Benchmark highest since 2014
The Agriculture Department announced the July benchmark Class III milk price at $17.55 per hundredweight, up $1.28 from June, $3.45 above July 2018, and the highest Class III price since December 2014. It equates to $1.51 per gallon, up from $1.40 in June and $1.21 a year ago. California’s July 4b cheese milk price a year ago was $14.09, $3.46 below this year’s FO Class III price.
Friday’s Class III futures portended an August price at $17.29; September, $17.79; October, $17.76; November, $17.50; and December at $17.09. Looking ahead, the bottom for 2020 was $16.56 in February.
The seven month Class III average stands at $15.58, up from $14.37 at this time a year ago and $16.02 in 2017.
The July Class IV price is $16.90, up 7 cents from June, $2.76 above a year ago, and the highest Class IV since November 2014. Its seven month average is at $16.11, up from $13.73 a year ago and $15.30 in 2017.
Cash dairy traders are no doubt concerned over President Trump’s announcement on July 31 that the U.S. will impose an additional 10% tariff on $300 billion in Chinese imports starting Sept. 1. Exports to that country were already hurting.
The CME Cheddar blocks closed the first Friday of August at $1.82 per pound, down a half-cent on the week but 23 1/4-cents above a year ago. The barrels finished at $1.6925, down 2 3/4-cents, 21 3/4-cents above a year ago, but 12 3/4-cents below the blocks. Sales amounted to three cars of block on the week, 53 for the month of July, down from 71 in June. Twenty-four cars of barrel traded places on the week, 115 on the month, down from 159 in June.
FC Stone stated in its July 29 Early Morning Update that “Dairy product demand seems to have slumped somewhat this month, but that doesn’t eliminate issues with milk production or cow culling on U.S. dairy farms.” It adds that U.S. milk production was flat versus last year through June but “Dairy producers have done a great job of increasing component production, particularly flat, for several years now. Component production bumps U.S. milk production to 0.8% growth for the first six months of this year. Still that’s down from last year.”
Dairy Market News said most Midwest cheesemakers report that demand is meeting expectations but some say the early summer upticks have steadied somewhat. Curd and process cheesemakers continue to report positive sales numbers. Cheese production has slowed, as spot milk availability is dwindling. Those looking for spot milk are finding discounts harder to find. Prices ranged from $1 under to $2 over Class. Cheese stocks are balanced regionally.
Western cheese production remains active with plenty of milk on hand and plants are running near full capacity. Some parts of the region saw a few milk loads at $4 to $5 under Class. Cheese inventories are generally comfortable as steady end user and consumer demand has been able to offset production.
Spot butter, hurt from the higher than expected Cold Storage data, fell to $2.3275 per pound on July 30, regained some, then fell again to close the week at $2.32, down a nickel, 11 1/2-cents below the July 16 high, and dead even with a year ago. Ten cars traded hands on the week, 77 on the month, down from 115 in June.
Regional butter makers are either not taking on cream from the spot market or are finding spots in the West and paying freight costs. Churning, therefore, is slow or slowing. Butter sales are slower and more bulk butter has become available in recent weeks. Butter producers suggest buyers are waiting on potential price drops. Contacts suggest July’s cold storage data will be the yardstick for butter markets the rest of 2019.
The western butter market varies by area. Some processors report solid sales, others say demand has taken a step back. Retail demand is down a bit but food service sales are strong. Butter output remains active, but decreased somewhat as more cream continues to move to ice cream plants. Butter stocks are plentiful.
Grade A nonfat dry milk closed Aug. 2 at $1.02 per pound, down a penny on the week but 19 1/4-cents above a year ago. Eight cars sold on the week, 41 on the month, up from 25 last month. Ears to the rail reportedly say cheese plants in the upper-Midwest are fortifying their vats with nonfat dry milk as fluid milk is in shorter supply.
Spot dry whey lost 1 1/4-cents July 29, falling to 34 cents per pound, and stayed there the rest of the week, 9 1/2-cents below a year ago. Only two cars were sold on the week, 18 on the month, down from 31 a month ago.
Higher feed prices and just a small gain in the All Milk Price resulted in another slip in the June milk feed price ratio. The USDA’s latest Ag Prices report puts it at 2.08, down from 2.10 in May but it is up from 1.98 in June 2018.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. One pound of milk today purchases 2.08 pounds of that ration.
The U.S. All-Milk price averaged $18.10 per hundredweight (cwt.), up a dime from May and $1.80 above June 2018. California’s All Milk price was 20 cents higher than Wisconsin’s.
The national average corn price averaged $3.98 per bushel, up a whopping 35 cents from May and follows an 11 cent jump in May. Corn was up 40 cents per bushel from June 2018. Soybeans averaged $8.31 per bushel, up 29 cents from May, after dropping 26 cents in May, but is 1.24 per bushel below a year ago. Alfalfa hay averaged $193 per ton, down $11 from May but $12 per ton above a year ago.
Looking at the cow side of the ledger; the June cull price for beef and dairy combined averaged $65.90 per cwt., up 30 cents from May, 40 cents below June 2018 and $5.70 below the 2011 base average of $71.60 per cwt.
Milk cow replacements averaged $1,240 per head for the quarter in July, up $100 from April, but $80 below July 2018. Prices averaged $1,300 per head in California, up $200 from April and unchanged from a year ago. Wisconsin averaged $1,210 per head, up $80 from April but $40 below July 2018. ❖