Benchmark milk price slips
The Agriculture Department announced the June Federal order Class III benchmark milk price July 3 at $16.27 per hundredweight, down 11 cents from May but $1.06 above June 2018. It equates to $1.40 per gallon, up from $1.31 a year ago.
The June Class IV price is $16.83, up 54 cents from May, $1.92 above a year ago, and the highest Class IV price since November 2015.
July 5 Class III futures settlements promise brighter news ahead and even topped $18 in September, a level not seen in five years. But, dairy farmers aren’t breaking out the champagne just yet. Those low years took a toll on finances and equity, if they were even able to stay in business.
Rising feed prices are a cloud on the horizon driven by continuous rains in the Midwest where planting was delayed and will surely affect crop yield and quality.
The latest Crop Progress report shows 94% of U.S. corn had emerged, as of the week ending June 30, 6% below a year ago and the five year average. 56% of the crop is rated good to excellent, down from 76% a year ago.
Eighty-three percent of U.S. soybeans have emerged, down from 98% a year ago and 12% behind the five year average. 54% are rated good to excellent, down from 71% a year ago.
Purchases by China, still in a trade spat with the U.S., could affect prices U.S. farmers pay for feed grains. The increased costs will consume much of the gains in milk prices, along with the many other rising costs on a dairy.
Dairy product prices were lower in the shortened Fourth of July holiday week at the Chicago Mercantile Exchange but cheese and butter prices are still the highest in the world currently.
The Cheddar blocks closed July 5 at $1.8475 per pound, down a penny on the week, ending six weeks of gains, but were 30 1/2-cents above a year ago. The barrels found themselves at $1.78 on July 5, also a penny lower on the week but 53 1/2-cents above a year ago.
Dairy Market News reports that Midwestern cheese demand was generally unchanged week to week. Some cheesemakers, particularly mozzarella and provolone producers, are still seeing positive ordering trends. Curd and barrel producers also reported stronger sales with outside festivities in full swing. Other producers of varietal/specialty cheeses are experiencing an expected slowdown. Cheese output has picked up some and spot milk is available at discounts.
Looking westward, cheese exports were reported to be mixed while domestic demand is unchanged. Inventories are balanced to a bit tight. With declining milk components and supplies, Western cheese output fluctuates, DMN said.
Butter saw a July 5 close at $2.4050 per pound, down a half-cent on the week but 23 1/2-cents above a year ago.
The strong U.S. price is a magnet to imports and while imports may act somewhat as a governor on how high the U.S. price goes, it’s not likely we will return to a price below $2 any time soon. The last time U.S. butter was below $2 was Nov. 15, 2016. The all-time high was $3.06 on Sept. 19, 2014.
Some Midwest butter plant managers reported finding cream at prices within their reach, at least during the holiday week. Cream was more available within the region and from the West, as both butter/other production plants took time off for the holiday weekend. As rising temperatures hit large areas of the region, cream is predicted to tighten. Butter demand is steady, keeping availability manageable.
Western butter orders were “not so good compared to the previous week,” according to DMN. Churning activities had slowed because several plants prepared to close for the holiday, thus cream was more available.
Spot Grade A nonfat dry milk closed July 5 at $1.04 per pound, down a penny on the week but 26 3/4-cents above a year ago.
CME dry whey saw a July 5 finish at 32 3/4-cents per pound, down three-quarter cents on the week and 6 1/4-cents below a year ago.
One of the biggest factors in the whey market is African Swine Fever, as whey is a big component in feeding pigs. The Food and Agriculture Organization of the United Nations reports that ASF “continues to spread within East and Southeast Asia, leading to the death and the culling of millions of pigs. The disease poses a serious threat to the livelihood and food security of large numbers of people relying on the production and processing of pigs.” ❖
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