Lee Mielke: Monthly Dairy Prices 2-14-11
The nation’s benchmark milk price slipped some more. The Agriculture Department announced the January Federal order Class III price at $13.48 per hundredweight (cwt.), down 35 cents from December, $1.02 below January 2010, and 99 cents above California’s comparable 4b milk price. It equates to about $1.16 per gallon. However, Friday’s Class III futures portend a February price of $16.63, March $18.30, and April $18.06. The January Class IV price is $16.42, up $1.39 from December, and $2.57 above a year ago.
The NASS-surveyed cheese price averaged $1.4076, down 5.3 cents from December. Butter averaged $1.8428, up 18.9 cents. Nonfat dry milk averaged $1.2530, up 6.8 cents, and dry whey averaged 39.35 cents, up 1.5 cents.
California’s January 4b cheese milk price is $12.49 per cwt., up 27 cents from December but 23 cents below January 2010. The 4a butter powder price is $16.49, up $1.82 from December and $2.74 above a year ago.
Cash dairy prices keep rising with the exception of butter. Block cheese, after jumping 21 cents the previous week, closed the first Friday in February at $1.81 per pound, up another 7-1/2-cents on the week, and 31-3/4-cents above a year ago. The barrels closed at $1.7750, up 7 cents on the week, and 30-1/4-cents above a year ago. Only two cars of block traded hands all week and none of barrel. The NASS-surveyed U.S. average block price hit $1.4580, up 6.3 cents. Barrel averaged $1.4662, up 4.7 cents.
Butter held all week at $2.10, where it’s been since January 7, and 77-1/4-cents above a year ago. Five cars did trade hands on the week. NASS butter averaged $2.0674, up 7.2 cents.
Cash Grade A nonfat dry milk closed Friday at $1.72, up 6-1/4-cents on the week. Extra Grade closed at $1.69, up 9 cents. Seven cars of Grade A were sold on the week. NASS powder averaged $1.2842, up 2.4 cents, and dry whey averaged 39.96 cents, up 0.4 cent.
Why would someone pay the prices we’re seeing at the CME for nonfat dry milk? The University of Wisconsin’s Dr. Brian Gould called it a real quandary, given where international prices are at in Tuesday’s DairyLine but speculated that cheese manufacturers may be caught short and want to standardize their milk to improve the protein content because they’re making a lot of cheese or they may be skimming off the butterfat to make butter and sell it and then add the “relatively inexpensive nonfat dry milk” to increase the protein content.
He admitted he wasn’t sure of the reason and said he has not tracked the historical relationship between CME cash nonfat dry milk and the lagging NASS surveyed price which is currently at a substantial difference.
Gould would not speculate how high cheese prices will go but expressed concern over the stocks on hand which are well above a year ago. Citing December data, Gould reported that American cheese stocks were up 8 percent from a year ago and total stocks were up 6 percent and “were high to begin with.”
If you factor the increased milk production we’re seeing and the potential for even more milk given the biannual “Cattle” inventory report which showed an abundant supply of replacements, “that strength can’t be maintained,” he warned.
Gould reported that there’s been a lot more activity in the Livestock Gross Margin insurance program. As of December there was about 7 million hundredweight insured, he said, and even more activity because of the recent government subsidies to the program. “People are recognizing that, even with those high grain prices we may want to try and set some floors,” he concluded.
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