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Benchmark jumps $1.30

Farm milk prices continue to recover but more is needed. The October Federal order Class III benchmark was announced by the USDA at $17.83 per hundredweight, up $1.30 from September but is $3.78 below October 2020. Depending on the farm, a breakeven price these days is right around $18.50.

The Nov. 5 Class III futures settlements portended a November price at $17.81 and December at $17.59, which would result in a 2021 average of $17, down from $18.16 in 2020, and compares to $16.96 in 2019.

The October Class IV price is $17.04, up 68 cents from September, $3.57 above a year ago, and the highest Class IV since Nov. 2014. The Class IV average is at $15.44, up from $13.52 a year ago but compares to $16.23 in 2019



One of the measures of dairy farm profitability appears to have turned the corner. A small rise in the September All Milk Price and some relief in corn and soybean prices moved the September milk feed price ratio in a positive direction for the first time since November 2020. The USDA’s latest Ag Prices report has the ratio at 1.69, up from 1.50 in August, but down from 2.27 in September 2020.

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 1.69 pounds of dairy feed of that blend.



The U.S. all milk price averaged $18.40 per cwt., up 70 cents from August and 70 cents above Sept. 2020. The California all milk price, at $18.80, was up 70 cents from August and $1.50 above a year ago. Wisconsin’s, at $18.30, was up 90 cents from August and 40 cents above a year ago.

The national average corn price slipped to $5.45 per bushel, down 87 cents per bushel from August, but still $2.04 per bushel above Sept. 2020.

Soybeans averaged $12.20 per bushel, down $1.50 from August after falling 40 cents the previous month, but were still $2.96 per bushel above Sept. 2020.

Alfalfa hay averaged $209 per ton, up $3 from August and $41 above a year ago.

The September cull price for beef and dairy combined averaged $72.90 per cwt., down $3.10 from August, $6.30 above Sept. 2020, and $1.30 above the 2011 base average of $71.60 per cwt.

Quarterly milk cow replacements averaged $1,340 per head in October, down $40 from July and even with October 2020. California cows averaged $1,300 per head, down $50 from July and down $50 from a year ago. Wisconsin’s average, at $1,450 per head, was down $30 from July but $30 above October 2020.

Chicago-based Commodity and Ingredient Hedging LLC.’s latest Margin Watch (MW) reports that “Dairy margins strengthened further over the second half of October as milk prices continued to advance in deferred periods which more than offset a similar rise in projected feed costs.”

“A significant slowdown in the growth of milk production while demand has stayed strong has been attributed to some of the recent strength,” the MW stated. “The feed markets have been trending higher as strong ethanol demand for corn has helped to limit harvest pressure,” according to the MW.

The milk price recovery however is too little too late for the large dairies that came up for sale in California and Texas, according to the Oct. 28 Dairy and Food Market Analyst.

Editor Matt Gould talked about it in the Nov. 8 Dairy Radio Now broadcast. He says nearly 28,000 cows were sold in New Mexico since June, 6,800 cows in Texas, and 6,150 in California. Of the auctions he tracks, Gould said some 51,000 head have been sold at dispersals over the last four months.

He blames low margins and says “Dairies in Texas and New Mexico have experienced especially low milk prices so far in 2021. January thru August, prices averaged just $15.56 per cwt. in New Mexico, $2.39 below the national average. Texas was the fifth-lowest and averaged $17.31 per cwt, according to the DFMA.

“Add in elevated feed costs,” says Gould, up $3.16 per cwt. January thru August, and average farm-level margins fell to the lowest level in the USA since July 2013. Typically, when average revenue over feed costs are below $8 per cwt. for six months or more, it triggers a slowing of growth,” he concludes. “Margins have been below that level every month in 2021 and most recently totaled just $5.46 per cwt. Dairy processors face many of the same issues.”

Cheese vats were busy in September, according to USDA’s latest Dairy Products report. Cheese output totaled 1.14 billion pounds, down 0.5% from August level which was revised up 7 million pounds, but 3.3% above Sept. 2020. Year to date (YTD) output sits at 10.2 billion pounds, up 3.5% from the same period in 2020.

Wisconsin produced 289.0 million pounds of the September total, down 1.9% from August but 1.9% above a year ago. California output, at 201.9 million pounds, was up 0.1% from August and 4.5% above a year ago. Idaho produced 83.3 million pounds, up 6.9% from August but 4.4% below a year ago.

