Benchmark milk price jumps $1.29
U.S. milk prices are making June Dairy Month a little happier for farmers. The Agriculture Department announced the May Federal order Class III benchmark milk price at $18.96 per hundredweight (cwt.), up $1.29 from April, $6.82 above May 2020, and the highest Class III since November 2020. The five month average is at $16.91, up from $15.10 at this time a year ago and $15.05 in 2019.
Late Friday, June 4, morning Class III futures had the June price at $17.29; July, $17.82; August, $18.33; September, $18.73; October, $18.86; November, $18.75; and December at $18.45.
The May Class IV price is $16.16 per cwt., up 74 cents from April, $5.49 above a year ago, and the highest since February 2020. Its average now stands at $14.54, up from $13.96 a year ago, and compares to $15.81 in 2019.
Meanwhile, a jump in the April all milk price helped offset increased feed costs to pause the slide in the U.S. milk feed ratio. The USDA’s latest Ag Prices report shows April at 1.75, same as March, but down from 1.85 in April 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 purchase 1.75 pounds of dairy feed of that blend.
The U.S. all milk price averaged $18.40 per cwt., up $1 from March and $4 above the March 2020 average. California’s all milk price climbed to $16.70, up 90 cents from March and $2.80 above a year ago. Wisconsin’s, at $18.80, was up $1.30 from March and $4 above a year ago.
Unfortunately, the national average corn price hit $5.31 per bushel, up 42 cents per bushel from March and a pricey $2.02 per bushel above April 2020.
Soybeans averaged $13.90 per bushel, up 70 cents from March and a whopping $5.55 per bushel above April 2020.
Alfalfa hay averaged $187 per ton, up $6 from March and $7 above a year ago.
Looking at the cow side of the ledger; the April cull price for beef and dairy combined averaged $71.10 per cwt., up $4 from March, $7.10 above April 2020, and 50 cents below the 2011 base average of $71.60 per cwt.
Milk cow replacements averaged $1,310 per head in April, down $50 from January but $60 per head above April 2020. Cows averaged $1,400 per head in California, up $50 from January and $100 per head above a year ago. Wisconsin’s average, at $1,490 per head, was up $20 from January and $240 per head above April 2020.
International dairy values continue to slip. The June 1 Global Dairy Trade auction saw the weighted average down 0.9%, following a 0.2% slip on May 18 and 0.7% loss on May 4. While the slippages are small, due to China remaining in the market as well as stepped up trade from other regions, it was the fourth consecutive event to lose ground.
Buttermilk powder led the losses, down 7.5%, after not trading in the last event. Butter was down 5.4%, after dropping 2.2%. Anhydrous milkfat was off 0.8%, after inching 0.1% lower. Lactose was down 1.6%, following a rise of 1.6% last time. Skim milk powder and whole milk powder were both down 0.5%, after skim powder inched up 0.7% last time and whole milk powder was off 0.2%. GDT Cheddar was up 0.5%, following a 1.0% rise last time.
StoneX Group says the GDT 80% butterfat butter price equates to $2.0757 per pound U.S., down 10.6 cents, and compares to CME butter, which closed Friday, June 4, at $1.7750. GDT Cheddar, at $1.9615, was up fractionally, and compares to Friday’s CME block Cheddar at $1.50. GDT skim milk powder averaged $1.5491 per pound, down from $1.5634, and whole milk powder averaged $1.8426 per pound, down from $1.87. CME Grade A nonfat dry milk closed Friday at $1.26.
CME block Cheddar closed the Memorial Day holiday shortened week at $1.50 per pound, as traders anticipated the afternoon’s April Dairy Products report. The blocks were down for the fifth week in a row, losing 30 cents in that time period, falling to their lowest level since May 12, 2020, and were $1.0525 below a year ago when they gained 32.25 cents, hitting $2.5525.
The barrels finished at $1.6150, up 4.50 cents on the week, 74.50 cents below a year ago when they shot up 33.75 cents to $2.36, and are an inverted 11.50 cents above the blocks. Thirty-three cars of block were sold on the week and 20 of barrel.
The lagging NDPSR values were well above current CME values and the dry whey price saw its first decline since Christmas Week 2020.
Midwest cheese producers are busy, reports Dairy Market News, and “milk availability is evidence that peak flush season has yet to be achieved. Cool weather continued to put a surplus of milk into cheese vats. DMN says “It is getting to a point where milk handlers are aggressively seeking out destinations for notable volumes of milk. Contacts are hopeful that heat in the forecast will begin to stanch the current flow of milk.”
Western cheese demand is steady in both retail and food service markets. Milk is readily available, allowing producers to run full schedules however cheese output is, reportedly, outpacing demand. Market tones are unsteady though contacts believe the lower prices should lead to increased interest from international buyers but port congestion and shipping issues are continuing to cause delays.
Cash butter finished Friday, June 4, at $1.7750 per pound, down 3.50 cents on the week and 15 cents below a year ago when it gained 26.50 cents and was trading at $1.9250. There 17 carloads that found new homes on the week.
Central butter contacts reported continued strength in food service demand and suggest overall demand has grown closer to pre-COVID levels. There was plenty of cream following the holiday but not as hearty as expected. Some contacts expect tightness in upcoming weeks. Market tones are quiet with some potential bullish undertones, says DMN.
