Benchmark milk price falls $2.32
The Agriculture Department announced the first Federal order Class III benchmark milk price of 2020 at $17.05 per hundredweight, down $2.32 from December but $3.09 above January 2019 and the highest January Class III price since 2014.
It just might be the low point for 2020 as well. The Feb. 7 Class III futures settlements portended a February price at $17.06; March, $17.42; April, $17.50; and May at $17.45. The peak was $17.91 in September and October.
The January Class IV price is $16.65, down a nickel from December but $1.17 above a year ago and the highest January Class IV price since 2014.
Powder and butterfat values pulled the third Global Dairy Trade auction of 2020 down, reversing the previous two upticks as apprehensive traders await the continuing fallout of the coronavirus outbreak. The weighted average of products offered fell 4.7%, following the 1.7% rise on Jan. 21 and 2.8% on Jan. 7.
Whole milk powder led the declines, down 6.2%, after it gained 2.4% Jan. 21. Anhydrous milkfat was down 4.5%, after falling 2.6% last time and skim milk powder was down 4.2% after inching up 0.7%.
Gains were led by rennet casein and GDT Cheddar, both up 6.0%, after the Cheddar was up 0.6% higher last time. Butter inched 0.2% higher, following a 5.5% jump in the last event.
FC Stone equated the GDT 80 percent butterfat butter price to $1.8841 per pound U.S., up fractionally from the last event. CME butter closed Feb. 7 at $1.8325. GDT Cheddar cheese equated to $1.9513 per pound, up 11.5 cents, and compares to Feb. 7’s CME block Cheddar at $1.93. GDT skim milk powder averaged $1.3186 per pound and compares to $1.3770 last time. Whole milk powder averaged $1.3786, down from $1.4663. CME Grade A nonfat dry milk closed Feb. 7 at $1.25 per pound.
President Trump has signed the US-Mexico-Canada Agreement which should benefit U.S. dairy exports and China announced recently that it will halve the additional tariffs it imposed last September on $75 billion worth of U.S. imports, even as it deals with the escalating coronavirus outbreak there. China imports a lot of dairy products but most originate from New Zealand and the EU however easing trade relations with the trading giant holds great potential for the U.S. dairy industry.
Dairy prices at the Chicago Mercantile Exchange came under some downward pressure the first week of February. The Cheddar blocks fell to $1.8950 per pound Feb. 6 but rallied to close Feb. 7 at $1.93, up a penny on the week and 40.25 cents above a year ago.
The barrels lost 4.5 cents Feb. 3, falling to the lowest level since March 13, 2019, and set a new record spread of 46.5 cents. After losing 11 cents the previous week, they closed at $1.4775, down another 2.25 cents, 10.5 cents above a year ago, but at an unsustainable 45.25 cents below the blocks.
Cheese plant managers cite the drastic shift in markets since fall 2019 and how they are negatively affecting orders, according to Dairy Market News. Others suggest 2020 sales have been steady but one certainty is the availability of milk.
Heavy milk supplies are also heading to western vats and cheese output is at or near full capacity. Inventories are relatively stable and able to cover most buyer needs but contacts suggest demand is steady.
Cash butter saw its Feb. 7 closing at $1.8325, 6.75 cents lower on the week and 46.25 cents below a year ago.
Central region butter output has been higher this year compared to previous years, according to plant managers. With the bountiful abundance of cream from Western and Midwestern sources, churns are busy with cream trucks lined up outside.
Western butter production is also active. Cream supplies are reportedly tighter than they have been but there is still plenty to keep the churns full.
Grade A nonfat dry milk fell to $1.2150 Feb. 4 but closed Feb. 7 at $1.25, up a penny on the week and 25.5 cents above a year ago.
CME dry whey finished at 39 cents per pound, up 2.5 cents on the week, all on unfilled bids, and 2.5 cents above a year ago.
A lower All Milk price and higher feed prices pulled the December milk feed price ratio down, ending five consecutive months of gain for U.S. dairy farmers. The USDA’s latest Ag Prices report put the ratio at 2.55, down from 2.61 in November and compares to 2.07 in December 2018.
The index is based on the current milk price in relationship to feed prices for a set dairy ration.
The U.S. All-Milk price averaged $20.70 per hundredweight (cwt.), down 30 cents from November but $4.10 above December 2018.
The national average corn price averaged $3.71 per bushel, up 3 cents from November and 17 cents per bushel above December 2018. Soybeans averaged $8.70 per bushel, up 11 cents from November and 14 cents per bushel above a year ago. Alfalfa hay averaged $175 per ton, up $2 from November but $4 per ton below a year ago.
The December cull price for beef and dairy combined averaged $59.30 per cwt., up $1.60 from November, $7.50 above December 2018, but is $12.30 below the 2011 base average of $71.60 per cwt. ❖