Benchmark milk price up $5.18
The October Federal order Class III benchmark milk price vaulted $5.18, to $21.61 per hundredweight (cwt.), highest October price since 2014, with a little more to come, thanks in large part to Uncle Sam’s Farmers to Families Food Box program.
The November Class III futures contract settled Nov. 6 at $23.20 but December fell to $18.70, with January 2021 at $17.25 per cwt.
The 2020 Class III average is at $17.89, up from $16.37 a year ago.
The October Class IV price is $13.47 per cwt., up 72 cents from September but $2.92 below a year ago. The Class IV average now stands at $13.52, down from $16.23 a year ago and $14.06 in 2018.
The Class III price peaked at $24.54 in July and slipped in August and September, only to shoot higher in October. And, as I have pointed out the past few months, the quirks of U.S. milk pricing has tempered the higher than average milk prices that farmers actually receive and, adding insult to injury, feed prices have crept higher as well.
The latest drop in the U.S. All Milk price, plus sharply higher corn and soybean prices, pulled the September milk feed price ratio to the lowest level since May. The latest Ag Prices report has the ratio at 2.28, down from 2.50 in August, and down from 2.34 in September 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 purchased 2.28 pounds of dairy feed of that blend in September.
The US All-Milk price averaged $17.90 per hundredweight (cwt.), down 90 cents from August and $1.40 below September 2019.
California’s All Milk price fell to $18.70, down $1.30 from August but 10 cents above a year ago. Wisconsin’s, at $17.70, was down $1.70 from August and $2.20 below a year ago.
The national average corn price averaged $3.41 per bushel, up 29 cents per bushel from August but 39 cents per bushel below September 2019. Soybeans averaged $9.24 per bushel, up 58 cents from August and were 89 cents per bushel above a year ago. Alfalfa hay averaged $171 per ton, down $1 from August and $8 per ton below a year ago.
Looking at the cow side of the ledger; the September cull price for beef and dairy combined averaged $66.60 per cwt., down $4.10 from August, $1 above September 2019, but $5 below the 2011 base average of $71.60 per cwt.
Milk cow replacements averaged $1,340 per head in October, up $30 per head from July and $30 above October 2019. They averaged $1,350 per head in California, unchanged from July and $50 below a year ago. Wisconsin cows averaged $1,420 per head, up $70 from July and $150 above October 2019
The loud crash you heard the first week of November was Cheddar block cheese plunging 44 cents, to a Nov. 6 close of $2.3425 per pound, ending five consecutive weeks of gain, but they were still 32.75 cents above a year ago.
The barrels rolled from their new record high set Oct. 30 at $2.53 per pound, to a $2.3175 Nov. 6 close, down 21.25 cents on the week, ending seven weeks of gains, 1.25 cents below a year ago, but at a more typical 2.50 cents below the blocks. There were only two cars of block traded on the week at the CME and 14 of barrel.
Midwest cheese producers reported changes in production levels this week to Dairy Market News, as some were seeking less milk and limiting production. Customers were buying hand-to-mouth and, with prices where they were, no one wants to be holding extra stocks, anticipating the price declines. Spot milk was available at prices still around or just under Class III.
Western retail cheese demand has remained strong, but while government purchases and fast food outlets are moving good volumes of cheese, total food service is underperforming. Export sales have receded, due to the higher prices, and in some cases, manufacturers had to discount cheese to move it overseas. Contacts say domestic market prices and freight costs are making it harder to compete in international markets. Parts of the nation face increasing COVID cases so marketers are concerned about further restrictions that could hamper recovery of the food service sector. Manufacturers and buyers are cautious in cheese production and storage that could lose value. Stocks are moderate.
Butter climbed to $1.4375 per pound Wednesday, but closed Nov. 6 at $1.43, up 4 cents on the week but 60.75 cents below a year ago, on 26 sales on the week.
Plant managers relay that cream availability is opening up from local and Western regions and that cream suppliers are setting Thanksgiving week deals. Butter makers say inventory is moving and churning remains busy. Retail demand has increased seasonally, but food service is doubtful to return to “normal” anytime soon. Market tones remain quiet and some believe they may remain somewhat mum into first quarter 2021.
The western butter supply is more than adequate and reflects a somewhat unstable market undertone. Sources tell DMN “The market is capable of seeing a domestic price surge, encouraged by strong retail demand that neutralizes the butter supply situation.” Stocks are in good shape and churning thrives at expected yearend holiday levels. Customers are inquiring about first quarter 2021 purchases. Food service is fairly steady, but below seasonal standards. Competitive U.S. butter in the global market, “could potentially be the mechanism for a stronger domestic butter price,” says DMN.
Grade A nonfat dry milk finished the week 4.25 cents lower, closing at $1.0650 per pound, 14 cents below a year ago, with 13 cars finding new homes. Poor exports and a weak GDT were the likely culprits for the powder downfall.
Dry whey climbed to a 42.25 cents per pound finish, highest since Jan. 22, 2019, up 2.25 cents on the week and 14.75 cents above a year ago, with three sales reported on the week.
Looking internationally, the first Global Dairy Trade auction of November reversed direction, after three consecutive gains, and saw its weighted average drop 2.0%. Powder and anhydrous milkfat were responsible.
Skim milk powder led the losses, falling 4.4%, after inching 0.2% lower on Oct. 20. Whole milk powder was down 2.0%, after inching up 0.3%. Anhydrous milkfat was down 2.6%, following a 0.5% slippage. Cheddar was off 0.8%, after gaining 3.0% last time.
Butter led the two gains, up 3.9%, after a 3.3% rise last time, and buttermilk powder was up 1.2%, after not trading in the last event.
StoneX equated the GDT 80% butterfat butter price to $1.6913 per pound U.S., up 6.4 cents from the last event. CME butter closed Nov. 6 at a bargain $1.43. GDT Cheddar equated to $1.7172 per pound, down 0.8 cent, and compares to the Nov. 6 CME block Cheddar at $2.3425. GDT skim milk powder averaged $1.2348 per pound, down from $1.2933, and whole milk powder averaged $1.3539, down from $1.3776. CME Grade A powder closed at $1.0650.
On a brighter note; U.S. dairy exports topped year ago levels for the 13th consecutive month in September. Cheese exports hit 62.7 million pounds, up 4.2% from September 2019, fifth month in a row they topped year ago levels, and “somewhat against expectations,” says HighGround Dairy (HGD), “as cheese prices rose to record levels in July, likely impacting export potential.”
Interestingly, considering the low U.S. butter prices, September exports only totaled 3.3 million pounds, down 10.2% from 2019.
Nonfat dry milk-skim milk powder exports hit 135.6 million pounds, down 5.9% from a year ago, first time they were down from a year ago since February, and followed several months of record high volume. Powder to Mexico was lower again, says HGD, on trend with recent months and down 33% year over year.
Dry whey exports totaled 41.5 million pounds, up 52.3%, and the eighth consecutive month they topped the prior year. HGD says the increase was led by China, who took 358% or 15.3 million pounds more than a year ago. Chinese demand was down slightly from August but higher than July, according to HGD.
The COVID outbreak and its resulting stay at home directives, plus a divisive Presidential election, has put the country in an emotional and financial roller coaster. Dairy price volatility has made farm bottom lines next to impossible to project. “Normal” may only be a setting on a dryer as we look to finish 2020 and absolutely no one has a clue as to what that will be in the New Year either.
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I want to address a couple of issues in this week’s editor’s note.