Market News

Dairy prices slip ahead of Tuesday’s GDT

Cash cheese barrels slipped another 2.75 cents on the Chicago Mercantile Exchange on Monday while blocks lost 3.5 cents.  Class III futures were lower in response as the market was a bit cautious ahead of Tuesday’s Global Dairy Trade auction.

Last week the Reserve Bank of New Zealand cut interest rates a quarter-percent in an effort to reduce the value of the New Zealand dollar and make dairy exports more affordable on the global market.  The bank has made no secret that it may reduce rates further.  Farm milk prices have plunged to below-cost-of-production for many New Zealand dairy farmers ever since China cut-back on purchases over a year ago.

HighGround Dairy notes Fonterra will offer less whole milk powder at Tuesday’s sale but the offers will pick-up in the ensuing sales.  So the question is, will buyers take this auction off and wait for the higher volumes down the road?

Conducted on the first and third Tuesdays of the month, the Global Dairy Trade auction is the price discovery mechanism for world dairy prices.  The overall index of the nine products offered has declined for six consecutive sales and is the lowest it has been since July of 2009.

 

The California Department of Food and Agriculture conducted a hearing last week on proposed changes to the state’s Class 4b pricing formula.  Two proposed changes were submitted.  The Dairy Institute wants the pricing formula to use liquid whey protein concentrate instead of dry whey.  Cheesemakers say adjusting the 4b formula to get a higher producer price would put small cheese plants out of business.  Producers have complained that the 4b price is consistently well-below the Federal Class III price and there is no justification for the gap.

California Farm Bureau tells Cheese Market News the CDFA has 62 days from the hearing date to make a decision.  If changes are made, they would be announced 10 days prior to taking effect.