Dairy and Grain Report

Dairy and Grain Report

May 17, 2019


  • Maybe? Maybe not? Some days it looks like the CME spot butter market is ready to bust out and gallop to the upside. But on other days, the market seems more tentative, measuring its steps. This week, Monday, and Thursday were the “go” days; Tuesday and Friday featured retreat. So, after hitting a high of $2.3850 per pound—a level not seen since last August—the market dropped back to finish the week at $2.3400, unchanged.
  • While CME spot activity did not reach unusual levels, market participants surely noted that sellers managed to find some product to bring to Chicago at the upper level of the price range. A total of 25 cars changed hands, up from five last week.
  • Second half futures traded between $2.30 and $2.35 for ten straight months. This week, July to December contracts hit $2.4188 per pound—a life of contract high—before closing Friday at $2.4045 per pound, up two-cents from the week before.
  • Snug cream availability east of the Rockies is rattling some nerves. USDA implied Class II multiples in the East at 127—the highest multiple for week 20 in five years. That was up three points from last week and six points from the five-year-average. Upper Midwest implied multiples rose to 129, up from 128 last week, a jump from last year’s 124 rate and the 123 five-year-average. Cream is reportedly more readily available in the West. USDA reported the cream multiple across all classes in the West at 116, steady with last week, a point lower than 2018, and down from the 119 five-year average.
  • Reports of stronger domestic demand peppered first quarter discussions, and the data confirms as much. Blimling estimates show implied domestic use at 448.3 million pounds in the first quarter, up 4.7% year-over-year. That’s an additional 20.3 million pounds of butter demand compared to 2018.
  • European prices held steady. German values dipped slightly to €4,125 per metric ton ($2.05 per pound adjusted to 80% fat), off 0.6% in Euro terms. The Dutch quotation lingered at €4,140 per metric ton ($2.05 per pound at 80% test). Third quarter EEX butter futures dropped to life-of-contract lows, hitting €4,225 per metric ton, down from €4,344 the week before. NZX futures slumped as well, falling to $4,748 per metric ton, down $110 from the week before.
  • Next week brings USDA’s latest Cold Storage report. History says that stocks climb on average by about 30 million pounds from March to April. An average build would put butter inventories at 300 million pounds, down 2% year-over-year. In the last five years, month-to-month movement ranged from down 5 million pounds to up 53 million pounds. But in years with Easter in late April, there’s been a greater probability of lighter-than-average stocks growth—with 2011 and 2014 both showing a decrease from month-to-month.


  • Sellers threw water on the CME spot cheese market after its fiery affair with the $1.70s last week but did not snuff out all the romance. At midweek, block prices had fallen to $1.6575 per pound (down $0.0225) with barrels all the way back to $1.6125 (down $0.0975). Things warmed up anew as the weekend approached, though, with blocks making it back to $1.6725 (down $0.0075) and barrels closing at $1.6250 (down $0.0850). Trading activity picked up, with 43 cars of barrels changing hands, the most since mid-April, and 19 cars of blocks moving.
  • The biggest news of the week landed around lunchtime on Friday, when President Trump announced that the US will be dropping steel and aluminum tariffs levied against Canada and Mexico. That should pave the way for Mexico to roll back retaliatory tariffs on cheese—a measure that has slowed trade between the US and its biggest export customer. Between July 2018 (when tariffs went into place) and March, US exports to Mexico totaled 143.1 million pounds, down 4.5% from the same period in 2017-2018. That was the lightest volume in that stretch going back to 2012 to 2013.
  • That news, combined with firmer spot pricing, provided some late week support to futures markets. Third quarter cheese futures found some support late in the week, pushing to $1.7730 per pound, up $0.0190. Second half contracts rose to $1.7732 per pound, up $0.0207 on the week. 
  • Anecdotal reports point to an increasingly balanced market, yet cheese plants in the Upper Midwest still have limited access to cheap spot milk. USDA reported spot milk in the Upper Midwest trading between $2.00 over to $2.00 per hundredweight under class. By comparison, spot milk was at $3.00 below class last year and an average $3.18 under in the past five years.
  • Looking ahead to the Cold Storage report, on average, total cheese inventories climb by about 23 million pounds from March to April. That would take inventories to 1,405 million pounds—up 4% from 2018. In the past five years, the month-to-month move has ranged from +17 million pounds to +41 million pounds.
  • Contacts continue to cite okay domestic demand in both food service and retail channels. The Census Bureau Retail Sales report had April “food and drinking place” sales up only 0.2% from March, but still 5.7% higher year-over-year. Higher menu prices are fueling some, but not all, of the increase, with “food away from home” inflation running at +3.1% year-over-year in April.
  • Competition is stiff across the export market with European prices holding the advantage. German gouda prices held steady at €3,025 per metric ton ($1.54 per pound), unchanged in Euro terms. Even with the downtick in US spot prices, that’s still a 13-cent discount to CME spot blocks and 23-cents below third quarter futures.