Italian style cheese totaled 486.2 million pounds, up 0.2% from August and 3.5% above a year ago. YTD Italian hit 4.3 billion pounds, up 2.6%.

American type cheese, at 454.2 million pounds, was down 0.9% from August but 5.1% above a year ago. YTD American was at 4.2 billion pounds, up 5.3%. Mozzarella totaled 379.3 million pounds, up 2.1% from a year ago, with YTD at 3.4 billion pounds, up 1.0% from 2020.

Cheddar, which is traded at the CME, totaled 313.0 million pounds, down 6.5 million pounds or 2.0% from August, but 9.7 million pounds or 3.2% above a year ago. YTD Cheddar was at 2.95 billion pounds, up 4.0% from 2020.

Increased cheese meant less fat for butter. Churns produced 143.4 million pounds, down 4.6 million pounds or 3.1% from August, and 7.3 million or 4.9% below a year ago. YTD butter stands at 1.6 billion pounds, down 2.3% from 2020.

Yogurt output totaled 401.3 million pounds, up 2.5% from a year ago, with YTD at 3.6 billion pounds, up 4.3%.

Dry whey production totaled 75.7 million pounds, down 1 million pounds or 1.3% from August, and 1.3 million pounds or 1.6% below a year ago. YTD dry whey output is at 696.2 million pounds, down 4.1% from a year ago.

Dry whey stocks slipped to 64.2 million pounds, down 4 million or 5.9% from August and were 15.7 million pounds or 19.7% below those a year ago.

Nonfat dry milk output totaled 122.4 million pounds, up 400,000 pounds or 0.3% from August but were down 3.8 million or 3.1% below a year ago. Powder production YTD totaled 1.6 billion pounds, up 5.6% from 2020.

Stocks fell to 244.1 million pounds, down 40.6 million pounds or 14.3% from August, but were up 5.2 million pounds or 2.2% above those a year ago.

StoneX Dairy Group says it’s not clear if NFDM sitting in a container at port waiting for a ship would be included in this inventory data.

Skim milk powder production amounted to 62.8 million pounds, up 1.3 million pounds or 2.1% from August but were 18.3 million pounds or 22.5% below a year ago. YTD skim milk powder, at 408.9 million pounds, is down 20.8% from 2020.

Strength remained in the Nov. 2 Global Dairy Trade auction where the weighted average jumped 4.3%, following a 2.2% advance Oct. 19. Traders brought 66.0 million pounds of product to market, up from 61.4 million on Oct.5, and the most since Jan. 5.

Cheddar led the gains, soaring 14.1%, after a 2.9% gain on Oct. 19. Skim milk powder was up 6.6%, following a 2.5% gain. Whole milk powder was up 2.7%, which followed a 1.5% increase. Butter was up 4.7%, duplicating the gain last time, and anhydrous milkfat was up 4.2%, following a 2.5% gain. Lactose was up 1.6% after gaining 5.9%. Buttermilk powder was down 3.8%.

StoneX says the GDT 80% butterfat butter price equates to $2.3674 per pound U.S., up 10.6 cents, and compares to CME butter which closed Friday, Nov. 6 at $1.9350. GDT Cheddar, at $2.2941, up 28.7 cents, and compares to Friday’s CME block Cheddar at $1.5850. GDT skim milk powder averaged $1.6450 per pound, up from $1.5426. Whole milk powder averaged $1.7785 per pound, up from $1.7248. CME Grade A nonfat dry milk closed Friday at $1.57 per pound.

StoneX Nov. 3 Early Morning Update points out that China’s participation in the GDT was reduced from the last event but the sharp rise in cheese was driven by bidding out of Africa, not Asia, “likely reflecting the dearth of available cheese out of Europe.” They ask; “What’s worse than high priced cheese? Answer: No Cheese. Or cheese that is not reliably delivered on time.”

“That seems to be the story emerging for cheese globally,” says StoneX. “The price spreads may say a lot about global demand. They may even indicate something about global supply. But what we think they really reveal is that of all the cheese exporters out there, the U.S. is, for now, the least reliable.”

