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Benchmark sets new record high

Happy June Dairy Month. While it is indeed a happier one for dairy farmers looking at milk prices, the luster fades considering rising production costs.

The May Federal order Class III milk price was announced at $25.21 per hundredweight, up 79 cents from April, $6.25 above May 2021, and a new record high, besting $24.60 in Sept. 2014 by 61 cents. The 2022 average now stands at $22.67, up from $16.91 a year ago, $15.10 in 2020, and $15.05 in 2019.

Friday’s futures settlements portend a June price at $24.33; July, $24.60; Aug., $24.42; Sept., $24.38; Oct., $24.10; Nov., $23.71; and Dec. at $23.24 per cwt.



The May Class IV price is $24.99, down 32 cents from April, but $8.83 above a year ago. The five-month average is at $24.44, up from $14.54 a year ago, $13.96 in 2020, and $15.81 in 2019.

The April All Milk Price also set another record high. The USDA’s latest Ag Prices report has the April milk feed price ratio at 2.00, down from 2.06 in March, but compares to 1.75 in Apr. 2021.



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, one pound of milk would only purchase 2.0 pounds of dairy feed of that blend.

The All Milk Price averaged a record high $27.10 per cwt., up $1.20 from March, eighth consecutive increase, and was $8.80 above April 2021.

Speaking in the June 6 Dairy Radio Now broadcast, dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Mo., said the increase in the All Milk Price was enough to offset all three input commodities, as the income over feed calculation increased for the seventh time in the past eight months. He reported the April income over feed cost moved above $13.50 for the first time since Nov. 2014 and was above $8 per cwt. for the seventh month running.

“Dairy producer profitability for 2021, in the form of milk income over feed costs, was $7.87 per cwt.,” according to Brooks. “The profitability was $2.37 below 2020 and $1.79 lower than the 2016-20 average. In 2021, the decrease in milk income over feed costs was a result of the milk price increasing less than feed prices rose, he said, and income over feed was close to the level needed to maintain or grow milk production.”

April’s national average corn price jumped to $7.08 per bushel, up 52 cents from March, after jumping 46 cents the previous month, and was $1.77 per bushel above April. 2021.

Soybeans averaged $15.80 per bushel, up 40 cents from March and $1.90 per bushel above Apr. 2021.

Alfalfa hay shot up to a record high average of $243 per ton, up $22 from March, highest since May 2014, and a budget busting $58 per ton above a year ago.

Looking at the cow side of the ledger; the April cull price for beef and dairy combined averaged $88.10 per cwt., up $3.40 from March, $17 above April 2021, and $16.50 above the 2011 base average.

Brooks predicts 2023 milk income over feed costs, using May 31 CME settling futures prices for milk, corn, and soybeans plus the Stoneheart forecast for alfalfa hay, are expected to be $9.74 per cwt., a loss of $3.45 per cwt. versus the 2022 estimate. 2023 income over feed would be above the level needed to maintain or grow milk production,” according to Brooks.

The rise in corn and bean prices has slowed, he admitted, but “A lot of what’s going on in the marketplace right now is not fundamental.” Delayed plantings and other factors prompt fears of $10 corn and beans approaching $20, he said, and those conditions, plus what’s happening in Ukraine, could bring that result.

The latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC. says “Dairy margins improved over the second half of May, particularly in deferred production periods, as a combination of higher milk prices and lower feed costs increased forward profitability.”

Milk futures prices were supported by both the April Milk Production and Cold Storage reports, according to the MW. “Most of the 24 major dairy states reported lower milk production in April, compared to last year, as high feed costs, scarce heifers and regional supply management programs discouraged expansion and complement a trend of declining global milk output.”

“Strong spring holiday sales and increased exports likely drew down butter inventories, according to Dairy Market News, with cream supplies tight in northeastern states in April,” the MW stated. While cheese stocks were record high in April, like butter, the monthly build in cheese from March to April was only half the most recent five-year average,” the MW concluded.

