Mielke: Canada may give some dairy concession to U.S.
September 7, 2018
Media reports were abundant Aug. 27 regarding the U.S. and Mexico reaching agreement on a re-tooled North American Free Trade Agreement. Next stop is Canada to keep the trio intact. Word was that Canada may give some concessions even on dairy issues.
Dairy producer margins took a hit in July as a 90 cent drop in the July U.S. All Milk price average could not be offset by lower feed prices and pulled the July milk feed price ratio down after it rose in June for the first time in six months. The USDA's latest ag prices report puts the July ratio at 1.91, down from 1.98 in June and down from 2.27 in July 2017.
The index is based on the current milk price in relation to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. One pound of milk today purchases 1.91 pounds of dairy feed containing that blend.
The U.S. All-Milk price averaged $15.40 per cwt., down 90 cents from June and $1.80 below July 2017. The price ranged from $14.10 in New Mexico and $14.20 in Michigan to Florida's $20.10. California was at $15.05, down 58 cents from June; and Wisconsin was at $15.30, down $1.20 from June.
July corn averaged $3.47 per bushel, down 11 cents from June and 2 cents per bushel below July 2017. Soybeans averaged $9.10 per bushel, down 45 cents from June and 32 cents per bushel below a year ago. Alfalfa hay averaged $179 per ton, down $2 from June but $26 per ton above a year ago.
The Daily Dairy Report points out that "the U.S. milk over-feed margin fell 61 cents from June to just under $6.76 per cwt. based on the dairy Margin Protection Program calculation, making it the second lowest in 2018 and the third lowest since May 2016."
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Looking at the cow side of the ledger; the July cull price for beef and dairy combined averaged $66.80 per cwt., up 50 cents from June, $10.50 below July 2017 and $4.80 below the 2011 base average of $71.60 per cwt.
Milk cows for the quarter averaged $1,320 per head in July, down from $1,360 in April, and $300 per head below July 2017. They averaged $1,300 in California, unchanged from April but $300 below a year ago. Wisconsin cows averaged $1,250 per head, down from $1,320 in April and $1,650 per head in July 2017.
The August Federal order Class III benchmark milk price was announced by USDA at $14.95 per hundredweight (cwt.), up 85 cents from July, $1.62 below August 2017 and the lowest August Class III price since 2009 when it was at $11.20. It equates to $1.29 per gallon, up 8 cents from July and compares to $1.21 a year ago. The eight month average stands at $14.44, down from $16.09 a year ago and compares to $14.13 in 2016.
Friday's Class III futures settlements portended a September Class III at $16.52; October, $16.71; November, $16.63; and December at $16.42 per cwt.
The August Class IV price is $14.63, up 49 cents from July, $1.98 below a year ago, and the second highest Class IV price this year. Its eight month average is at $13.85, down from $15.46 a year ago and compares to $13.57 in 2016.
The CME roller coaster took most dairy prices higher as it entered the Labor Day weekend. Block Cheddar closed the week and the month at $1.6950 per pound, up 2 1/2 cents on the week, up 15 1/2 cents on the month, and 15 1/2 cents above a year ago when they tumbled 11 cents. The barrels finished at $1.6450, up 4 1/2 cents on the week, up 21 1/2 cents on the month, and 12 1/2 cents above a year ago. Six cars of block traded hands on the week at the CME (33 on the month) and 34 of barrel (180 on the month).
Milk availability has markedly tightened for cheese production in the central U.S., according to Dairy Market News, with the range from Class to $2 over. Some cheesemakers report spot milk is unavailable. As a result, mozzarella producers are increasing usage of nonfat dry milk to fortify. Production activity in most varieties is picking up, as demand is steady to stronger. Some cheesemakers report a growing and new customer base which is bullish for the market
Western cheese producers have no trouble finding milk and cheese output is generally steady. Sales continue to improve, but a number of suppliers report that buyers are sensitive to offer prices. Barrels are in stronger demand than blocks, but the prices of both are firm. Food chains continue to demand more cheese for pizza.
Some contacts say the USDA purchase of cheese is impacting inventory levels. Stocks tightened a little, but continue to be widely accessible.
CME butter closed the month at $2.2150 per pound, down 4 1/2 cents on the week, down 10 1/2 cents on the month, and 29 1/4 cents below a year ago when it lost 12 cents. Twelve cars were sold on the week and 73 on the month. Cream availability for churning saw little change and remained plentiful the last week of August, DMN said. Supplies are available but market tones are steady
The western butter market is somewhat bearish but participants see lower prices as an opportunity to attract more international buyers. Butter output dropped slightly in recent weeks as more milk went into Class I utilization. Several vendors report abundant stocks and are looking for additional sales outlets.
Grade A nonfat dry milk saw an Aug. 31 close at 88 1/2 cents per pound, 1 1/2 cents higher on the week, 2 1/4 cents above a year ago, and up 4 1/2 cents from Aug. 1. Fifteen cars were sold at the CME last week, with 89 loads for the month.
Dry whey was bid 2 cents higher on the week to a new record 50 cents per pound, 6 3/4 cents higher than where it was on Aug. 1. ❖