Benchmark drops $1.81
Finances are getting tighter on the farm. The Agriculture Department announced the July Federal order Class III benchmark milk price at $22.52 per hundredweight, down $1.81 from June but $6.03 above July 2021, though it’s the lowest Class III since March.
The seven month average stands at $22.89, up from $16.90 at this time a year ago, $17.30 in 2020, and $15.58 in 2019.
Friday’s (Aug. 5) Class III futures settlements portend an August price at $20.02; September, $19.30; October, $20.06; November, $20.40; and December at $20.20. That would result in a $21.68 average for the year, $1.12 shy of the USDA’s latest projection of $22.80.
The Class IV price is $25.79, down 4 cents from the record high June price, but is $9.79 above a year ago and the highest July Class IV price ever. Its seven month average is at $24.83, up from $15.01 a year ago, $13.78 in 2020, and $16.11 in 2019. USDA predicts a $24.70 Class IV average for 2022.
Lack luster demand with ample supplies sums things up at the Chicago Mercantile Exchange. The first week of August was the fifth week in a row that cheese prices fell. Block Cheddar dipped to $1.7650 per pound Thursday, lowest since January 27, but regained 2 cents Friday to close at $1.7850, down 9.50 cents on the week, 61.25 cents below its April 18 peak, but 15 cents above a year ago.
The barrels fell to $1.7475 Thursday, Aug. 4, lowest since Jan. 11, but regained 4.50 cents Friday to finish at $1.7925, also 9.50 cents lower on the week but 48.25 cents above a year ago. CME sales totaled six cars of block and 16 of barrel.
Midwest cheesemakers say milk is available despite summer heat drawdowns. Spot prices ranged $3 to $1 under Class III at midweek. Cheese demand received a shot in the arm in recent weeks, says Dairy Market News, as customers are more willing to pay sub-$2 per pound prices.
Cheese demand is softening in the west in retail and food service. Some restaurants in the region have reduced hours and cheese purchases due to labor shortages and higher costs, while International demand is unchanged.
CME butter shot up to $3.06 per pound Wednesday, highest since Sept. 25, 2015 when it set a record at $3.1350. Wednesday’s price was 7.50 cents shy of that but fell to a Friday finish at $3.01, up 2 cents on the week and $1.3625 above a year ago. There were 11 sales on the week. Interestingly the butter also saw the biggest single day collapse in December 2015, plunging 49 cents.
Central butter producers report that cream is still available regionally and from the West. Butter sales are ticking up as summer progresses and customers prepare for fall demand. The $3 plus prices are expected to put a damper on buying, says DMN. Potential buying slowdowns in the fall will only push more demand in the winter. Most expect butter to maintain firmness near to mid-term.
High temperatures in the west are contributing to lower milk output and reduced components. Cream availability is tightening but demand is strong. Scheduled maintenance, labor shortages, and high temperatures are contributing to reduced butter output. Retail and food service butter demand is steady to lower.
Grade A nonfat dry milk did not have a good week, closing Friday at $1.5025 per pound, down 13.75 cents on the week, lowest since Oct. 13, 2021, but still 24.75 cents above a year ago. There were 16 sales reported on the week.
Dry whey fell to 42 cents per pound Wednesday but closed Friday at 43.50 cents, down a penny on the week and 10.50 cents below a year ago, with one sale.
The debate continues as to whether dairy markets are being swayed by dairy product demand or milk supply. Concerns about demand seems to be in the driver’s seat though the U.S. milk “deficit” appears to have ended.
Preliminary data indicates June ended seven months of milk output trailing that of a year ago, coming in at 18.975 billion pounds, up 0.2% from June 2021, first gain since last October, and follows a 0.5% drop in May.
June output in the top 24 states totaled 18.13 billion pounds, up 0.3%. Revisions raised the 50-state May estimate by 40 million pounds to 19.755 billion, 0.5% below a year ago, instead of the 0.7% originally announced.
June cow numbers totaled 9.423 million, up 4,000 from May numbers which were revised up 14,000 head, but were 78,000 head below June 2021. There were 56,000 more cows in the June milking string than on Jan. 31. Cow numbers peaked in May a year ago at 9.507 million, 88,000 more than May of this year.
Output per cow averaged 2,014 pounds, up 20 pounds or 1.0% from June 2021.
California output totaled 3.46 billion pounds, up 6 million pounds or 0.2% from a year ago. Cow numbers were up 3,000 while output per cow was unchanged. Wisconsin, produced 2.68 billion pounds, up 39 million or 1.5%. Cow numbers were down 3,000 but output per cow was up 35 pounds from a year ago
Idaho was up 0.1% on a 5 pound gain per cow offsetting 1,000 fewer cows. Michigan was down 1.0% on 16,000 fewer cows, but output per cow was up 60 pounds. Minnesota was down 1.0% on a 12,000 cow loss, while output per cow was up 30 pounds. New Mexico showed the biggest loss, down 12.3%, on 37,000 fewer cows although output per cow was up 20 pounds.
New York was off 0.2% on a 7,000 cow loss, though output per cow was up 20 pounds. Pennsylvania was off 0.6%, on 8,000 fewer cows, though output per cow was up 20 pounds.
South Dakota again showed the biggest increase, up 14.7%, milking 21,000 more cows and getting 20 more pounds per cow than a year ago. Texas was up 6.9%, thanks to 24,000 more cows and a 60 pound gain per cow. Washington State was down 4.2% on 12,000 fewer cows, with output per cow up 5 pounds.
Eyes are watching milk output carefully as dairy demand slows. The July 15 Dairy and Food Market Analyst warned; “Break-even milk prices in California are around $23.50 per cwt., which, while down $1.50 from the 2022 high, is above current August Class III milk futures price.”
Feed inputs keep rising as milk prices slide. The USDA’s latest Ag Prices report shows the June milk feed price ratio at 1.93, down from 1.98 in May, but compares to 1.59 in June 2021.
The U.S. All Milk Price average, after hitting a record high in May, slipped to $26.90 per cwt., down 40 cents, ending nine consecutive increases, but is $8.70 above June 2021.
The national average corn price climbed to $7.37 per bushel, up 11 cents from May, after jumping 18 cents the previous month, and $1.37 above June 2021.
Soybeans averaged a record $16.40 per bushel, up 30 cents from May, after gaining 30 cents the previous month, and $1.90 per bushel above June 2021.
Alfalfa hay averaged a record $245 per ton, up $1 from May, and $46 per ton above a year ago.
The June cull price for beef and dairy combined averaged $90.20 per cwt., up $3.50 from May, $16.30 above June 2021, and $18.60 above the 2011 base.
Quarterly milk cow replacements averaged $1,710 per head in July, up $140 from April, and $330 above July 2021. Cows averaged $1,750 per head in California, up $310 from April, and $400 above a year ago. Wisconsin’s average, at $1,870 per head, was up $160 from April, and $390 above July 2021.
Thankfully, U.S. dairy exports remained impressive in June, despite all of the shipping challenges. Hopefully that continues to be the case and lends support to domestic prices.
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