Benchmark drops $2.42 |

Benchmark drops $2.42

What goes up, does come down and dairy farmers know the drill all too well unfortunately. The Agriculture Department announced the August Federal order Class III milk price at $20.10 per hundredweight, down $2.42 from July, after losing $1.81 in July, but is $4.15 above August 2021.

It’s the third monthly decline after peaking at $25.21 in May, and is the lowest Class III price since December 2021. The eight month 2022 average stands at $22.54, up from $16.78 at this time in 2021 and $17.61 in 2020.

Friday’s Class III futures settlements portend a September price at $19.75; October, $19.94; November, $20.69; and December at $20.83.

Break even prices in California are right around $23.50 per cwt. and $22.50 in Idaho, according to the Aug. 12 Dairy and Food Market Analyst.

The August Class IV price is $24.81, down 98 cents from July, $8.89 above a year ago, and the lowest it has been since February. Its eight month average sits at $24.83, up from $15.12 a year ago and $13.62 in 2020.

Dairy farmers got a small break on the price of corn and soybeans in July but a big jump in hay prices and a drop in the all milk price pulled the month’s milk feed ratio lower for the sixth month in a row. The latest Ag Prices report shows the July ratio at 1.79, down from 1.93 in June, but compares to 1.52 in July 2021.

The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, 1 pound of milk would only purchase 1.79 pounds of dairy feed of that blend.

The All Milk Price average fell to $25.70 per hundredweight, down $1.20 from June, after dropping 40 cents the previous month, but is $7.90 above July 2021.

The July national average corn price slipped to $7.25 per bushel, down 12 cents from June, but was $1.13 above July 2021.

Soybeans, after hitting a record $16.40 per bushel in June, fell 90 cents in July to $15.50, but are still $1.40 per bushel above July 2021.

Alfalfa hay averaged a record $276 per ton, up a whopping $31 from June, and a budget busting $70 per ton above a year ago.

U.S. milk production is recovering slowly, very slowly. The Agriculture Department’s latest data shows July output hit 19.14 billion pounds, up just 0.2% from July 2021, and the first gain since October 2021. Revisions lowered the 50-State June estimate by 45 million pounds to 18.93 billion, 0.1% below a year ago instead of the 0.5% increase originally reported.

July cow numbers totaled 9.416 million, up 1,000 head from June numbers which were revised down 8,000 head. The July herd was down 67,000 from July 2021.

Output per cow averaged 2,033 pounds, up 19 pounds or 0.9% from July 2021. June output per cow was revised down 3 pounds, to 2,011 pounds.

California cows put 3.52 billion pounds of milk in the tank, up 77 million or 2.2% from a year ago. Cow numbers were up 4,000 while output per cow jumped 40 pounds. Wisconsin produced 2.72 billion pounds, down 7 million or 0.3%. Cow numbers were down 6,000 but output per cow was up 5 pounds from a year ago.

Idaho was up 1.5% on a 25 pound gain per cow and 2,000 more cows. Michigan was down 3.8% on 19,000 fewer cows, while output per cow was up 10 pounds. Minnesota was down 1.1% on a 12,000 cow loss, while output per cow was up 30 pounds. New Mexico was down 8.1% on a 32,000 cow drop. Output per cow was up 40 pounds. It was second to Florida which had the biggest decline, down 11.4%.

New York was unchanged, thanks to a 25 pound gain per cow offsetting a loss of 7,000 cows. Oregon was up 0.9% on 1,000 more cows. Output per cow was unchanged. Pennsylvania was off 0.9%, on 8,000 fewer cows, though output per cow was up 15 pounds.

South Dakota showed the biggest gain, up 13.1%, thanks to 20,000 more cows and a 10 pound gain per cow. Texas was up 6.0%, on 25,000 more cows and a 40 pound gain per cow. Washington State was down 2.9% on 9,000 fewer cows, with output per cow up 10 pounds.

As I pondered the July data I was reminded of the old “Got Milk” campaign which endeavored to portray what life would be like if we ever ran out of milk. We’re not even close to that, according to Matt Gould, analyst and editor of the Dairy and Food Market Analyst (DFMA) newsletter in the Aug. 29 Dairy Radio Now broadcast. But he quickly added “We’re not facing a gusher or a wall of milk either.” He talked about USDA revisions in the report and the fact that July output was only up 0.2%. He spoke of the stress that dairy farm profit margins are under, particularly those in the west where drought has ravaged feed production and lifted hay prices. “We’re not short of milk right now,” he said, “But the outlook isn’t exactly like we’re going to have a surplus any time soon.”

There’s no shortage of cheese. The latest Dairy Products report shows July output totaled a record 1.158 billion pounds, up 0.5% from June and 1.1% above July 2021. Output year to date stands at 8.1 billion pounds, up 2.2% from a year ago.

