Benchmark milk price plummets
The U.S. Federal order benchmark Class III milk price ended 2020 sharply lower and well below a year ago. The Agriculture Department announced the December Class III at $15.72 per hundredweight, down $7.62 from November, $3.65 below a year ago, and the lowest Class III price since May. That put the 2020 average at $18.16, up from $16.96 in 2019 and $14.61 in 2018.
New Year’s Eve Class III futures settlements had the January contract at $15.80; February, $17.49; March, $17.51; April $17.37; May, $17.39; June, $17.25; July, $17.33; August, $17.35; September, $17.54; October, $17.30; November, $17.18; and December at $17.15. That would portend a $17.22 average in 2021. The USDA’s latest prediction for 2021 was for a $15.60 average. The Class III price saw a low of $12.14 in May and a high of $24.54 in July.
The December Class IV price is $13.36, up 6 cents from November, $3.34 below a year ago, and the lowest December Class IV price since 2008. Its 2020 average is $13.49, down from $16.30 in 2019 and $14.23 in 2018. The USDA is projecting a 2021 Class IV average of $13.60. The 2020 Class IV low was $10.67 in May and a high of $16.65 in January.
Cash dairy prices ended 2020 below where they were a year ago but what a roller coaster ride they had. The 40-pound Cheddar block cheese saw a COVID-pandemic-driven bottom of $1 per pound on April 15, then soared to a $3 peak on July 13, and closed New Year’s Eve at $1.65, up 5.25 cents on the New Year’s holiday shortened week but 24 cents below a year ago.
The 500-pound Cheddar barrels bottomed out April 9 at $1 per pound, peaked at $2.53 on Oct. 30, and closed Dec. 31 at $1.5425, up 7.75 cents on the week, 10 cents below a year ago, and 10.75 cents below the blocks. 33 cars of block traded hands on the week at the CME and 19 of barrel.
Dairy Market News says the markets have begun to show some stability, at least in the near term. Some Midwestern cheese plants are running full schedules while others are allotting days off but “there is ample milk available.”
Spot milk prices had already been reported at lower discounts than previous weeks. Demand notes are mostly unchanged, according to DMN, but “There are more questions regarding potential governmental bids and food service demand moving into the first quarter of 2021.” Some contacts are concerned about growing cheese inventories, but not overly concerned, at least in the near term, according to DMN.
Ample milk flows are keeping Western cheese plants busy and most are running at capacity. Customers are taking regular shipments, says DMN, but predicting demand has been a moving target throughout the year as purchase tendencies are somewhat erratic. Retail demand is steady and strong while food service demand has been weak, though there are exceptions. Sales of snack items that would go into bag lunches are weaker than the rest of retail items. Pizza cheese and process cheese for fast food burgers are stronger than the rest of food service items. Western cheese inventories are balanced to long, says DMN.
CME butter, which hadn’t seen anything below $2 per pound since late November 2019, saw a far different scenario in 2020. The butter hit bottom at $1.10 on April 23, saw a one day price high of $2.0150 on June 4, and closed the year at $1.42, lowest since Dec. 1, down 10.5 cents on the week and 53 cents below a year ago. There was only one sale on the week.
Central butter market tones lack certainty, reports DMN. Butter plants were generally running as expected the last week of the year, with some allotting multiple days off leaving cream handlers to find homes for the cream. Some plant managers relayed positive notes from food service customers. Churning was limited New Year’s week but DMN says the overall picture is that “churning will be strong for the foreseeable future with ample cream available.”
Western butter makers also have plenty of cream for the churns and spot loads were selling at flat multiples. Retail demand slowed going into the winter holidays however some contacts reported that orders had picked up again as retailers restocked shelves. Food service accounts continue to struggle, says DMN. Restaurant sales were starting to show signs of life a few weeks ago but tighter restrictions in efforts to combat COVID-19 have curtailed any further gains in food service.
Grade A nonfat dry milk saw its peak at $1.2975 per pound on Jan. 22, but saw a low point of 79.25 cents per pound on May 1. The powder finished the year at $1.1425 per pound, down a half-cent on the week and 9 cents below a year ago, on 12 reported sales for the week. StoneX says “End-user buying seems to have dried up a bit.”
CME dry whey saw its 2020 low at 28.75 cents per pound on July 7. It peaked at 47 cents on Dec. 10, and closed Dec. 31 at 46.25 cents per pound, down a half-cent on the week but 14.75 cents above a year ago, with one sale for the week.
Another jump in the U.S. All Milk price offset sharply higher corn and soybean prices to push the November milk feed price ratio higher. The USDA’s latest Ag Prices report shows the ratio at 2.58, up from 2.50 in October and the highest since July, but was down from 2.65 in November 2019.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk could purchase 2.58 pounds of dairy feed of that blend in November.
The U.S. All-Milk price averaged $21.30 per hundredweight (cwt.), up $1.10 from October and 20 cents above the November 2019 average.
California’s All Milk price hit $23, up $1.80 from October and $3.50 above a year ago. Wisconsin’s, at $22.70, was up $1.20 from October and 20 cents above a year ago.
The national average corn price averaged $3.79 per bushel, up 18 cents per bushel from October, which follows a 21 cent rise in October, and is 11 cents per bushel above November 2019. Soybeans averaged $10.30 per bushel, up 67 cents from October, following a 39 cent rise in October, and is $1.71 per bushel above a year ago. Alfalfa hay averaged $167 per ton, down $4 from October and $2 per ton below a year ago.
Looking at the cow side of the ledger; the November cull price for beef and dairy combined averaged $59.30 per cwt., down 70 cents from October, $1.60 above November 2019, but $12.30 below the 2011 base average of $71.60 per cwt.
In the week ending Dec. 19, 63,000 dairy cows were sent to slaughter, up 900 head from the previous week but 1,600 or 2.5% below a year ago.
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