Mielke: Benchmark milk price drops 21 cents
The September Federal order Class III benchmark milk price is $16.36 per hundredweight (cwt.), down 21 cents from August, 3 cents below September 2016, but $1.48 above California’s comparable 4b cheese milk price. That’s the largest shortfall since March when it hit $2.05. The Class III price is equivalent to $1.41 per gallon, down a penny from August. The nine-month Class III average is at $16.12, up from $14.38 a year ago and $16.04 in 2015.
The Oct. 6 Class III futures settled with an October price at $16.80; November at $16.57; and December at $16.35 per cwt. There is nothing above $16 until July 2018.
The September Class IV price is $15.86, down 75 cents from August but $1.61 above a year ago, and the lowest Class IV since May 2017. Its nine-month average is at $15.51, up from $13.65 a year ago and $13.70 in 2015.
California’s comparable September Class 4b cheese milk price is $14.88, down $1.38 from August and 36 cents below a year ago. It is the lowest 4b price since April 2017 and the lowest September 4b in five years. The year’s average now stands at $15.24, up from $13.64 a year ago and $14.62 in 2015.
The September 4a butter-powder price is $15.69, down 99 cents from August, but is $2.11 above a year ago. Its nine-month average is at $15.32, up from $13.26 a year ago and $13.60 in 2015.
Support Local Journalism
The Oct. 4 Daily Dairy Report reminds us of the differences in how California and federal order Class milk prices are determined. It said, “The California 4b price is derived from the simple average of the CME Cheddar block price from the 26th of the preceding month though the 25th of the current month.”
“The Federal Order Class III price is calculated from the monthly weighted average National Dairy Products Sales Report Cheddar price, which includes both block and barrel cheese prices.”
While many in the U.S. are hoping exports can turn prices higher, the Oct. 3 Global Dairy Trade auction actually headed lower as a weighty 83.75 million pounds of product found its way to the Oct. 3 GDT, up from 75.2 million pounds Sept. 19, 73.9 million Sept. 5, and 71.1 million on Aug. 15.
The weighted average for products offered was down 2.4 percent, following a 0.9 percent increase last time and a 0.3 percent increase Sept. 5.
Cheddar cheese was up 1.9 percent, following a 1.9 percent drop last time, and rennet casein inched 0.9 percent higher, after it fell 2.4 percent in the last event.
Buttermilk powder led the declines, down 10.3 percent. It did not trade last time. Butter was down a bearish 3.6 percent and anhydrous milkfat was down 3.4 percent, following increases last time of 1.2 and 5.3 percent. Whole milk powder was down 2.7 percent, after it inched 0.6 percent higher, and skim milk powder was off 1.4 percent, after it slipped 1.2 percent last time.
FC Stone equated the GDT 80 percent butterfat butter price to $2.5833 per pound U.S. CME butter closed Oct. 6 at $2.34. GDT Cheddar cheese equated to $1.8640 per pound U.S. and compares to Oct. 6 CME block Cheddar at $1.76. GDT skim milk powder averaged 85.94 cents per pound and whole milk powder averaged $1.3778. CME nonfat dry milk closed Oct. 6 at 82 1/2-cents per pound.
U.S. dairy prices were mixed the first week of October as traders weighed the GDT and the August Dairy Products report. The Cheddar blocks closed Oct. 6 at $1.76 per pound, up 2 1/2-cents on the week, 21 cents above a year ago, and the highest block price since Aug. 1, 2017. The barrels finished at $1.7450, up 5 1/4-cents, 23 1/2-cents above a year ago, and the highest since Aug. 21. Only three cars of block traded hands on the week at the CME and six of barrel.
Dairy Market News reports that milk is becoming less available in the central region. Cheese production varies but contacts view the market tone as “steady.” The western cheese market is relatively strong as domestic demand remains solid. Export sales are also stronger as the result of favorable cheese prices and exchange rates. Some contacts don’t expect prices to increase much because many people have already bought the stocks they need.
August cheese exports were “slightly weaker than expected,” according to FC Stone, “but overall a strong number and up significantly from last year. Same story for butter. NFDM/SMP exports were a little weaker than expected, but that has been true nearly every month this year.”
Spot butter climbed to $2.3750 per pound Oct. 5 but closed Oct. 6 at $2.34, up 2 1/2-cents on the week and 83 cents above a year ago, with 43 cars sold.
Cream into churns remains available, according to DMN, and butter output is matching cream availability. Retailers continue holiday orders. Contacts suggest many manufacturers are not producing the 82 percent butterfat European-style butter, so global interest is up, but only with specific U.S. manufacturers.
Western butter makers report steady production amid strong domestic demand and interest from international buyers. Although cream is relatively tight for this time of year, butter makers are not concerned as there are adequate amounts of cream and a number have enough butter for much of their fourth quarter needs.
HighGround Dairy reported in its Oct. 2 “Monday Morning Huddle” that “Exhaustion finally set in for European butter prices with the first pullback recorded since early February 2017 last week as milk deliveries are stronger than the prior year into autumn due to higher milk prices.”
“There has reportedly been a transfer in demand from block butter to mixed fats, indicating that last week’s record high prices (Dutch butter: $3.7853 per pound) officially discouraged buyers and has led to substitution (vegetable and otherwise). With inventories in the U.S. ample, a weaker indication from Europe added pressure to the market with U.S. prices dropping,” HGD said.
Cash Grade A nonfat dry milk saw an Oct. 6 close at 82 1/2-cents per pound, a quarter-cent lower on the week and 9 cents below a year ago, with 33 cars sold.❖
Support Local Journalism
Support Local Journalism
Readers like you make the Fence Post’s work possible. Your financial contribution supports our efforts to deliver quality, locally relevant journalism.
Now more than ever, your support is critical to help us keep our community informed about the evolving coronavirus pandemic and the impact it is having locally. Every contribution, however large or small, will make a difference.
Each donation will be used exclusively for the development and creation of increased news coverage.
Start a dialogue, stay on topic and be civil.
If you don't follow the rules, your comment may be deleted.
User Legend: Moderator Trusted User