Mielke: Benchmark milk prices slip
August 11, 2017
The July Federal order Class III milk price was announced by the Agriculture Department at $15.45 per hundredweight (cwt.), down 99 cents from June, but 21 cents above July 2016 as lower cheese, dry whey and nonfat dry milk prices pulled the benchmark lower. It equates to $1.33 per gallon, down from $1.41 in June and compares to $1.31 a year ago. It also topped California's comparable Class 4b cheese milk price by 16 cents, the lowest differential since November, 2016 when the 4b topped the Class III by 69 cents.
The seven-month Class III average stands at $16.02 per cwt., up from $13.73 at this time a year ago and compares to $16.04 in 2015.
Friday's Class III futures settlements portended an August price of $16.33; September, $16.69; October, $16.92; November, $16.98; and December at $16.78 per cwt.
The July Class IV milk price is $16.60, up 71 cents from June, $1.76 above a year ago and the highest Class IV since November 2015. The seven-month Class IV average is $15.30, up from $13.42 a year ago and $13.62 in 2015.
California's comparable July 4b cheese milk price is $15.29 per cwt., down 31 cents from June, but 62 cents above a year ago. The 4b seven-month average stands at $15.14, up from $13.02 a year ago and $14.41 in 2015.
The July 4a butter-powder milk price is $16.41 per cwt., up 50 cents from June, $2.18 above a year ago and the highest since November 2015. Its average now stands at $15.07, up from $13.11 a year ago and $13.42 in 2015.
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Meanwhile, August started with strengthening dairy prices despite a lower Global Dairy Trade auction but relapsed. The Cheddar blocks climbed to $1.7875 per pound Aug. 1, highest price since Feb. 2, 2017, but closed that Aug. 4 at $1.6975 per pound, down 5 3/4-cents on the week and 11 3/4-cents below a year ago.
The barrels shot up 11 1/2-cents Aug. 1, hitting $1.66, highest since Feb. 8, 2017 and reduced the spread to 12 3/4-cents, but finished the week at $1.53, down 2 1/2-cents, 35 cents below a year ago when they peaked for the year at $1.88, and a still too high at 16 3/4-cents below the blocks. Five cars of block were sold last week and 48 of barrel.
Midwest cheese producers report that milk supplies are still available but noticeably lower, according to Dairy Market News. A majority of spot milk prices range from flat market to $2 under Class III. Food service orders are growing for specialty and traditional cheesemakers. Pizza cheese producers report sales are meeting seasonal expectations. Curd producers are still experiencing a seasonal push as state fairs are underway in the Midwest.
Many Western cheese producers report there is plenty of milk available and processing facilities are at or near full capacity. Although some parts of the region are seeing a good balance between milk intakes and cheese production needs, a few in the mountain states report some milk being discarded due to disruptions at several plants, heavy milk supplies and the difficulty in moving milk to alternative sites. Domestic demand is solid and traders remain hopeful that exports can effectively soak up their heavy stocks.
Butter was also on a roller-coaster last week, after all it is fair season, and a lot of product made its way to the CME. It climbed to $2.7375 per pound Aug. 3 but closed Aug. 4 at $2.73, up a penny on the week and 46 cents above a year ago, with 63 cars selling on the week.
Butter makers continue to report that weekly sales figures are improved from last year. Food service orders continue to be the focus of production for some.
Western contacts report that processors do not have any problem getting cream. Butter supplies are comfortable and domestic butter demand is good. International demand seems to be picking up due to higher foreign prices.
FC Stone points out that "The U.S. has been a net importer of fat the past few years. To suddenly become a fat exporter the U.S. would drastically tighten up inventories. Right now the market is attempting to ration demand between domestic end users and importers."
Cash Grade A nonfat dry milk closed Aug. 4 at 86 1/4-cents per pound, up a quarter-cent on the week and 3 cents above a year ago, with seven cars selling on the week.❖