Wisconsin produced 289.7 million pounds of that total, up 0.3% from June but 1.2% below a year ago. California vats produced 208 million pounds, up 2.2% from June and 2.5% more than a year ago. Idaho contributed 85.8 million pounds, up 1.9% from June, but 0.5% below a year ago.

Wisconsin handily remains the biggest cheese producer in the U.S., followed by California, then Idaho, New Mexico, New York, Minnesota, Pennsylvania, Iowa, Ohio and Vermont.

July butter totaled 151.7 million pounds, down 8.5 million pounds or 5.3% from June, but was up 4.6 million or 3.1% from a year ago. YTD butter output is at 1.25 billion pounds, down 2.2% from a year ago.

Dairy prices started September mixed as high temperatures and drought takes a toll on the west, especially California where wildfires caused evacuations and the governor to declare a state of emergency.

The spotlight was on butter last week which, after jumping 14.25 cents the previous week, matched the second highest level on record. First, it fell to $3.05 per pound Tuesday, but headed back up from there, closing Friday, Sept. 2, before Labor Day at $3.10, up 1.75 cents on the week, highest since Sept. 24, 2015, and 3.50 cents shy of the record $3.1350 on Sept. 25, 2015. It’s $1.3025 above a year ago. Sales totaled 19 for the week and 144 for the month, down from 216 in July.

Cream availability held steady in the Midwest last week, according to Dairy Market News, but the amount of offers had not increased significantly. Churning and micro-fixing were reportedly somewhat even most days. Employee hiring and retention has improved but the challenge is getting new hires trained. Butter demand is steady to slightly underperforming for this time of the year, but near-term expectations are more bullish. Demand is expected to pick up in late summer/early fall but the limited butter stocks are and have been a concern for months. “Still, as domestic butter prices maintain a stronger position than those of Oceania, an unanswered question is how buyers, particularly industrial confectioners, plan to proceed in regards to their purchasing,” said DMN.

The Aug. 26 DFMA reported that butter retailers were being put on “allocation” because of a lack of available supply.

Cream production is declining in the West, but availability was steady to higher last week. Contacts reported that some Class II facilities were going to run shorter schedules Labor Day weekend, enabling butter makers to utilize the additional cream and increase output. Plants continue to run below capacity due to limited tanker availability and labor shortages, according to DMN. Butter inventories are tight and demand from food service and retail is steady.

CME Cheddar block cheese saw some ups and downs but closed Friday, Sept. 2, at $1.7650 per pound, up 2.50 cents on the week, and 3 cents above a year ago, as traders awaited the afternoon’s July Dairy Products report.

The barrels finished the week at $1.8575 per pound, 2.50 cents lower, 46.25 cents above a year ago and an inverted 9.25 cents above the blocks.

There was only one sale of block on the week at the CME and 19 for August, down from 23 in July. Barrel sales totaled nine for the week and 64 for the month, up from 29 in July.

Midwestern cheesemakers reported a tighter spot milk market last week. Mid-week spot prices ranged from Class to $1 under and processors say offers “noticeably quieted down,” said DMN. “In a typical week, this would not necessarily be of circumstance but ahead of a holiday weekend it does eschew the more common trend of increasing milk availability at discounted offer prices.” Cheese sales were mixed but some producers say business is picking up. Some pizza cheese and retail Cheddar producers report having to limit customers’ orders to ensure all other orders are being met.

Demand for cheese is mixed in the West. Some contacts noted an uptick in food service sales, particularly for mozzarella cheese from pizza makers. This is contrasted by recent declines in food service demand, as restauranteurs reduce hours and menu offerings. Retail demand was unchanged while export demand remains strong due to competitive prices. Cheese output is steady in the region, with some plants continuing to report labor shortages and delayed deliveries of supplies, preventing them from running closer to capacity, according to DMN.

Grade A nonfat dry milk climbed to $1.57 per pound Monday, highest since Aug. 4, but headed south from there and closed 4 cents lower on the week at $1.52, 18 cents above a year ago. The powder saw 18 trades on the week and 70 for the month, up from 49 in July.

The DFMA said there has been “rumblings that Chinese buyers are somewhat back in the market. Mexican buyers have also returned after a two-month hiatus. And after a couple months of quiet activity, the tones of both nonfat dry milk and dry whey markets have firmed.” We’ll learn more at the Sept. 6 GDT.

Dry whey gained 1.50 cents Monday, hitting 48.50 cents per pound, highest since July 11, then fell backwards, closing the week at 46.50 cents per pound, down a half-cent, and 2 cents below a year ago. There were two sales of whey on the week and 10 for August, down five from July.


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