Happy June Dairy Month!!
The Agriculture Department announced May Federal order milk prices Wednesday. The benchmark Class III price is $22.57 per hundredweight (cwt.), down $1.74 from April, $4.05 above May 2013, $3.23 above California’s comparable 4b price, and equates to about $1.94 per gallon. The five-month Class III average now stands at $22.94, up from $17.69 at this time a year ago and $15.96 in 2012.
Looking ahead; Class III futures settled Friday as follows: June, $21.24; July, $20.38; August, $20.33; September, $20.32; October, $20.05; November, $19.53; and December, $19.05.
The May Class IV price is $22.65 per cwt., down 69 cents from April but $3.76 above a year ago. The Class IV average thus far stands at $23.08, up from $18.02 a year ago and $15.24 in 2012.
The four-week, National Dairy Products Sales Report (NDPSR)-surveyed cheese price used in calculating this month’s milk prices was $2.1703 per pound, down 18.4 cents from April. Butter averaged $2.0477, up 12.5 cents. Nonfat dry milk averaged $1.8768, down 14.2 cents, and dry whey averaged 67.45 cents per pound, down fractionally.
The California Department of Food and Agriculture announced its May Class 4b cheese milk price at $19.34 per cwt, down $2.39 from April but $2.14 above May 2013 and the highest May 4b price since May 2004. The 4a butter-powder price is $22.57, down 74 cents from April but $4.33 above a year ago.
The 4b five-month average now stands at $20.94, up from $16.08 at this time a year ago and $13.66 in 2012. The 4a average is now at $22.89, up from $17.84 a year ago and $15.04 in 2012.
Amidst the ongoing discussion in California, the nation’s number 1 milk producer, over formation of a possible Federal Milk Market Order, comes new fuel to the fire. The Federal order Class III milk price is $3.23 per cwt. above California’s comparable 4b cheese milk price, and that despite the temporary price enhancement mandated by the California Department of Food and Agriculture.
This is the biggest gap so far this year, up from $2.58 last month, a far cry from the 84 cent difference in January, and the biggest gap since December 2011. The five month FO Class III average now stands at $22.57 per cwt. versus California’s five month Class 4b average at $20.94, $1.63 per cwt. below.
Checking the cash dairy markets; $2 per pound cheese returned to Chicago this week. The 40-pound Cheddar blocks hit $2.03 per pound Wednesday and closed Friday at $2.05, up 9 cents on the week and 30-1/4-cents above a year ago. The 500-pound Cheddar barrels closed at $1.9675, up 3-1/2-cents on the week and 20-3/4-cents above a year ago. Six cars of block traded hands on the week and 18 of barrel. The lagging NDPSR-surveyed U.S. average block price fell 6.1 cents, to $2.0516 per pound. Barrel averaged $2.0563, down 4 cents.
Look for “choppiness for the next several weeks” in the cheese market, according to Jerry Dryer, Editor of the Dairy and Food Market Analyst. Speaking in Friday’s DairyLine, Dryer said the market is “trying to figure itself out.” He adds that the outlook is that supplies are going to be relatively tight however we’re working through the spring flush right now and, while milk has peaked in the Upper Midwest, you still have cheese coming out of the vat and cheese coming out of the cooler as it has to sit in the cooler 10-15 days before it’s eligible to come to the CME or the market. “So you have a little extra product hanging around the edges,” Dryer said, but he believes prices will hover about 2 cents below or above $2 per pound.
Cheese production in the Northeast is steady, according to Dairy Market News (DMN). Manufacturers are continuing full production schedules that initiated several weeks ago. Domestic sales are slowing. Central cheese manufacturing is being bolstered by strong milk intakes, increasing at some plants, in addition to some use of condensed skim to fortify vats. Barrel interest remains active to higher with some Midwest manufacturers being challenged in meeting increased recent demand but this is viewed as a short term situation.
Cheese production in the West is active with sufficient milk available to meet buyers’ demand. Some plants are turning milk away rather than building surplus stocks. Cheese producers are reporting good retail demand, despite higher than year ago prices. Export demand is moderating.
Cash butter headed down this week, reversing two weeks of gain, and closed Friday at $2.2225 per pound, down 7-3/4-cents on the week but still 67-3/4-cents above a year ago. Twenty nine cars were sold on the week. NDPSR butter averaged $2.1293, up a penny.
Northeast butter production is marginally declining following the post-holiday milk and cream supply surge, according to DMN. Some market participants are questioning with uncertainty, the pull on cream supplies as they suggest disproportionate volumes are available relative to milk supply. Butter sales are expected to pick-up in the domestic market with interests from food service and retail outlets. Central butter prices softened following seasonal weaker sales. The market tone is unsettled. Cream availability varies amongst manufacturers, while milk supplies are increasingly growing. Butter production rates are mostly steady.
Domestic buyer interest slowed. International demand is steady as the global markets slowly converge closer with the U.S. prices. Butter inventories are maintaining to slightly higher. Western butter production is mostly steady. Some producers are opting to sell excess cream rather than build inventory at current prices. Butter demand remains strong as plants report tighter than usual stocks.
Cash Grade A nonfat dry milk closed Friday at $1.8575 per pound, up 1-1/4-cents. Three cars were sold. NDPSR powder averaged $1.8901, up 7.6 cents, and dry whey averaged 67.24 cents per pound, down 0.8 cent. ❖