Western cream loosened the first week of June as some processors paused operations over the holiday but limited tanker availability curtailed movement out of the region. Some expect cream to tighten in the coming days, but the current supply is adequate. Butter output is steady to seasonally lower though Southwest plants are growing inventories to meet fall demand. Retail sales are lower but steady. Food service demand is healthy but cautious as customers are placing smaller, more frequent orders. Some contacts report diminished export interest.
StoneX says “While butter does not fee” bullish these days the stocks/use ratio for the U.S. is pointing towards $2 butter in the near future.”
Grade A nonfat dry milk closed Friday, June 4, at $1.26 per pound, down 3.25 cents on the week but still 28.25 cents above a year ago. 10 sales were reported.
CME dry whey fell to 60 cents per pound Tuesday, June 1, lowest since Mar. 16, 2021, but closed Friday. June 4, at 60.25, 2 cents lower on the week but 25.75 cents above a year ago, on 2 trades.
The fridge is far from empty but the Agriculture Department’s latest Cold Storage report shows inventories are not getting out of hand, at least on cheese.
American type cheese stocks fell to 830.8 million pounds, down 3.6 million pounds or 0.4% from March, which was revised up 2.6 million pounds, and they were 3.5 million pounds or 0.4% below those a year ago.
The “other” cheese category saw stocks dip to 601.2 million pounds, down 10.7 million pounds or 1.7% from March and 17.5 million or 2.8% below a year ago.
The total cheese inventory stood at 1.45 billion pounds on April 30, down 15.9 million pounds or 1.1% from March and 25.5 million pounds or 1.7% below a year ago, ending five consecutive months that total cheese stocks grew.
The decline in cheese stocks in April is a rare occurrence during the Spring Flush, says HighGround Dairy (HGD), “and especially notable following expanded cheese production capacity that has come online in recent months. It was the first April stocks decline since 1993 and signifies that cheese demand was extraordinary in the month, likely driven by both retail and foodservice channels as the economy quickly reopened.” But, that healthy demand will need to persist,” HGD warned.
April 30 butter stocks climbed to 385.3 million pounds, up a hefty 27.9 million pounds or 7.8% above the March inventory, which was revised up 2.8 million pounds. They were 12.7 million pounds or 3.4% above April 2020, making April the 22nd consecutive month that butter stocks topped those of a year ago.
Keep in mind, a year ago, COVID lockdowns had restaurants closing their doors thus butter stocks grew quickly. It will be interesting to see what April butter output looked like in the next Dairy Products report issued June 4.
HGD warns that “Butter stocks are at multi-decade highs and will only climb further in second quarter before reaching the yearly peak. Heavy inventories prevent meaningful price appreciation throughout the remainder of 2021 with plenty of product available to meet demand.”
StoneX says that overall, they are still bullish on butter with expectations of stocks falling back below year ago levels by August.
April milk production totaled 19.3 billion pounds, up a hefty 3.3% from April 2020, according to USDA’s preliminary data, and USDA’s latest Dairy Products report shows that a lot of that milk ended up in the cheese vat.
Cheese output totaled 1.136 billion pounds, down 3.4% from March but a bearish 8.0% above April 2020. Year to date (YTD) output was at 4.49 billion pounds, up 3.7% from the same period in 2020.
Italian style cheese totaled 480.7 million pounds, down 4.3% from March but 7.4% above a year ago. YTD Italian hit 1.9 billion pounds, up 2.1%.
American type cheese, at 473.4 million pounds, was off 0.7% from March but 6.0% above a year ago. YTD American was at 1.85 billion pounds, up 5.8%.
Mozzarella output totaled 376.4 million pounds, up 6.6% from a year ago, with YTD mozzarella at 1.5 billion pounds, up 0.8% from 2020.
Cheddar output, the cheese traded at the CME, totaled 334.2 million pounds, up 400,000 pounds or 0.1% from the March level which was revised down 4.9 million pounds, but was 4.1 million or 1.2% above a year ago. YTD Cheddar hit 1.3 billion pounds, up 4.0% from 2020.
U.S. churns produced 185.2 million pounds of butter, down 13.7 million pounds or 6.9% from March, and 42 million pounds or 18.5% below a year ago. YTD butter totaled 780 million pounds, down 5.7% from 2020. April 2020 saw the highest single month butter output ever, and was up 31.8% from 2019.
Yogurt output totaled 412.1 million pounds, up 13.9% from a year ago, with YTD at 1.6 billion pounds, up 5.6%.
Dry whey totaled 74.4 million pounds, down 5.2 million pounds or 6.5% from March and 1.4 million pounds or 1.8% below a year ago. YTD dry whey was at 313.4 million pounds, down 2.6%.
Dry whey stocks slipped to 60.5 million pounds, down 5.1% from March and 16.5 million or 21.5% below those a year ago.
Nonfat dry milk output fell to 194.6 million pounds, down 4.7 million pounds or 2.4% from March and 8 million or 3.9% below a year ago. Powder production YTD is at 775.5 million pounds, up 5.5% from 2020.
Stocks dropped to 302 million pounds, down 15.1 million pounds or 4.7% from March and were a whopping 90.6 million pounds or 23.1% below a year ago.
Skim milk powder production crept to 41.6 million pounds, up 2 million pounds or 5.0% from March but were 10 million pounds or 19.4% below a year ago. YTD skim milk powder, at 148.9 million pounds, is down 20.6% from 2020.
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