Weekly
Dairy Market Outlook
By Ken Bailey October
31, 2003 Block
Cheese Prices Decline Sharply · CME blocks fall to $1.4850/lb · Butter holding firmly · CME futures are lower Block and barrel cheese prices at the Chicago Mercantile Exchange finally gave in to lower prices. Block prices fell from $1.60 per pound on Monday, October 27 to $1.4850 by weeks end. Barrels fell from $1.50 per pound on Monday to $1.4575. There wasn’t much in the way of actually trades, but it is apparent that there were more offers to sell than bids to buy. Much of this price decline was expected. Cheese yields and milk production has been recovering and is more than adequate to meet current “fresh” market needs. As the fear of market shortages disappeared, cheese buyers held back in anticipation of future price reductions. That gets the ball rolling in a downward spiral. Tempering the rate of price decline, however, is the fact that buyers are in the market in preparation for holiday needs. USDA released their estimates of January through August
commercial disappearance. This is a
measure of consumption, or actual product eaten by consumers. They are based on USDA estimates of
production, imports, change in inventory, government
removals, and exports. I have my own
estimates based on a new USDA shows butter consumption through August was 0.7 percent behind a year ago. My numbers show it is more like -2.4 percent. American cheese consumption through August was estimated by USDA to be 0.6 percent behind a year ago. My figure is -1.6 percent. Finally, other cheese, an estimate of Italian cheese consumption, was estimated by USDA to be 1.8 percent ahead of a year ago. My estimate is 1.4 percent, almost the same. Both my estimates and that of USDA suggest that consumption of key dairy products for the first eight months of this year have not been very exciting. That may explain why cash market prices for cheese are now showing signs of weakness. This is what economists call “market fundamentals.” Class III futures at the Chicago Mercantile Exchange indicate that November futures are down from over $14 per cwt in the prior month to $13.16 per cwt. December futures are now at $11.90 per cwt. Expect both of these to decline some in the weeks ahead. Class III futures for the first six months of 2004 averaged $11.44 per cwt. For all of 2004 they averaged $11.94, still at a pretty good level. Producers who are interested in protecting milk prices may want to consider looking at these prices since they are close to 5-year averages. Want to get a friendly weekly reminder via email that my dairy outlook report is available? Subscribe to my email service. To subscribe, send a blank email to join-dairyoutlook@lists.cas.psu.edu. |