but unchanged in the West. Production is mainly based on contractual needs. Spot prices for dry buttermilk are steady to higher across the country. Inventories are short as most drying time has been devoted to NDM/SMP production. National dry whole milk prices shifted up this week, influenced by the bullish pricing trends of milk protein component, rather than butterfat. Prices for dry whey are mostly steady to up in the Central region, higher in the West, but stagnant in the Northeast. Demand for dry whey has picked up in the last few weeks. Animal feed whey trading remains quiet at the start of the year. Whey protein concentrate 34% (WPC 34%) prices are mostly steady to higher, prompted by the upward pricing trend of NDM. Lactose prices held steady this week. Current lactose inventories are comfortable to committed, while production is steady. Acid casein prices firmed, but remained steady for rennet casein. INTERNATIONAL DAIRY MARKET NEWS: INTERNATIONAL OVERVIEW: WESTERN EUROPE: Much of Western Europe has experienced mild winter weather conditions. This has benefitted milk production in recent weeks. Dairy observers characterize early 2020 milk production as normal to slightly high. EASTERN EUROPE: Eastern European milk production is described as steady at seasonally lower volumes. Decent winter weather is noted. Typical early year increases in production are still awaited this year. This is constraining dairy manufacturing, leading to some reliance on inventories to fill orders. AUSTRALIA: When fires started burning in Australia last fall, few dairy producers or officials expected they would still be burning in January. NEW ZEALAND: November 2019 New Zealand milk production reported by DCANZ was 3,003 million MT, up 0.3 percent from November 2018 milk production, 2,995 million MT. November 2019 milk solids, 249,135 million kg, are up 0.4 percent from November 2018, 248,156 million kg. SOUTH AMERICA: After several weeks of dryness, moderate to heavy rains returned to the central/southern regions of South America. In general, these showers were beneficial to several corn/soybean plantation areas, increasing soil moisture. However, this wet climate hindered milk yields in a few farms mainly due to sanitary issues of some milking cows. In addition, some minor hauling issues were reported. NATIONAL RETAIL REPORT (DMN): The total number of conventional dairy product advertisements increased 8 percent and the total number of organic dairy product ads increased 6 percent. Conventional 8 oz. shred cheese was the most advertised dairy product this week, with a 19 percent increase in ad numbers. Among organic dairy products, half gallon milk was the most advertised item, while having a 14 percent drop in ad numbers. DECEMBER CONSUMER PRICE INDEX AND PRODUCER PRICE INDEX (BLS): In December 2019, the Consumer Price Index (CPI) for the all food category was 259.8, up 1.8 percent from 2018. The dairy products index is 221.9, up 2.4 percent from a year ago. The following are the December 2018 to December 2019 changes for selected products: fresh whole milk is +5.2 percent; cheese, +3.1 percent; and butter, +0.7 percent. During December 2019, the Producer Price Index (PPI) for the all food manufacturing was 202.6, up 2.3 percent from 2018. The PPI index for manufactured dairy products is 208.4, up 7.0 percent from a year ago. The following are the December 2018 to December 2019 changes for selected products: fresh whole milk is +12.2 percent; cheese, +13.7 percent; butter, -12.4 percent; and dry milk products and mixtures, -0.2 percent. JANUARY SUPPLY AND DEMAND ESTIMATES (USDA, WAOB): Milk production forecasts for 2019 and 2020 are lowered from December on slower expected growth in milk per cow. The 2019 fat basis import forecast is unchanged from last month, but the 2020 import forecast is reduced on lower expected cheese and butterfat imports. The fat basis export forecast for 2019 and 2020 are raised on recent trade data and strong sales of cheese and other dairy-containing products. The NDM price forecast is raised from December on continued strength in demand from export markets. The Class III price and Class IV price are lowered from the previous month. The 2019 all milk estimate is unchanged at $18.60, but the 2020 all milk price forecast is reduced to $19.25 per cwt. Information for the period January 13 - 17, 2020, issued weekly Published by: Dairy Market News - Madison, WI ANGEL TERAN-RAMOS, 6084228593 Email: angel.teran@usda.gov Additional Dairy Market News Information: Dairy Market News (DMN) by Phone: (608)422-8602 DMN Website: https://www.ams.usda.gov/market-news/dairy DMN MARS (My Market News): https://mymarketnews.ams.usda.gov