The U.S. has enjoyed good exports, StoneX says, but “lately it seems the world favors more certainty around deliveries and they’re willing to pay a premium for it. In the meantime, we may have a small glut of cheese available here. Add what appears to be a seasonal slowdown and you have a recipe for weaker prices.”

The Nov. 3 Daily Dairy Report says congestion at U.S. ports and limited availability of shipping containers have constrained U.S. dairy exports, according to a USDA Global Agricultural Information Network report. The DDR citied data from Indonesia as an example of the lost U.S. sales and says European seaports face less severe backlogs so importers are reportedly switching their buying from the U.S. to Europe and Oceania.

That said, the September U.S. export data remains encouraging. Nonfat-skim milk powder exports totaled 154.5 million pounds, up 16.2% from Sept. 2020, with solid gains to Mexico, according to HighGround Dairy (HGD).

Cheese exports totaled 75.2 million pounds, up 20.5% from a year ago, and HGD says third quarter exports were the strongest on record, led by gains to Mexico, Japan, and Chile.

The U.S. shipped 6.8 million pounds of butter, up 111.5%, and topped year ago levels for the tenth consecutive month. Canada remained the top destination.

Dry whey exports, at 41.4 million pounds, were off 0.2% from a year ago.

Cheese imports, at 38.4 million pounds, were up 14.4%, and we took in 10.7 million pounds of butter, up 8.8% from a year ago.

U.S. cheese prices continued to head lower as they entered November. The CME Cheddar blocks closed Nov. 5 at $1.5850 per pound, down 9 cents on the week and 75.75 cents below a year ago when they plunged the second largest drop ever, losing 44 cents, as traders anticipated results of the presidential election and the uncertainty of the government’s Food Box program.

The barrels finished Friday at $1.5025, down 31.75 cents on the week, 81.50 cents below a year ago when they lost 21.25 cents, and are 8.25 cents below the blocks. There were five sales of block on the week at the CME and 26 of barrel.

After several weeks with barrel prices above the blocks, the situation corrected itself last week as a few contacts report that barrels have become a bit harder to move. Some believe this may signal more volatility for the next few months. Midwest cheesemakers suggest block demand has been steady and are trying to stay ahead of buyer calls, though a few plants are short workers and cannot run at full capacity. Milk intakes are in good balance with processing and spot load prices returned to near flat Class III to $1 above Class last week.

Western cheese demand for food service and retail is softening but interest in international markets is still strong. Transportation delays continue to challenge. A shortage of truck drivers continues to cause delays while port congestion is delaying loads. Contacts say that softening demand and cheese inventories being sold at a discount have contributed to lowering prices. Cheese plants are running busy schedules where available while others are limited due to decreased milk supplies and staffing shortages.

Butter headed for $2 per pound, marching to $1.98 on Tuesday, highest since June 4, 2020, with a sale on Wednesday hitting $1.9925, but gears reversed Wednesday and closed Friday, Nov. 6 at $1.9350, a half-cent higher on the week and 50.50 cents above a year ago, with 24 cars exchanging hands.

Cream tightness continues for Midwest butter makers as seasonally heightened production of dips and whips pulls heavily on cream supplies. Butter production is busy, but some contacts tell DMN of having to work around delayed cream deliveries and labor challenges. Butter demand is steady to stronger across food service and retail sectors and market tones remain bullish.

Cream is available to meet demand across the West though a shortage of truck drivers is causing delays. Demand for butter is strong in food service and retail, which is continuing to pull heavily on butter inventories

Grade A nonfat dry milk saw a Friday finish at $1.57 per pound, up 1.25 cents on the week, highest since Aug. 5, 2014 and 50.50 cents above a year ago, 12 sales for the week.

Dry whey crept up to 66 cents per pound, up 3 cents on the week, highest since April 29, and 23.75 cents above a year ago. Four cars were sold on the week.

In dairy politics; the International Dairy Foods Association (IDFA) announced the formation of a Supply Chain Task Force to develop policy recommendations to address severe supply chain disruptions affecting the U.S. dairy industry.

“Formation of the task force comes as the food and agriculture sector deals with several mounting challenges including labor shortages, steadily increasing costs for inputs such as ingredients and packaging, and major challenges moving products through sea and land ports,” stated an IDFA press release. “Supply chain challenges are affecting the dairy industry’s ability to remain profitable, support good-paying jobs, and provide healthy, nutritious food to families around the world.”


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