Lee Mielke: Benchmark dairy price hits five-year low
May 17, 2016
The April Federal order benchmark Class III milk price was announced by USDA at $13.63 per hundredweight (cwt.), down 11 cents from March, $2.18 below April 2015, but 92 cents above California's comparable 4b milk price. It is the lowest Class III price since January 2011 and equates to about $1.17 per gallon, down a penny from March and compares to $1.36 a year ago. The four month Class III average stands at $13.72, down from $15.75 at this time a year ago and compares to a generous $23.04 in 2014.
Class III futures don't portend much hope ahead. The May contract settled Friday at $12.87; June, $12.92; July, $13.34; August, $14.00; and September was at $14.65. The peak for the year was only $14.89 in December.
The April Class IV price is $12.68, down 6 cents from March, 83 cents below a year ago, and the lowest April Class IV since 2009's $9.82. The four month average, at $13.06, is down from $13.59 a year ago and $23.19 in 2014.
California's April 4b cheese milk price is $12.71 per cwt., down 53 cents from March, $1.51 below a year ago, and the lowest 4b price since January 2011's $12.49. The 4b price average stands at $13.02, down from $13.93 a year ago and $21.34 in 2014.
The 4b's 92-cent deficit to the Federal order Class III is the largest so far of 2016, despite the State mandated temporary price adjustment which runs through July, but it is 67 cents less than what is was in April a year ago.
The 4a butter-powder price is $12.54, up 13 cents from March, 82 cents below a year ago, and the lowest April 4a price since 2009. The 4a average is at $12.87, down from $13.33 a year ago and $22.97 in 2014.
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The May 3 Global Dairy Trade (GDT) auction reversed direction following its biggest gain since Dec. 1, 2015 in the April 19 event. The weighted average for all products offered slipped 1.4 percent, after jumping 3.8 percent last time and gaining 1.2 percent on April 5 dampening hopes of a recovery.
Rennet casein led the gains, up 3.5 percent, following a 7.5 percent upshot last time. Cheddar cheese was up 1.8 percent, after dropping 3.9 percent last time. Whole milk powder inched 0.7 percent higher, after jumping 7.5 percent last time.
Butter and buttermilk powder led the losses, both down 5.5 percent, after rising 2.0 and 2.4 percent respectively last time. Skim milk powder was down 3.6 percent, after inching up 0.3 percent on April 19. Lactose followed, down 2.7 percent, after an 8.0 percent gain last time, and anhydrous milkfat was off 1.6 percent, following a 1.6 percent increase last time.
FC Stone reported the average GDT butter price equated to about $1.18 per pound U.S. Contrast that to CME butter which closed Friday at $2.05 per pound.
GDT Cheddar cheese equated to about $1.2368 per pound U.S. and compares to Friday's CME block Cheddar at $1.3050. GDT skim milk powder, at 76.04 cents per pound U.S. and whole milk powder, at 98.71 cents per pound U.S., compares to CME Grade A nonfat dry milk price which closed Friday at 77 3/4-cents per pound.
CME cash dairy prices weakened the first week of May. Block cheese closed at $1.3050 per pound, down 6 1/2-cents on the week, 30 3/4-cents below a year ago, and the lowest block price since March 2010. Barrel finished at $1.30, down 11 1/4-cents on the week, and 32 cents below a year ago. Nine cars of block traded hands on the week and 14 of barrel.
"Cheese vats throughout the Midwest are getting little to no rest as high volumes of milk intakes show little sign of slowing," reports Dairy Market News (DMN). Cheese production is steady to increasing but the dip in prices may be contributing to the increase in sales some manufacturers are reporting and "seems to be giving some relief to the inventory pressure."
"Western cheese output remains active. Milk is readily available and many manufacturers are running full schedules. Inventories are long, especially for commercial cheese and in some cases, storage is becoming harder to find. Retail and commercial demand is steady at current market prices with some cheese clearing to export channels, "albeit at lower levels than the last year."
Cash butter closed the week at $2.05 per pound, down 7 cents but still 6 1/2-cents above a year ago, with three cars trading hands on the week at the CME.
DMN reports that Central butter demand is "generally unchanged from year ago patterns, according to manufacturers. Food service interest is steady. Retail demand is trending sideways. Recent features at consumer outlets offering bundled pricing on one pound packages have helped clear retailer inventories brought in prior to the spring holidays. Butter production is steady to lower as additional cream volumes clear to Class II production. Butter stocks are building steadily, although most manufactures are holding those stocks with confidence."
"Western butter manufacturers are able to get plenty of cream to meet current needs. However, a bit more cream is starting to move into Class II channels and taking a little of the pressure off the churns. Manufacturers say butter production and sales are good for this time of year. Inventories continue to build seasonally."
Cash Grade A nonfat dry milk closed Friday at 77 3/4-cents per pound, up 2 1/4-cents on the week but 17 1/4-cents below a year ago on 14 cars sold this week.❖