The recent $40 billion aid package for Ukraine may benefit U.S. dairy farmers. The Dairy and Food Market Analyst says the bill provides $5.1 billion for “food aid,” including $4.348 billion “to respond to humanitarian needs in Ukraine and in countries impacted by the situation in Ukraine.” It encompasses “emergency food and shelter and for assistance for other vulnerable populations and communities” and up to $760 million “to prevent and respond to food insecurity,” says the DFMA.

Analyst and editor Matt Gould stated in the May 30 Dairy Radio Now broadcast that the funds would be price-supportive for dry dairy products like nonfat dry milk and possibly cheese and butter if the government seeks to offset the food inflation hitting our nation’s poor and result in helping low income food programs. Reminiscent of the Food Box program during the Trump Administration which benefited dairy markets, Gould said both programs involves “billions of dollars.”

Cheese, butter, and powder prices are at historic levels, Gould said, in large part because feed is so expensive to produce milk on the farm. Those high prices are being seen at retail, he said, and near term nothing is happening to change that, adding that Europe’s milk supplies also continue to be constrained because they’re experiencing the same high feed prices. “As we sit today, there isn’t any wind of change. We’re going to stay at these elevated prices, he concluded.

Dairy prices started June Dairy Month divided but StoneX Dairy Group stated in its May 31 Early Morning Update; “There are valid concerns over a lack of fresh milk as we move into summer and Class IV milk strength.”

The Cheddar blocks, after dropping a dime the previous week, fell to $2.2475 per pound Tuesday following the Memorial Day-holiday, but closed Friday at $2.27, down just a penny on the week, but 77 cents above a year ago, as traders anticipated Friday, June 3, afternoon’s April Dairy Products report and Tuesday’s GDT.

The barrels finished the week 5 cents lower at $2.2450, lowest since March 31, 63 cents above a year ago and a more typical 2.50 cents below the blocks.

Sales totaled five cars of block on the week and 34 for the month of May, up 1 from April. Barrels totaled 15 for the week and 61 for the month, down from 75 in April.

Cheese production is steady despite continuing staff shortages, says Dairy Market News. Most milk prices were at discounts from $1.50 or more at mid-week. Cheddar producers say inventories, in some cases, are building a little more quickly than earlier in the year. Curd and process cheesemakers are trying to keep up with demand, and or shifting production to meet strengthening and seasonal demands. Market tones continue to “wobble,” says DMN.

International cheese demand is strong in the West, as purchasing continues for export to Asia in first quarter. Domestic demand is steady from both retail and food service. Port congestion and truck driver shortages continue to cause delays. Cheese makers are running busy schedules as milk is ample. Some plants are running below capacity due to continued labor shortages and delayed deliveries of production supplies, according to DMN.

Butter climbed to $2.9350 per pound, equaling its Jan. 21 high, but fell back 2 cents Friday, June 3, to $2.9150, up 3.75 cents on the week and $1.14 above a year ago. Sales totaled 27 for the week and 116 for May, up from 57 in April.

Butter churning remains active, as more cream flowed into Class IV channels due to the holiday. Plant managers are more commonly reporting short staffing and, depending on the plant, total output declines based on limited plant hands have been estimated as high as 15 to 20%. Butter demand is seasonally quiet but market tones remain quite firm. Fall demand expectations, along with limited supply forecasts, have created a “bullish stirring of the market pot,” says DMN.

Strong demand for cream is present in the West, as contacts reported steady to higher interest following the holiday weekend. Ice cream makers are pulling heavily on cream supplies. Churns are active, though labor shortages continue to prevent some from running full schedules. Food service butter demand is steady to lower, as some restaurateurs are reducing hours due to labor shortages. Retail demand is unchanged, though high prices continue to affect consumer buying.

Grade A nonfat dry milk got to $1.87 per pound Thursday, highest since Mar. 24, but closed Friday at $1.8625, up 0.25 cents on the week and 60.25 above a year ago. There were 10 sales on the week and 57 for the month, up 2 from April.

Dry whey climbed to a Friday finish at 55.75 cents per pound, up 3.50 cents on the week but 4.50 cents below a year ago. Sales totaled two for the week and 47 for the month of May, up from 33 in April.


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