Benchmark up 42 cents

By Lee Mielke

Farm milk prices are climbing but will back track some next month and have a ways to go before hitting profitability again for most U.S. dairy farms. 

The Agriculture Department announced the April Federal order Class III benchmark at $18.52 per hundredweight, up 42 cents from March but $5.90 below April 2022. The four month average stands at $18.46, down from $22.04 a year ago, and compares to $16.40 in 2021.

The Friday, May 5, Class III futures settlements portend a May price at $16.57; June, $16.99; July, $17.76; and August at $18.52, with a peak of $19.40 in November.

The April Class IV price is $17.95, down 43 cents from March, $7.36 below a year ago, and the lowest Class IV since October 2021. Its four month average is at $18.80, down from $24.31 a year ago, and compares to $14.14 in 2021.

I know it sounds like a broken record regarding the financial woes on the dairy, but some would say we have a broken pricing system.

Feed prices showed some relief in March, according to the latest Ag Prices report, but another drop in the All Milk price pulled the milk feed ratio to 1.56, down from 1.58 in February, lowest since August 2021, and compares to 2.02 in March 2022.

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 this case, 1 pound of milk would only purchase 1.56 pounds of dairy feed of that blend.

The All Milk Price average fell for the fifth month in a row, slipping to $21.10 per hundredweight, down 50 cents from February, after losing $1.50 the month before, and is $4.50 below March 2022. 

California’s price averaged $21.20 per cwt., down $1 from February, and $3.70 below a year ago. Wisconsin’s, at $20.50, was up a dime from February, but $4.80 below a year ago.

Corn averaged $6.67 per bushel, down 13 cents from February, after jumping 16 cents the month before, but is still 11 cents per bushel above March 2022.

Soybeans fell to $14.90 per bushel, down 20 cents, after jumping 60 cents to a record $15.10 the previous month, but were still 50 cents above a year ago. 

Alfalfa hay averaged $267.00 per ton, up $1 from February and $39 per ton above a year ago.

Looking at the cow side of the ledger; the March cull price for beef and dairy combined continued to climb, averaging $95.70 per cwt., up $6.20 from February, after gaining $7.80 the month before, is $11 above March 2022, and $24.10 above the 2011 base average.

Quarterly milk cow replacements averaged $1,720 per head in April, unchanged from January, but $150 above April 2022. Cows averaged $1,655 per head in California, down $165 from January, but $215 above a year ago. Wisconsin’s average, at $1,840 per head, was up $30 from January, and $130 above April 2022.

Part of the reason for the lower feed prices is China. The April 28 Daily Dairy Report pointed out that China has cancelled orders to buy U.S. corn. “Through April 20, before the cancellations, Chinese commitments to buy U.S. corn were 39% lower than at this point last year and 63% less than in April 2021.” Corn exports to other destinations are also down, according to the DDR.

But, “With on-farm expenses at all-time highs, many U.S. dairy producers are bracing for their worst losses since the 2009 dairy crisis,” the DDR somberly concluded. “Eventually, pain on the farm will result in weaker milk production and rising prices. But today, by all accounts, milk is abundant, and prices remain low.”

Betty Berning, contributing dairy economist with HighGround Dairy, stated in the May 8 “Dairy Radio Now” broadcast that the U.S. breakeven milk price depends a lot on whether a farm is buying feed or not. The range is $18 on the low end to the mid $20s if you’re purchasing feed. Last year farmers were able to pay down some debt or defer some income, she concluded, “Bankers seem willing to work with farmers despite milk prices being below breakeven but it’s not fun when you feel squeezed.”

It’s not a huge oversupply of milk. The “spring flush” is upon us but farm milk tanks are not exactly bulging. The Agriculture Department’s preliminary data shows March output at 19.8 billion pounds, up 2.1 billion from February, but only 90 million pounds or 0.5% above March 2022, and less than the 1.1% increase in February.

The 24-State March total, at 18.9 billion pounds, was up 1.9 billion pounds from February and up 0.6% from a year ago. The February 50-State total was revised up 51 million pounds, while the 24 State total was revised up 48 million pounds.

Milk output in first quarter 2023 totaled 56.8 million pounds, up 1% from 2022, with cow numbers at 9.42 million, up 20,000 from fourth quarter 2022 and 40,000 more than first quarter 2022.

Farmers have added cows however, despite the high feed prices and falling milk income. Cow numbers totaled 9.435 million, up 6,000 head from the February count which was revised up 12,000 head, 28,000 more than in January, and up 31,000 from a year ago. This makes for the largest dairy herd since August 2021. The 24-State count was also up 6,000 from February and 44,000 above a year ago, largest since July 2021.

Output per cow averaged 2,099 pounds, up 3 pounds or 0.1% from March 2022.

California, battered by heavy rains and flooding in February and March, saw March milk drop to 3.6 billion pounds, down 75 million pounds or 2.0% from a year ago. Output per cow fell 45 pounds, far outweighing the 1,000 cow increase. 