Fluid Milk 

  • Fluid milk sales are still floundering, with USDA data showing March volume down 5.0% year-over-year. That pulled first quarter sales down 2.7% from the same period in 2018. The 299-million-pound difference in fluid volume translated to enough milk to make 52 truckloads of cheese per week during the quarter

Nonfat Dry Milk

  • What will be the next piece of bullish news in the nonfat dry milk market? Less milk in the East hitting the dryers? That’s hardly news at this point. International markets finding a little bit of strength? We’ve watched that play out for the past few months. Lately, it seems as though fresh bullish news hinges on the appetites of international buyers. And this week is seemed like their interest was a little more hit or miss. And without any new friendly tidbits to run on, the CME spot rally quickly lost momentum. Prices retreated to $1.0475 per pound, off two-cents. Trading volume was light, with four lots changing hands throughout the week.
  • Third quarter futures backed off to $1.0623 per pound, down $0.0217 to the lowest price in a month. Second half contracts fell to $1.0851 per pound, losing $0.0185 on the week.
  • International prices are finding some support. The Dutch quotation climbed to €2,050 per metric ton ($1.04 per pound), 2.5% higher in Euro terms—the highest price since January 2017. Ahead of next week’s GDT, third quarter NZX futures prices closed at $2,528 per metric ton, steady with last week. That compares to the previous GDT session average of $2,521 per metric ton.
  • EU SMP exports surged in March, with a record 90,618 metric tons shipped, 31.5% higher than 2018. Sales to Mexico alone jumped to 6,703 metric tons, up from 60 metric tons the year before. Presumably, marketers were moving some recently released intervention stocks as part of the mix.

Dry Whey

  • After holding steady for eight days, spot dry whey prices finally moved…only to stall out again. On Monday, spot prices slipped to $0.3400 per pound, $0.0075 lower than last week, and held there for the next four days.
  • Third quarter futures fluctuated in a half-cent range for most of the week before getting some pep in its step. July through September contracts landed at $0.3508 per pound, up $0.0348 on the week.


  • Planting isn’t making much progress as rain continues to deluge the Midwest. USDA’s latest Crop Progress report showed,  as of May 12, just 30% of corn was in the ground compared to 59% last year and a five-year average of 66%. Only 9% of soybeans were planted as opposed to 32% last year and 29% on average.
  • Any hopes for improved planting progress next week were dashed with the forecast calling for more thunderstorms in the Midwest next week. July corn futures surged to $3.8325 per bushel in response, a $0.3150 week-over-week gain.
  • Soybean futures were choppy throughout the week as China trade news mixed with the possibility of increased plantings. July contracts eventually rebounded to $8.2175 per bushel, rising $0.1250 on the week.


Tariffs might be an effective negotiating tool. Saying it hurts us misses the point. China relies more on trade and loses more. As in a labor strike where management and workers both get hurt, the process may demonstrate relative strength and resolve and where compromise needs to happen.

—Lloyd Blankfein

Please click here or on the button in the sidebar to download the report or, for Lotus Notes users, copy and paste the following url into your browser to access the report.


Josie Russo


Futures trading and OTC swaps trading involve substantial risk of loss and are not necessarily appropriate for all persons.  Past results are not necessarily indicative of future results. Statements of fact herein contained are derived from sources believed reliable, but are not guaranteed as to accuracy, nor do they purport to be complete.  No responsibility is assumed with respect to any such statement, nor with respect to any expression of opinion herein contained.  Any data contained herein is proprietary and may not be copied, disseminated, or used without the express written permission of Roger W. Blimling, Inc., Blimling and Associates, Inc., or  Blimling Management Services, Inc.