Benchmark jumps $1.99, record high butter has meltdown |

Benchmark jumps $1.99, record high butter has meltdown

By Lee Mielke

The Agriculture Department announced the October Federal order Class III benchmark milk price at $21.81 per hundredweight, up $1.99 from September, $3.98 above Oct. 2021, and the highest October Class III since 2014. The 10 month average stands at $22.20, up from $16.86 a year ago, $17.89 in 2020, and $16.37 in 2019.

Friday’s Class III futures settlements portended a November price at $20.88 and December at $20.35.

The October Class IV price is $24.96, up 33 cents from September, $7.92 above a year ago, and the highest October Class IV ever. The 10 month average is at $24.82, up from $15.44 a year ago, $13.52 in 2020, and $16.23 in 2019. 

Dairy farm profitability crept out of the red a little in September. The month’s milk feed price ratio inched higher, ending seven consecutive months of decline. The USDA’s latest Ag Prices report shows the September ratio at 1.74, up from 1.70 in August, and compares to 1.66 in Sept. 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 purchase 1.74 pounds of dairy feed of that blend.

The All Milk Price average crept up to $24.40 per hundredweight, up a dime from August, after dropping $1.40 the previous month, and is $6.10 above Sept. 2021.

The September national average corn price was $7.09 per bushel, down 15 cents from August, but is $1.62 per bushel above Sept. 2021.

Soybeans, fell to $14.10 per bushel, down $1.20 from August, after falling 20 cents last month, but are still $1.90 per bushel above Sept. 2021.

Alfalfa hay, gained $2, averaging $277 per ton, a record high, and $63 per ton above a year ago.

The September cull price for beef and dairy combined averaged $91.20 per cwt., up $1.10 from August, $18.30 above Sept. 2021, and $19.60 above the 2011 base average.

The “recovery” will be short-lived however as butter and cheese prices have fallen. October will be “decent,” said dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Mo. Speaking in the Nov. 7 Dairy Radio Now broadcast, Brooks warned that things will head south from there.

“September’s gain in the income over feed calculation broke a three-month run of declines,” Brooks said. “Income over feed costs were above the $8 per cwt. level needed for steady to increasing milk production for the 12th month running.” 

“Feed costs were the highest ever for the month of September and the third highest all time. The All-Milk price stayed just outside of the top 10 at the 13th highest recorded,”  according to Brooks.

Cash butter suffered a Halloween Day meltdown, plunging a ghostly 19.50 cents, first time below $3 per pound since Aug. 19. It plunged a whopping 24.50 cents Tuesday, Nov. 1, largest single day fall since Dec. 10, 2015, when it lost 49 cents. Another 9 cents got whacked off Wednesday, Nov. 2, with 15 loads being sold, and fell to $2.61 per pound, a low not seen since May 10.

Buyers grabbed the falling knife Thursday and three sales took the price back up 5.75 cents. It added 10.50 cents Friday to close at $2.7725, down 36.75 cents on the week, lowest since May 17, but still 83.75 cents above a year ago, as traders anticipated the afternoon’s September Dairy Products report. Sales totaled 27 for the week and 58 for the month of October, down from 87 in September.

Butter makers continue to report “normal conditions,” according to Dairy Market News. Cream is readily available. Churning has picked up in recent weeks and demand is “steady to busy in the final pushes of the holiday ordering season.” 

Cream volumes continue to increase in the West. Demand for cream is steady for both Class II and butter production, though some churning is limited by labor shortages. Food service butter demand is steady but retail grocers have filled stocks in preparation for the holiday season and are reducing their butter orders.

Block Cheddar, after falling almost a dime the previous week, closed the first Friday of November at $2.01 per pound, up 5 cents on the week and 42.50 cents above a year ago. It closed Oct. 4 cents lower than it began the month.

The barrels, after plunging 16.50 cents the previous week, finished Friday at $1.9750, also up 5 cents on the week, 47.25 cents above a year ago, and 3.50 cents below the blocks. They closed October 26.75 cents weaker on the month.

Sales for Halloween Week totaled three cars of block, with 18 for the month of October, down from 21 in September. Barrel sales totaled seven for the week and 43 for the month, up from 35 in September.

Dairy Market News said Central cheese market tones were under some of the same bearish pressure that have impacted all dairy commodities in recent weeks. Contacts say “There are two potential silver linings: lower prices prompting more sales and a closure of the block/barrel price spread.” Most cheese processors have been reporting somewhat strong sales. Milk availability is slightly tighter and offers were quiet last week but Class III producers are actively seeking milk. Cheese inventories are generally balanced. 

