Benchmark milk prices headed back up
July 3, 2016
The June Federal order benchmark milk price was announced by USDA at $13.22 per hundredweight (cwt.), up 46 cents from May but $3.50 below June 2015, and the lowest June Class III price since 2009. It equates to about $1.14 per gallon, up from $1.10 in May and compares to $1.44 a year ago.
The half-year average is at $13.48, down from $15.99 at this time a year ago and $22.68 in 2014. Class III futures settled Friday as follows: July, $15.07; August, $15.89; September, $16.04; October, $16.13; November, $16.11; and December was at $15.89.
The June Class IV price is $13.77, up 68 cents from May, 13 cents below a year ago, but the highest Class IV price since December 2015. The Class IV average now stands at $13.18, down from $13.70 a year ago and $23.09 in 2014.
California's June benchmark cheese milk price, the Class 4b, is $13.03 per cwt., up $1.66 from May but $2.52 below a year ago and just 19 cents below the comparable Federal order Class III price. That is the lowest deficit since February 2011, thanks in large part to the permanent whey factor adjustment recently mandated by the California Department of Food and Agriculture. The 2016 4b average stands at $12.75, down from $14.32 a year ago and $20.63 in 2014.
The June Class 4a butter-powder price is $13.51, up 94 cents from May but 14 cents below a year ago. Its 2016 average now stands at $12.93, down from $13.48 a year ago and $22.94 in 2014.
A lower All-Milk price and higher feed prices sent the latest milk feed price ratio lower. The May ratio is 1.89, down from 1.97 in April and 1.97 in May 2015, according to the USDA's Ag Prices report. The index is based on the current milk price in relationship to feed prices for a dairy ration of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay, in other words, one pound of milk today purchases 1.89 pounds of dairy feed containing that blend.
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The May U.S. average All-Milk price was $14.50 per cwt., down 50 cents from April, $2.30 below May 2015, and the lowest in 7 years. California saw an All Milk average of $12.92, down 71 cents from April, while Wisconsin's was at $14.70, down 90 cents.
May corn averaged $3.68 per bushel, up a dime from April and 4 cents per bushel above May 2015. Soybeans averaged $9.76 per bushel, up 72 cents from April, and 18 cents per bushel above May 2015. Alfalfa hay averaged $147 per ton, down $6 from April, and $45 per ton below May 2015.
The May cull price for beef and dairy combined averaged $79.60 per cwt., down $1.90 from April, $34.40 per cwt. below May 2015, but $8 above the 2011 base average of $71.60 per cwt.
Do you have any extra room in your freezer? The Agriculture Department's latest Cold Storage report shows U.S dairy stocks are bulging.
May American cheese stocks stood at 757.5 million pounds, up 23.4 million pounds or 3 percent from April and 88 million or 13 percent more than May 2015.
The total cheese inventory, at a record 1.25 billion pounds, was up 40 million pounds or 3 percent from April and 137.4 million pounds or 12 percent above a year ago. The Daily Dairy Report says it is the largest inventory since USDA started keeping records in 1917.
Butter stocks hit 324.9 million pounds, up 29.1 million pounds or 10 percent from April and 59.7 million pounds or 23 percent above a year ago. The DDR says May stocks haven't been this large since 1993.
Meanwhile; cash dairy markets saw block Cheddar cheese climb to $1.66 per pound Thursday, highest price since November 2015, then drop to close Friday July 1 at $1.6250 per pound, still up 11 1/4-cents on the week and a half-cent above a year ago. The barrel Cheddar shot up to $1.71, highest level since October 2015, then retreated, closing at $1.67. That's up 13 1/2-cents on the week, 8 3/4-cents above a year ago, and 4 1/2-cents above the blocks, despite 28 cars of barrel exchanging hands on the week at the CME plus six of block.
Cheese production is steady in the Central region, according to Dairy Market News (DMN). Milk intakes remain high, and plant managers report little change in milk components and yields. Demand from retail and foodservice are both strong. Cheese stocks are seeing relief as strong sales prevail. Manufacturers producing cheese requiring little to no aging report light inventories. Other participants report long inventories. International interest in U.S. cheese is light. Speculation is that interest is unlikely to improve as the U.S. dollar gains strength.
Some western cheese makers say they will buy the occasional load of condensed skim milk to round out cheese production, while others are content with what they have. The overall view is western output remains full and active. A few manufacturers are looking for ways to reduce production in order to keep inventories from growing more. Some contacts say there are challenges in finding available warehouse space and many wonder how market prices can increase under the weight of heavy production and heavy cheese inventories. Retail sales remain strong. Domestic and export buyers are reportedly looking for fresh blocks and barrels.
Cash butter closed Friday at $2.35 per pound, up a half-cent on the week and 41 cents above a year ago, with six cars trading places on the week at the CME.
July is National Ice Cream month and the time of year that generally sees strong sales. Butter manufacturers are reportedly selling cream for America's favorite dessert instead of sending it to the churn knowing butter stocks are well supplied.
Butter production varies across the Central region, says DMN. Some manufacturers are keeping churns running at full schedules. Others are slowing. Demand for butter is high however, many stockholders are choosing to hold on to their inventories, or have stocks that are already committed.
Industry participants comment that retail outlets show more interest in planning ahead and are locking in prices. Some end users have reportedly set up contracts through the end of the year. This has several butter manufacturers packing ahead for the fall. Market participants speculate that a large portion of inventory in the Central region is committed print butter. Industry contacts comment that bulk butter is hard to come by in the Central region.
Western butter makers say cream supplies are tightening as ice cream manufacturers use more cream. In most cases, butter manufacturers are content with current supplies of cream. Although inventories are high, and may build a little further, butter makers are comfortable with current holdings. Continued strong domestic demand, coupled with the slowdown in production, may soon help slow or reverse the growth of butter inventories, according to DMN.
Cash Grade A nonfat dry milk finished at 83 1/2-cents per pound, down 6 1/2-cents on the week but a quarter-cent above a year ago. Thirty six cars traded hands on the week at the CME, 17 on Friday.