Wisconsin output totaled 2.7 billion pounds, up 11 million pounds or 0.4% from a year ago, thanks to a 15 pound gain per cow offsetting the loss of 4,000 cows. 

Texas was up 4.7%, thanks to 17,000 more cows and a 45 pound gain per cow. The fire at a dairy near Dimmitt April 10 claimed some 18,000 cows. The cow loss will register in next month’s report however milk output may or may not, as milk in the state was already being dumped due to the excessive supply.

Idaho milk was up 3.1%, on 15,000 more cows and a 15 pound gain per cow. Florida again registered the biggest loss, down 5.5%, Michigan was up 2.9%, Minnesota was up 1.2%, and New Mexico was down 4.4%. New York was up 2.1%. 

Oregon was down 2.6%, on a loss of 3,000 cows. Output per cow was unchanged. Pennsylvania was off 0.2%. South Dakota was up 7%, thanks to 13,000 more cows offsetting a 10 pound loss per cow. Washington State was down 1.6% on 5,000 fewer cows. Output per cow was up 5 pounds.

Dairy product demand is good although there’s plenty of cheese to consume. Butter demand has strengthened as prices fell, however fluid milk sales continue to falter. The Agriculture Department’s latest data shows packaged sales totaled 3.4 billion pounds, down 3.2% from February 2022.

A general rule of thumb says a 4% decline in fluid milk sales means about 1% of milk nationally will end up in manufacturing instead of in the jug.

Conventional product sales totaled 3.1 billion pounds, down 3.1% from a year ago. Organic products, at 218 million pounds, were down 3.2%.

Whole milk sales totaled 1.2 billion pounds, up 0.1% from a year ago, up 0.7% year to date, and represented 34.3% of total milk sales for the two months. Skim milk sales, at 173 million pounds, were down 8.0% from a year ago and 7.0% below a year ago.

Total packaged fluid sales for the two months amounted to 7.2 billion pounds, down 1.8% from 2022. Conventional product sales totaled 6.7 billion, down 2.0%. Organic products, at 476 million pounds, were up 1.0%, and represented 6.7% of total milk sales for the period.

One more positive note; the March 16 Daily Dairy Report says “Sales of lactose-free and low-lactose milks are growing even more rapidly than plant-based alternatives. These milks include longstanding brands like Lactaid, as well as the newer ultra-filtered, nutrient-dense, high protein milks such as Fairlife and to a lesser degree the much newer A2 milks. While technically not low-lactose, A2 milk, which contains only the A2 protein, have been shown to prevent some symptoms for those who suffer from lactose malabsorption,” the DDR stated.

CME cheese prices started May hesitating. The blocks fell to $1.6625 per pound Tuesday, then climbed to $1.69 Wednesday, but closed Friday at $1.6125. That’s down 7.50 cents on the week, sixth consecutive week of decline, the lowest they’ve been since Nov. 5, 2021, and 73.75 cents below a year ago.

The barrels fell to $1.5575 Tuesday, hit $1.5850 Wednesday, but closed Friday at $1.53, 6 cents lower on the week, 85 cents below a year ago, and 8.25 cents below the blocks. The week’s CME sales totaled 34 of block and 31 of barrel.

Midwestern cheesemakers report mixed demand to Dairy Market News. Milk availability remains wide open with mid-week spot milk prices ranging $11 to $4 under Class and offers reportedly growing. Plant downtime continues to play its part in keeping milk available, according to DMN.

Cheese demand from Western food service and retail is strong to steady, with reports of tight inventories. Some report stronger export sentiment with recent spot price decreases. Demand from Mexico and South America is strong to steady, while an uptick in interest for additional fourth quarter bookings from Asian purchasers is indicated. Cheese vats are running strong with plentiful milk.

Cash butter climbed to a Friday finish at $2.4450 per pound, up 9.25 cents on the week, but 19.50 cents below a year ago, with 14 sales reported on the week.

Midwest butter demand and churning were busy last week, says DMN. Demand has not ebbed despite some expectation of bearish pressure on markets due to reported supply increases. Plants are still working through readily available cream at similar prices to previous weeks. Milkfat component levels from the farm are “keeping cream supplies somewhat hearty,” says DMN.

Cream demand is strong in the west and some butter manufacturers report plants are more balanced with regional cream supplies compared to Class IV needs. Cream multiples moved higher last week. Churns are operating at strong schedules with some at max capacity. Contract sales are steady and retail demand is strong to steady, with some upticks reported. Upticks from Canada is indicated, says DMN, but “demand is on the steady to light end of the spectrum.”

Grade A nonfat dry milk lost 1.75 cents Monday but Tuesday’s GDT jump started a recovery that climbed to $1.1975 per pound Friday, up 2.25 cents on the week, highest since Feb. 27, but still 54.25 cents below a year ago. There were 13 sales on the week.

Dry whey closed Friday at 32.75 cents per pound, down 2.50 cents on the week and 25.75 cents below a year ago, with a 54 sales put on the board for the week.

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