Lee Mielke: Monthly Dairy Prices 4-11-11
Farm milk prices will jump again. The Agriculture Department announced the March Federal order Class III benchmark price Friday at $19.40 per hundredweight (cwt.), up $2.40 from February, $6.62 above March 2010, and equates to about $1.67 per gallon. This is the highest Class III price since June 2008 however it appears to be the peak for 2011. Class III futures settled Friday as follows; April $16.65, May $16.58, June $16.70, July $17.32, August $17.70 and September at $17.72. The 2011 Class III average stands at $16.61, up from $13.85 at this time a year ago and $10.18 in 2009.
The March Class IV price is $19.41, up $1.01 from February and $6.49 above a year ago.
The four-week NASS-surveyed cheese price averaged $1.9722 per pound, up 22.7 cents from February. Butter averaged $2.0591, down almost a penny. Nonfat dry milk averaged $1.4945, up 1.2 cents, and dry whey averaged 45.78 cents, up 3.4 cents.
Meanwhile; California’s 4b cheese milk price is $16.76, down 16 cents from February, $5.63 above a year ago, but $2.64 below the comparable Federal order Class III price. The 4a butter powder price is $19.06, up $1.18 from February, and $6.22 above a year ago.
Market analyst Alan Levitt told DairyLine that California uses the CME block price instead of the NASS-surveyed prices. Blocks crashed in mid month, thus the drop in the March 4b price. That won’t show up in the Federal order Class III price until April. Also, rising whey prices have no bearing on the California 4b price so there will be a growing disparity there. Class III gets a nice boost from whey, California’s 4b does not.
Slumping cash cheese prices temporarily reversed gears Monday in a surprise 7-1/4-cent turn around on the blocks and a penny and a quarter-cent gain on the barrels and followed the previous Friday’s quarter-cent increase on the blocks. Butter inched a half-cent higher, to $2.08 per pound, but then came Tuesday and prices retreated.
The blocks closed Friday at $1.5950, down 3-1/4-cents on the week, but 16-1/2-cents above a year ago. The blocks have lost 42-1/2-cents since late February and generally a penny movement on the cheese price equates to about a dime on the milk price. Barrel closed at $1.5725, down 6-3/4-cents on the week, and 19-3/4-cents above a year ago. The barrels have lost almost 41 cents in the last four weeks. Thirty nine cars of block traded hands on the week and three of barrel. The NASS-surveyed U.S. average block price came in at $1.9192, down 8.4 cents. Barrel averaged $1.9078, down 8 cents. Softening international prices may be playing a role in weakening U.S. product prices.
Butter finished the week at $1.99, down 8-1/2-cents, but still 49-1/2-cents above a year ago. Seventeen cars were sold. NASS butter averaged $2.0659, down a nickel.
Cash Grade A nonfat dry milk closed Friday at $1.70, down a nickel, while Extra Grade held all week at $1.80. NASS powder averaged $1.5183, up 0.4 cent, and dry whey averaged 45.84 cents, up a penny and a half.
When asked what prompted Monday’s gain in cheese, Dr. Robert Cropp, Emeritus Professor at the University of Wisconsin at Madison relied, “That’s a good question,” in Tuesday’s DairyLine. He mentioned last week’s Cold Storage data which showed a slight decline in cheese stocks from January to February which he said is good news but stocks were still 4 percent above a year ago.
Indications are that cheese demand is holding pretty good, according to Cropp, however cheese production is running strong but buyers may be looking down the road. The last Milk Production report showed U.S. milk output was only up 2 percent and February cow numbers did not increase from January.
He warned however that it was questionable whether it would hold and said he expected it to slip as we enter the spring flush but then start to rebound in the summer months and fall.
I asked if the situation in Japan or China might have any bearing and Cropp pointed out that the markets took a little nosedive immediately after the earthquake in Japan but it looks like exports will recover as there is growing concern about milk quality in Japan. Japan is also a major cheese buyer.
China has also been active in the international dairy market, he said, but their interest is more on powdered milk and dry whey than on cheese.