Mielke: Benchmark milk prices slide | TheFencePost.com

Mielke: Benchmark milk prices slide

Lee Mielke
lkmielke@juno.com

The first benchmark milk price of 2018 is not good news for dairy producers and, hopefully, not a Punxsutawney Phil type prediction of "six more weeks of winter." The Class III fell to $14 per hundredweight (cwt.), down $1.44 from December 2017 and $2.77 below January 2017, lowest Class III price since June 2016, but is 63 cents above California's comparable 4b price. The Class III price equates to $1.20 per gallon, down from $1.33 in December and $1.44 a year ago.

Friday Class III futures settlements portend a February price at $13.63; March, $13.61; and April at $13.80; with a peak at only $15.78 in October.

The January Class IV milk price is $13.13 per cwt., down 38 cents from December, $3.06 below a year ago, and the lowest Class IV since May 2016.

California's comparable January 4b cheese milk price is $13.37, down 15 cents from December, $2.62 below a year ago, and the lowest 4b price since June 2016. The January 4a butter-powder price is $12.93, down 43 cents from December, $2.74 below a year ago, and the lowest 4a price since May 2016.

Cash dairy product prices saw little change the week of Jan. 29 as traders absorbed the neutral to bearish December Dairy Products report. Block Cheddar cheese closed Feb. 2 at $1.4625 per pound, down a penny on the week and 27 3/4-cents below a year ago. The barrels finished a half-cent higher at $1.3250, 38 1/4-cents below a year ago and 13 3/4-cents below the blocks. Three cars of block traded hands and 25 of barrel.

Dairy Market News reports that cheese production in the Midwest varies by plant but cheese sales are "generally meeting expectations." Process cheesemakers, in particular, suggest that sales have increased from a very slow start in 2018. Pizza cheese suppliers also report a demand uptick. But, milk into cheese, for the most part, is discounted, with prices ranging $3 under to $1 over Class.

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It adds that "There is some positivity regarding market tones among contacts. Although the path to some steadiness has not been cogent, there is currently a bullish sentiment as prices are appealing to buyers who have, until recently, been very hesitant to purchase more than absolutely necessary."

Western cheese makers continue to push milk through cheese vats. With ample milk supplies, cheese production is active and many facilities are running at or near capacity. Some Class II manufacturers have pulled a little more milk into their facilities, helping ease the pressure. Contacts report an increase in demand from both export and domestic markets, possibly due to lower prices.

"Whether due to more favorable prices or the Super Bowl surge, manufacturers note an increase in buyer activity," DMN said. "Inventories are still heavy but the uptick has drawn total stocks down slightly."

Cash butter closed Feb. 2 at $2.1150 per pound, down 1 1/2 cents on the week and 4 1/4 cents below a year ago, with nine cars exchanging hands on the week.

Butter sales are seasonally quiet, according to DMN, but demand is "generally meeting seasonal expectations." Butter makers suggest production activity is steady, as cream remains available from within and outside the Midwest and contacts suggest that the uptick in butter stocks in the latest Cold Storage report is "less concerning for butter than other commodities. As butter's public perception has shown marked improvements in recent years, contacts suggest a need for increased supplies." That said, others "question whether the butter market tones can remain resilient, as all other dairy commodities bear the brunt of low prices and/or instability."

Western butter output is heavier due to "above needs supplies of cream." Processors are selling some of their cream but supplies are so abundant they have to churn more butter and processing capacities seem to be limited in some areas. Butter inventories are also growing. Current demand is "alive but seems to not be enough to keep up with the speed of production."

Cash Grade A nonfat dry milk closed the week at 72 1/4 cents per pound, up 1 1/4 cents but 21 3/4 cents below a year ago, with 21 cars sold on the week.

Meanwhile, a drop in the U.S. All Milk price average, plus higher corn and soybean prices served to pull the December milk feed price ratio sharply lower. The Agriculture Department's Ag Prices report shows the December ratio at 2.38 down from 2.54 in November and 2.73 in December 2016.

The U.S. All-Milk price averaged $17.20 per cwt., down 90 cents from November and $1.70 below December 2016. California showed the bottom price, at $15.73 per cwt., down $1.22 from November and $1.82 below a year ago. Michigan and Arizona didn't fare much better, at $16. Wisconsin averaged $17.80, down $1.20 from November and $1.90 below a year ago.

December corn averaged $3.23 per bushel, up 8 cents from November but 9 cents below December 2016. Soybeans averaged $9.30 per bushel, up 8 cents from November but 34 cents per bushel below a year ago. Alfalfa hay averaged $148 per ton, unchanged from November, but $21 per ton above a year ago.

The December cull price for beef and dairy combined averaged $62 per cwt., down $1.40 from November, after dropping $2 the previous month. That's also 90 cents above December 2016 and $9.60 below the 2011 base average of $71.60.

The January price received for milk cows averaged $1,520 per head, down $90 from October 2017 and $100 per head below January 2017. Wisconsin cows averaged $1,470 per head, down $140 from October and $260 below January 2017. California averaged $1,500 per head, down $100 from October and $100 below January 2016.❖