Mielke: June Dairy Month not too happy
June 8, 2018
Happy June Dairy Month, though it's not a real happy one for dairy producers struggling to make ends meet. Prospects are looking better for the second half of the year but that may be too little, too late for many.
The May Federal order Class III benchmark milk price was announced May 31 by the USDA at $15.18 per hundredweight (cwt.), up 71 cents from April but still 39 cents below May 2017, though it is the highest Class III price since December 2017. It equates to about $1.31 per gallon, up from $1.24 in April.
The five-month Class III average stands at $14.25, down from $16.05 at this point a year ago but compares to $13.53 in 2016.
June 1 Class III futures portend a June Dairy Month price at $15.49 per cwt.; July, $16.23; and August at $16.79, with a peak of $16.96 in September.
The May Class IV price is $14.57, up $1.09 from April, 8 cents above a year ago, and the highest it has been since October 2017. Its five-month average is at $13.42, down from $14.92 a year ago and compares to $13.06 in 2016.
California's May Class 4b cheese milk price (perhaps one of the last, depending on the federal order vote) is $14.90 per cwt., up for the fourth month in a row and the highest it has been since November 2017. It gained 63 cents from April but is 35 cents below May 2017 and 28 cents below the comparable federal order Class III price.
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The five-month 4b average stands at $13.98, down from $15.02 a year ago and compares to $12.69 in 2016.
The 4a butter-powder milk price is $14.06, up 77 cents from April, 37 cents below a year ago, but the highest it has been since October 2017.
The 4a average now stands at $13.20, down from $14.64 a year ago and compares to $12.81 in 2016.
The tough times on the farm was more evident in the Agriculture Department's latest ag prices report. The report showed another gain in the U.S.-All Milk price average but that was overwhelmed by a sharp rise in the alfalfa hay price and increases in corn and soybeans, thereby sending the April milk feed price ratio lower for the fifth month in a row. The April ratio is at 1.90 down from 1.97 in March and compares to 2.22 in April 2017.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. In other words, 1 pound of milk today purchases just 1.9 pounds of dairy feed containing that blend.
The U.S. All-Milk price averaged $15.80 per cwt., up 20 cents from March but that's still 70 cents below April 2017. Michigan again showed the bottom price at $14.50, with California at $15.26, up 40 cents from March, and Wisconsin at $16.30, up a dime.
April corn averaged $3.58 per bushel, up 7 cents from March and 15 cents per bushel above April 2017. Soybeans averaged $9.83 per bushel, up 2 cents per bushel from March and 50 cents per bushel above a year ago. Alfalfa hay averaged $183 per ton, up $17 from March, and $33 per ton above a year ago.
The U.S. milk-over-feed margin is down 15 cents from March to $6.62 per cwt. based on the dairy Margin Protection Program calculation. The Daily Dairy Report said the margin was the lowest since June 2016's $5.75 per cwt.
Looking at the cow side of the ledger; the April cull price for beef and dairy combined averaged $67.50 per cwt., down $1.40 from March, $4.70 below April 2017 and $4.10 below the 2011 base average of $71.60 per cwt.
The cash dairy markets ended the Memorial Day holiday-shortened week with block Cheddar at $1.5975 per pound, down 1 1/4 cents on the week, 10 1/4 cents below a year ago, and 6 1/4 cents lower than it was on May 1, as the week's global politics may have influenced traders some. The barrels finished at $1.52, down 2 1/2 cents on the week, 3 cents above a year ago, but 8 1/4 cents below its May 1 perch. There were seven cars of block that traded hands on the week at the CME and 26 of barrel. Cheese demand reports suggest a steady to slower market for most types of processors, according to Dairy Market News, with the exception of cheese curd makers. The seasonal return of fairs and street festivals has renewed cheese curd buying vigor. Although heat and humidity in the Midwest had some contacts questioning near-term milk availability, there was no shortage Memorial week. A growing amount of cheesemakers took to the spot milk market, as loads ranged $4 to $5 under Class. Cheese production is ramping up as a result but the market tone is "somewhat stable," according to DMN.
Western cheese output is active as some of the available fluid milk clears to cheese plants but the cheese market seems to be balanced, DMN said. Prices have been up and down in the last weeks but they haven't deviated much. Cheese inventories are up, but staying manageable. Domestic and international sales are solid and the U.S. cheese market is currently very competitive as U.S. prices continue below international prices. However, some contacts are worried that an upsurge in the exchange rate might negatively affect export demand. Others believe that the price gap between the EU and the U.S. is big enough that an increase in the value of the dollar won't have much effect on export sales.
Cash butter climbed to $2.4250 per pound May 29 but closed June 1 at $2.3775, down 3 3/4 cents on the week, 10 3/4 cents below a year ago when it jumped 12 1/2 cents, but is 1 3/4 cents above where it was on May 1. A whopping 65 cars were sold on the week at the CME, 32 on June 1 alone.
DMN said the butter markets reacted to the National Agricultural Statistics Service cold storage increases as many contacts expected them to: "indifferently, if not bullishly." Upper Midwest butter makers report that cream is unexpectedly tight and buying interest remains generally healthy in both salted and unsalted varieties.
Western butter remains active. Although ice cream manufacturers are pulling more cream, there is still plenty to keep the churns busy. Butter inventories are growing along seasonal patterns and contacts say current domestic demand is solid. International demand ebbs and flows. Inquiries from global buyers are not unlimited, and "U.S. butter makers feel there is a lot of tire kicking going on. The U.S. butter price may be favorable when compared to international butter prices, however, the work involved with converting the butterfat to a form acceptable to international interests gives some U.S. manufacturers a pause," DMN said.
Spot Grade A nonfat dry milk closed the week at 82 1/2 cents per pound, down 1 3/4 cents on the week, 12 1/4 cents below a year ago, and dead even with its May 1 price. There were six cars that exchanged hands on the week.
The CME's newest addition, dry whey, had a good week, hitting a new high of 39 cents per pound May 31 but it inched back June 1 to close at 38 1/2 cents, 1 1/4 cents higher on the week, with nine cars being sold the four days of trading.