Benchmark milk price at 5-year high
The October Federal order Class III benchmark milk price hit a five-year high at $18.72 per hundredweight, up 41 cents from September, $3.19 above October 2018, and the highest Class III since November 2014. It equates to about $1.61 per gallon, up from $1.57 in September and $1.34 a year ago.
It is $3.29 above California’s October 2018 4b cheese milk price. The nation’s largest milk producing state marked the one year anniversary of entering the Federal order Milk Marketing Order system on Nov. 1.
The Nov. 1 Class III futures settlements portended a November price at $20.19 before heading to $19.70 in December. The 2020 peak was $18.11 in January.
The 2019 Class III average stands at $16.37, up from $14.72 at this time a year ago and $16.18 in 2017.
The October Class IV price is $16.39, up 4 cents from September and $1.38 above a year ago. The 2019 average stands at $16.23, up from $14.06 a year ago and $15.44 in 2017.
Most cash dairy prices ended October strong. Block Cheddar climbed to $2.1750 per pound the day after Halloween but closed Friday at $2.1550, up 3.25 cents on the week, after gaining 15.5 cents the previous week, and is 69.75 cents above a year ago.
The Cheddar barrels closed at $2.3250, up 7.5 cents on the week on unfilled bids, after pole vaulting 25 cents the previous week, are 98.5 cents above a year ago, and the highest they have been since Sept. 25, 2014. They’re also an inverted 17 cents above the blocks. Twenty-four cars of block traded hands on the week and 69 on the month, up from 63 in September. No barrel was sold last week but 66 cars sold on the month, down from 80 in September.
Central cheesemakers continue to report steady, somewhat tight milk supplies, according to Dairy Market News. Spot milk markets were quiet early in the week, as prices continue to fall in the $1-over Class area. Cheese production is still slightly slower than this time in recent years. Cheese demand is good for short term needs. Barrel makers continue to report mostly bullish demand and some process cheese manufacturers say they are oversold week to week.
Cheese market tones are “bullish,” said DMN, but cheesemakers are concerned about how bullish. They say $2-plus cheese is “creating a short-term or necessity-based purchasing environment. Buyers are not looking for anything longer term.”
The CME barrel pricing topping the blocks was a surprise to many, according to DMN, and contacts credit a tightness of barrels. Increased governmental cheese purchases seem to be helping that trend. Demands for the holiday are surfacing “bit by bit,” said DMN, but domestic sales out west were close to the previous week’s levels. Export sales have improved slightly. Inventory is sufficient and cheese output is active, prompted by a stable to increasing milk supply.
CME butter closed Nov. 1 at $2.08 per pound, up 2 cents on the week but 22 cents below a year ago. Twenty-nine cars traded hands on the week, 115 on the month, up from 102 in September.
FC Stone reported in its Oct. 28 Early Morning Update that “Eurostat keeps revising up European Union butter production data. Each state submits data on their own schedule, so data drips in, along with revisions to historical data, but presently the data looks like EU butter stocks will be up 20% by year end.”
DMN said there was concern that cream availability for churning could dwindle as Class II and Class III producers took more cream for holiday-related items but butter makers say that was not the case last week. Bulk butter supplies are generally available and market tones are “maintaining a steadiness that market participants are accustomed to.” Some analysts expect to see a sub-$2 price point prior to seeing $2.25 again. Others expect continued steadiness, explaining that with Thanksgiving falling later this year, Nov. 28, it will assist the market later into the season.
Western retail butter sales are seasonally strong but bulk demand is mixed. Cream is adequate for most processing and butter production is steady. Butter stocks are getting pulled lower but the latest cold storage report did not match the typical expectation of a large decrease for the month. A few butter purveyors are unloading butter on the CME, an occurrence that some contacts say is unusual for this time of year. Some feel the market signals bestow a bearish tone and the strength of retail sales the next few weeks may be the true determinant of direction.
Grade A nonfat dry milk saw a Nov. 1 finish at $1.1825 per pound, 3 cents higher on the week, highest since Feb. 18, 2015, and 28.25 cents above a year ago. Sixteen cars sold on the week, with 60 for the month, up from 49 in September.
CME dry whey fell to 26.75 cents per pound Oct. 30, lowest since March 13, 2018, but it closed Nov. 1 at 28.25 cents, unchanged on the week but 16.25 cents below a year ago. Product continues to make its way to Chicago, with 48 loads traded this week and 305 on the month, up from just 50 in September.
Finances are looking better on the farm after five years of meager returns. A higher All Milk price pulled the September milk feed price ratio higher for the third month in a row. The USDA’s latest “Ag Prices” report put the ratio at 2.33, up from 2.26 in August and compares to 2.13 in September 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. In other words, one pound of milk today purchases 2.33 pounds of dairy feed containing that blend.
The U.S. All-Milk price averaged $19.30 per hundredweight, up 40 cents from August and $2.40 above September 2018. California’s All Milk price was $18.60, down a dime from August but $2.04 above a year ago. Wisconsin’s, at $19.90, was up 80 cents from August and $2.40 above a year ago.
The national average corn price averaged $3.80 per bushel, down 13 cents from August, after falling 23 cents from July, but is 40 cents per bushel higher than September 2018. Soybeans averaged $8.35 per bushel, up 13 cents from August, after dropping 16 cents from July, and are 43 cents per bushel below a year ago. Alfalfa hay averaged $181 per ton, up $2 from August and $2 per ton above a year ago.
Looking at the cow side of the ledger; the September cull price for beef and dairy combined averaged $65.60 per cwt., down $2.70 from August, $4.80 above September 2018, but $6 below the 2011 base average of $71.60 per cwt.
Milk cow replacements averaged $1,310 per head for the quarter in October, up $70 per head from July, and $80 per head above 2018. They averaged $1,400 per head in California, up $100 from July and $200 above a year ago. Wisconsin cows averaged $1,270 per head, up $60 from April and $90 above October 2018. ❖