Mielke: Benchmark milk prices fall | TheFencePost.com

Mielke: Benchmark milk prices fall

Lee Mielke
lkmielke@juno.com

The Agriculture Department announced the December Federal order Class III milk price at $15.44 per hundredweight (cwt.), down $1.44 from November, $1.96 below December 2016, and the lowest Class III since April 2017. It equates to about $1.33 per gallon, down from $1.45 in November and $1.50 a year ago. The 2017 Class III averaged $16.17, up from $14.87 in 2016 and $15.80 in 2015.

It's $1.92 above California's comparable Class 4b cheese milk price, second largest deficit between the two; the highest occurring in March at $2.05. The gap ranged from a low of 16 cents in July to $2.05 and averaged 98 cents for the year, up from 71 cents in 2016.

Class III futures portend a pretty lean 2018, with prices well below $16 per cwt. Late morning on Jan. 5, the January contract was at $14; February, $13.49; March, $13.54; April, $13.87; May, $14.29; and June was at $14.66, with a peak of only $15.72 in October.

The December Class IV is $13.51 per cwt., down 48 cents from November, $1.46 below a year ago, and the lowest Class IV price since May 2016. Its 2017 average is $15.16, up from $13.77 in 2016 and $14.35 in 2015.

California's December Class 4b cheese milk price is $13.52 per cwt., down $2 from November and $3.07 below a year ago. It is the lowest 4b price since June 2016. The 2017 4b average stands at $15.20, up from $14.27 in 2016 and $14.47 in 2015.

The December 4a butter-powder price is $13.36, down 26 cents from November and $1.43 below a year ago and the lowest 4a price since October 2016. It averaged $14.95 in 2017, up from $13.41 in 2016 and $14.10 in 2015.

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California dairy producers have given a thumbs up to the California Department of Food and Agriculture's Quota Implementation Plan, should they approve a Federal Milk Market order in a future referendum.

CDFA conducted the referendum of all market milk producers in the state of California and reported that 703 valid ballots out of a possible 1059 were received. The final tally showed that 66 percent of the state's eligible producers participated, with 613 or 87 percent voting in favor and 90 or 13 percent opposed.

The USDA has issued a Recommended Decision on a California Federal milk market order but has yet to issue its Final Decision. Once that happens, informational meetings will likely be held in the state, with a final producer referendum after that to approve or give it a thumbs down.

U.S. dairy margins ended December slightly weaker as milk prices continued to drift lower while feed costs held relatively steady, according to the latest Margin Watch from Chicago-based Commodity & Ingredient Hedging LLC.

It adds that "Margins remain negative through the first half of 2018, and projected only slightly above breakeven through the second half of the year. Milk prices languish heading into 2018, with little optimism that the bearish tide is turning," according to the MW

Cash dairy prices were mixed in the New Year's holiday-shortened week while much of the country started 2018 in bitter cold. The Cheddar blocks closed the first Friday of 2018 at $1.4950 per pound, down 4 1/2-cents on the week and 17 1/2-cents below a year ago. The barrels finished at $1.39, down 5 1/4-cents on the week, 18 1/2-cents below a year ago, a larger than normal 10 1/2-cents below the blocks and the lowest CME barrel price since July 10, 2017. Only four cars of block were sold on the week at the CME and 11 of barrel.

Dairy Market News reports that some central cheesemakers are no longer taking spot milk loads as they have more than needed at the onset of 2018 and those that are taking on milk are paying prices from $1.50 to $6 under Class III.

Some cheesemakers have relayed that milk suppliers are looking to lock in future deals now, as milk supplies are expected to remain plentiful. Many plant managers produced cheese through the New Year's weekend and holiday.

Mozzarella and provolone producers reported that sales were "better than expected this week. However, they suggest the holiday rush was cut short as fluctuating market prices gave buyers pause. As cheese markets re-enter more familiar grounds, cheese producers hope to make up for lost sales late in 2017."

Western cheese production is active and there's still plenty of milk, although some is refilling bottling pipelines as schools restart after the holidays.

DMN said, "Many cheesemakers want to accentuate the positives as the new year begins, but there is a level of uncertainty lingering within the dairy industry. While industry contacts suggest overall domestic cheese demand has been solid, demand for mozzarella has been stagnant."

"Export interest may be increasing," DMN said, "But it may be due to lower price points. While stocks have become more comfortable, there is the underlying sense that milk production regionally, nationally and globally, will continue to fuel the production of cheese and rebuild cheese inventories. The bulls and bears are trying to discern the future of the cheese market in the early stages of the new year, but the future is difficult to predict."

Cash butter saw a Jan. 5 close at $2.2375 per pound, up 3 cents on the week and 1 3/4-cents above a year ago, on 10 reported sales for the week.

Butter churns were running actively New Year's Week," DMN says, "both in preparation for the spring push and due to some producers reporting lower end-of-year inventories. Cream supplies also lend to the drive to produce more butter. Sales are slower, but meeting expectations. As cheese markets attempt to locate stable ground, and dry products' markets continue to falter, the butter markets remain the lone commodity stalwart, starting 2018 in steady to bullish fashion."

Western butter supplies have been drawn down due to holiday demand and many retailers are replenishing their post-holiday stocks sooner than usual. With the closure of some plants during the holiday weekend, many distressed loads of cream moved to the churns. Cream continues to be available for butter processing, but at slightly higher premiums compared to Christmas week.

Grade A nonfat dry milk remains in the cellar, closing Jan. 5 at 68 cents per pound, up a quarter-cent on the week but an attention grabbing 37 1/4-cents below a year ago. Six cars were sold on the week at the CME.❖