Mielke: Benchmark milk prices climbing
April 13, 2018
The March Federal order Class III benchmark milk price started climbing out of its hole and hit $14.22 per hundredweight (cwt.), up 82 cents from February but is $1.59 below March 2017. It is 26 cents above California's comparable 4b cheese milk price and equates to $1.22 per gallon, up from $1.15 in February and compares to $1.36 a year ago. The first quarter average is at $13.87, down from $16.49 at this time a year ago and compares to $13.75 in 2016.
Class III futures settled April 6 with an April price of $14.41; May, $14.70; and June at $15.05, with a peak at $16.09 in September and October.
The March Class IV price is $13.04, up 17 cents from February but $1.28 below a year ago. Its first quarter average stands at $13.01, down from $15.37 a year ago and compares to $13.75 in 2016.
California's comparable March 4b cheese milk price is $13.96, up 58 cents from February, 20 cents above a year ago and the highest 4b since November 2017. The 4b average for first quarter 2018 stands at $13.57, down from $15.19 a year ago and compares to $13.12 in 2016.
The 4a butter-powder milk price is $13.01, up 29 cents from February, 95 cents below a year ago, but the highest 4a since December 2017. The three month average, at $12.89, compares to $15.01 a year ago and $12.98 in 2016.
Speaking of the No. 1 milk producer; the Agriculture Department published its long awaited final decision to establish a Federal Milk Marketing Order for California. The proposed FMMO would incorporate the entire state. The final decision is based on the evidentiary record of a public hearing held in Clovis from September to November 2015.
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USDA will conduct a referendum from April 2 through May 5, 2018, and will mail ballot materials to all known eligible dairy producers supplying milk to the proposed marketing area. The FMMO would become effective if approved by two-thirds of the voting producers, or by producers of two-thirds of the milk represented in the voting process. Cooperatives can vote as a block. USDA allows a stand-alone California quota program but it will be administered by the California Department of Food and Agriculture.
Meanwhile; anhydrous milkfat led the declines while butter jumped in the April 3 Global Dairy Trade auction. The weighted average of products offered inched 0.6 percent lower, following a 1.2 percent drop March 20 and a 0.6 percent slide on March 6.
Anhydrous milkfat was down a bearish 7.0 percent but unchanged in the last event. Skim milk powder was down 1.8 percent after plunging 8.6 percent.
Gains were led by rennet casein, up 12.1 percent, after slipping 2.9 percent March 20. Butter was up 4.1 percent, after holding steady last time. Cheddar was up 2.2 percent, following a drop of 3.9 percent, and whole milk powder was up 1.6 percent, after inching 0.1 percent higher last time. Lactose was up 1.1 percent and buttermilk powder was up 1.0 percent.
Dairy product prices were mostly higher the first week of April. Cheddar block cheese closed that April 6 at $1.6025 per pound, up 7 1/4 cents on the week and 14 1/4 cents above a year ago. The barrels finished at $1.45, up a penny on the week, 1 1/2 cents above a year ago, but an unsustainable 15 1/4 cents below the blocks. Six cars of block were traded on the week at the CME and 32 of barrel.
Cheese demand is a mixed bag, says Dairy Market News. Reversing a trend from previous weeks, Italian style cheesemakers report steady to increased sales. While traditional style cheesemakers, who have recently provided generally positive demand reports, are relaying decreasing sales in some cases.
More cheesemakers are taking discounted spot milk, with prices ranging $2.50 to $5 under Class and milk offers are prevalent. Market tones are somewhat mixed. Some contacts expect prices to steadily increase near term, while others point to recent slips and question the market's direction.
Western cheese is active as milk continues to be readily available. Manufacturers expect production to remain solid in the coming weeks as they reach the upsurge of the spring flush. With current abundant inventories, prices are fairly steady. "Some contacts report that prices are not reflecting the current condition of the market. Cheese inventories/production are more than demand; therefore, according to contacts, prices are supposed to be lower than they are.
Cash butter shot up 9 1/2 cents April 4 to $2.3350 per pound, despite a lot of product finding its way to Chicago, but it closed April 6 at $2.2875, up 7 1/4 cents on the week and 19 cents above a year ago, with 51 cars sold last week.
Cream headed for the churns is not where some butter producers were expecting following the holiday, said DMN. Butter demand is not slowing and 82 percent butterfat loads are sought after on the world market, whereas 80 percent butterfat loads have been moving fairly regularly in the domestic arena. Contacts continue to relay the increased cold storage data has not affected overall market positivity.
Western butter makers report spring holiday retail sales were good but orders have slowed somewhat. Cream is readily available, butter production is vigorous, and butter inventories are generally heavy and growing.
Cash Grade A nonfat dry milk closed April 6 at 72 3/4 cents per pound, up 3 3/4 cents on the week but 8 1/4 cents below a year ago, with 11 cars trading hands.
The brand new spot dry whey price finished at 32 cents per pound, up 3 1/2 cents on the week.
USDA's latest Dairy Products report pegged February U.S. cheese output at 981.6 million pounds, down 10.5 percent from January but 4.2 percent above February 2017. That put the two-month total at 2.08 billion pounds, up 4.6 percent from a year ago.
Italian cheese totaled 423.9 million pounds, down 10.6 percent from January but 4.3 percent above a year ago. Year to date Italian cheese sits at 898.3 million pounds, up 4.4 percent from a year ago. Mozzarella, at 325.9 million pounds, was up 3.5 percent, with YTD at 692.9 million pounds, up 3.9 percent.
American type cheese production totaled 396.6 million pounds, down 8.5 percent from January but 6.1 percent above a year ago, with YTD at 830.3 million pounds, up 4.9 percent. Cheddar output, the cheese traded at the CME, totaled 291.8 million pounds, down 8.3 percent from January but 5.7 percent above a year ago, with YTD Cheddar hitting 610.0 million pounds, up 3.8 percent.
Churns produced 168.6 million pounds of butter, down 7.4 percent from January but 4.7 percent above a year ago. YTD output is at 350.7 million, up 3.5 percent.
Yogurt output amounted to 367.8 million pounds, up 1.3 percent from a year ago, with YTD hitting 733.2 million pounds, down 0.6 percent.
Dry whey totaled 89.4 million pounds, up 14.6 percent, with YTD output at 179.7 million pounds, up 12.1 percent. Stocks totaled 88.6 million pounds, down 1.8 percent from January but 24.8 percent above those a year ago.
Nonfat dry milk totaled 158.5 million pounds, down 1.1 percent from January but 12.1 percent above a year ago. YTD output stands at 318.8 million pounds, up 8.2 percent. Stocks climbed to 323.99 million pounds, up 17 million pounds or 5.5 percent from January and 61.9 million pounds or 23.6 percent above a year ago. January stocks were revised sharply lower to the tune of 33.2 million pounds.
Skim milk powder production totaled 36.5 million pounds, down 20.3 percent from January and 8.9 percent below a year ago.