June 9, 2023
About Face for Dairy Midweek
- Spot cheese rallied three days in a row to start the week, bringing optimism back into the dairy market. However, cheese sellers used the rally as a selling opportunity and brought the block/barrel average back down over 9c by week’s end.
- The GDT auction from this week saw anhydrous milk fat, butter, butter milk powder, and cheddar all move higher. Cheddar led the way, adding 7.40%.
- Several class III milk contracts hit new contract lows this week.
- US dairy cow culling for the week ending May 27th, up 14.3% from the same week last year, strong culling rates can likely be attributed to record high cattle prices at the time.
The beginning half of this week brought relief to the dairy markets with milk futures and spot markets enjoying gains and supported by a boost in GDT cheese prices on Tuesday. Despite the positivity of the GDT and early momentum, the dairy markets fell to heavy selling pressure by weeks end to find most gains from earlier were wiped away. Domestic cheese reports show strong availability of milk starting to outpace production at cheese plants as bottling plants no longer have school orders to fill. Declining export demand might be the reason for a struggling cheese price despite domestic manufacturers stating continued interest and demand. Lower prices cured retail inventories in Europe for cheese and milk availability remains strong while indications are sales are outpacing production. Despite an optimistic GDT event on Tuesday, April export data was rough with overall dairy tonnage exports down 12% from this time last year. Butter exports were particularly bearish with exports down 64% compared to last year and down 50% from March.
Corn Stays Rangebound
- Corn yield was unchanged on today’s WASDE report with only a slight change in ending stocks rising 35 million bushels.
- Despite forecasts turning wetter over the next few weeks, very few showers have materialized over much of the growing region since planting.
- Drought conditions currently cover nearly half of the corn production areas with good-to-excellent ratings declining 5% from last week. Both planting and emergence are ahead of average.
- Exports remain well behind estimates and year ago numbers leading to the rise in ending stocks in today’s report.
- Rain is desperately needed to remain on track to hit close to estimated production levels as ratings this poor and this early can lead to yields near 173.1 according to research over the last 15 similar years.
Meal Continues Move Lower
- Front month meal futures closed lower on the week for the fourth straight week, a $50 per ton range during these weeks.
- Carryout for beans was raised as exports continue to lag behind estimates and year ago levels.
- China is currently a mixed bag to try and figure out. Soybean imports are at record highs but both low hog prices and an abundance of cheap wheat for feed will impact soymeal needs. There were also May trade data showing a sluggish Chinese economy.
- Today’s WASDE showed a below-average initial soybean rating with drought conditions covering nearly 40% of bean growing areas.