Mielke: Benchmark inches 3 cents higher
July 13, 2018
The June Federal order Class III bench mark milk price crept to the highest level in six months, but that's not saying much. The Agriculture Department announced the June Class III price at $15.21 per hundredweight, up just 3 cents from May but $1.23 below June 2017. It equates to $1.31 per gallon, down from $1.41 a year ago.
That put the six-month Class III average at $14.41 down from $16.12 a year ago and compares to $13.48 in 2016. July 6's Class III futures settlements portend a July Class III at $14.20; August, $14.69; September, $15.22; October, $15.43; November, $15.51; and December at $15.46.
The Class IV price is $14.91, up 34 cents from May, 98 cents below a year ago but the highest Class IV since September 2017. Its six month average is at $13.67, down from $15.08 a year ago and compares to $13.18 in 2016.
California's comparable Class 4b cheese milk price is $14.43, down 47 cents from May, $1.17 below a year ago, and 78 cents below the comparable Federal order Class III price, highest differential since December 2017. The 4b's six month average stands at $14.05, down from $15.12 a year ago and compares to $12.75 in 2016.
The 4a butter-powder price is $14.22, up 16 cents from May, $1.69 below a year ago, but the highest 4a price since October 2017. The 4a average for the year now stands at $13.37 and compares to $14.85 a year ago and $12.92 in 2016.
The dairy farm price recovery is fading as the current tariff wars have global trade trumped in turmoil. The U.S. dairy industry has become a major exporter, particularly to Mexico and China and, for the time being, those exports will begin adding to already bulging stock piles of cheese and nonfat dry milk unless some agreements can be reached.
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The July 3 Global Dairy Trade auction saw its weighted average of products offered drop 5.0 percent, biggest drop since March 7, 2017 and follows a 1.2 percent slippage on June 19, and a 1.3 percent loss on June 5.
With the global market becoming a dumping ground for powder from Canada, the EU, and now India, it should come as no surprise that powder led the declines.
Whole milk powder fell 7.3 percent, following a 1 percent decline on June 19. Skim milk powder was down 4.6 percent after slipping 1.1 percent last time. Cheddar cheese was down 4.3 percent, after it fell 3.6 percent last time, and butter was down 4.0 percent, after inching 0.8 percent higher. Anhydrous milkfat was off 1.7 percent, and follows a 2.5 percent decline last time.
Only two offerings showed positive movement; buttermilk powder was up 6.4 percent and rennet casein was up 3.6 percent.
FC Stone equates the GDT 80 percent butterfat butter price to $2.3850 per pound U.S. CME butter closed July 6 at $2.17. GDT Cheddar cheese equated to $1.6843 per pound U.S. and compares to July 6's CME block Cheddar at $1.5425.
The U.S. cash dairy markets were mostly lower in the 4th of July holiday shortened week, thanks to the GDT auction and global trade uncertainty.
The Cheddar blocks closed that Friday at $1.5425 per pound, down 1 1/4-cents on the week and a penny below a year ago. The barrels finished at $1.2450, down 14 1/2 cents on the week, 13 cents below a year ago, lowest CME price since July 30, 2009, and a whopping 29 3/4-cents below the blocks, a differential that is normally 3-5 cents.
Cheese demand is slipping, according to Midwestern producer's reports to Dairy Market News, and there is concern over the markets. Some Western manufacturers are cutting output but abundant milk supplies are keeping cheese output active. Trade issues are unsettling the market.
DMN also reports that European Union cheese output is up. "In the first four months of 2018, total production increased 2.1 percent. Despite extensive production, the market has been absorbing all the available offers of cheese. Currently, cheese supplies are at lower levels due to a growth in domestic consumption. In addition, export trades have been higher, and sales are taking place at firmer prices. Some reports suggest that the current trade dispute may create even more international sales for EU cheese."
The bleeding butter price paused Friday at $2.17 per pound, down 9 3/4-cents on the week, lowest CME price since February 22, 2018, and 41 1/2-cents below a year ago.
DMN says butter sales have softened according to some producers and cream has been available further into the summer this year than expected but butter makers say they are continuing to pack away supplies for the fall.
Western butter stocks are heavy and more than enough to meet customer needs.
Grade A nonfat dry milk closed Friday at 77 1/4-cents per pound, up 2 1/2-cents on the week but 9 1/2-cents below a year ago, with 7 sales reported for the week.
July 6's dry whey closing was at 39 cents per pound, 1 3/4-cents lower on the week.
Tough times have returned to the dairy farm, though it can be easily argued, they never really left. The Administration has said it will defend farmers in the tariff-trade war. That remains to be seen as to how and when. ❖