Demand for cheese in the West is steady in food service markets, though retail demand is softening and below some previously forecasted levels. Export demand is strong as domestically produced loads are being sold at a discount to international suppliers. Cheese prices started heading south the week of Oct. 24 but saw some recovery Halloween Week. Some attributed the lower prices to increased spot availability for both barrels and blocks in recent weeks. Milk is available for cheesemakers to run steady schedules, sais DMN, though some continue to battle labor shortages and delayed deliveries of production supplies.

Grade A nonfat dry milk fell to $1.37 per pound Wednesday, lowest since Sept. 28, 2021, but rallied to a Friday close at $1.40, down 3 cents on the week, 17 cents below a year ago, and down 11.75 cents on the month. There were eight cars sold on the week and 29 in October, down from 78 in September.

Dry whey finished Friday at 46.75 cents per pound, up 3.75 cents on the week but 19.25 cents below a year ago, and unchanged from Oct. 3. Sales totaled three for the week and six for the month of October, down from 18 in September.

U.S. milk production jumped again in September, thanks to increases in cow numbers and output per cow but there’s more to the report than meets the eye.

The Agriculture Department’s latest data shows output at 18.28 billion pounds, up 1.5% from Sept. 2021. The 24-State total, at 17.5 billion pounds, was up 1.6%. It is the third monthly increase in 2022 and revisions raised the 50-State August total by 15 million pounds to 19.03 billion, up 1.7% from a year ago, instead of the 1.6% increase originally reported.

Cow numbers were expected to rise but the September herd totaled 9.41 million, down 2,000 head from August numbers which were revised 14,000 head lower. The September herd was up 6,000 from a year ago, first time since Sept. 2021 the herd size was above a year ago, but was 8,000 fewer than the peak in May.

StoneX called the report “neutral to slightly bullish,” and “with only 52,000 cows added to the herd over four months, 2022 has presented the weakest herd expansion seen in the U.S. over the last 15 years.” 

Output per cow averaged 1,943 pounds, up 27 pounds or 1.4% from Sept. 2021. August output was revised up 4 pounds, to 2,022 pounds.

Third Quarter milk output was up 1.2% from 2021, with cow numbers unchanged from second quarter but 29,000 less than third quarter 2021.

California output totaled 3.3 billion pounds in September, up 0.5% from a year ago. Cow numbers were up 4,000 and output per cow was up 20 pounds. Wisconsin produced 2.6 billion pounds, up 0.9%. Cow numbers were down 7,000 but output per cow was up 30 pounds from a year ago.

Idaho was up 2.4% on a 30 pound gain per cow and 6,000 more cows. Michigan was down 0.7% on a loss of 11,000 cows. Output per cow was up 40 pounds. Minnesota was up 0.6%, thanks to a 45 pound per cow gain offsetting an 8,000-cow drop. New Mexico was down 3.3% on a 16,000 cow drop. A 40 pound increase in output per cow could not offset the loss in cow numbers.

New York was up 2.2%, thanks to a 55 pound gain per cow offsetting a loss of 3,000 cows. Oregon was down 0.9% on a loss of 1,000 cows and unchanged output per cow. Pennsylvania was off 0.1%, on a drop of 5,000 cows. Output per cow was up 15 pounds. South Dakota was up 14.9%, thanks to 25,000 more cows but output per cow was down 10 pounds. Texas was up 8.5% on 30,000 more cows and a 70 pound gain per cow. Washington State was down 1.2% on 7,000 fewer cows, though output per cow was up 30 pounds. 

U.S. butter stocks still remain well below a year ago, according to the Agriculture Department’s latest Cold Storage report. Sept. 30 butter dipped to 267.3 million pounds, down 11 million pounds or just under 4% from the August total, which was revised down 4.3 million pounds, and down 57.1 million or 17.6% below a year ago, the 14th consecutive month stocks were below the previous year. It’s also the lowest inventory since 2017, according to the Daily Dairy Report.

American type cheese stocks inched up to 843 million pounds, up 1.5 million pounds or 0.2% from August, but down 1.1 million or 0.1% from a year ago.

The “other” cheese category fell to 603.5 million pounds, down 15.3 million or 2.5% from the August level, which was revised 1.5 million pounds lower, but was up 11.6 million pounds or 2.0% above a year ago.

The total cheese inventory slipped to 1.47 billion pounds, lowest since March, down 11.9 million pounds or 0.8% from August, but only 11.7 million or 0.8% above a year ago, still a new September record, according to the DDR. StoneX called the report neutral to slightly bullish for cheese and bearish on butter.

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