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Milk price benchmark falls

Lee Mielke
Mielke Productions

As those in the dairy industry know all too well, what goes up, will inevitably come down, especially when it comes to milk prices, but the news isn’t all bad.

The Agriculture Department announced the December Federal order Class III benchmark milk price on Jan. 2 at $19.37 per hundredweight (cwt.), down $1.08 from November’s five-year high, but is still $5.59 above December 2018, and the highest December price since 2007.

That put the 2019 Class III average at $16.96, up from $14.61 in 2018 and $16.17 in 2017. The USDA projected the 2020 average at $17.65 on Dec. 10 so expectations for 2020 milk prices are still good but much depends on consumer demand, global trade, and the price of feed.

The Jan. 3 Class III futures settlements portended a January price of $16.93; February, $17.02; and March at $17.25. The January price was the low for 2020, with the peak at $17.65 in September.

The December Class IV milk price is $16.70 per cwt., up 10 cents from November, $1.61 above a year ago, and the highest Class IV price since August. Its 2019 average is $16.30, up from $14.23 in 2018 and $15.16 in 2017.


Another higher All Milk price and lower feed prices pushed the November milk feed price ratio higher for the fifth consecutive month. The USDA’s latest Ag Prices report put the ratio at 2.61, up from 2.39 in October and compares to 2.21 in November 2018.

The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, 1 pound of milk today purchases 2.61 pounds of dairy feed containing that blend. The U.S. All-Milk price averaged $21 per cwt., up $1.10 from October and $3.80 above November 2018. California’s All Milk price was $19.50, up 60 cents from October and $2.29 above a year ago. Wisconsin’s, at $22.40, was up $1.90 from October and a whopping $5.40 above a year ago.

The national average corn price averaged $3.68 per bushel, down 16 cents from October but 27 cents per bushel above November 2018. Soybeans averaged $8.59 per bushel, down a penny from October but 23 cents per bushel above a year ago. Alfalfa hay averaged $173 per ton, down $6 from October and dead even with a year ago.

Looking at the cow side of the ledger; the November cull price for beef and dairy combined averaged $57.70 per cwt., down $3.20 from October, $5 above November 2018, but $13.90 below the 2011 base average of $71.60 per cwt.

The U.S. dairy industry saw many ups and downs in 2019, including the loss of hundreds of dairy farms, despite milk prices reaching highs not seen in five years which ironically came too little, too late for many.

Cash dairy product prices at the Chicago Mercantile Exchange started 2020 mixed as traders awaited the November Dairy Products report on Jan. 6 and the first Global Dairy Trade auction on Jan. 7.

The Cheddar blocks climbed to $1.91 per pound New Year’s Eve but closed the first Friday of the New Year at $1.89, up 6 cents on the holiday shortened week and 47.25 cents above a year ago. The barrels hit $1.70 New Year’s Eve but finished Friday at $1.6425, up 4.25 cents on the week and reversing four weeks of decline, 34 cents above a year ago, but 24.75 cents below the blocks.

Central cheese makers told Dairy Market News that orders were slow to return in the second shortened week of the holidays. Blocks and barrels are both readily available and milk for processing is “abundant.” Spot loads were offered at $6 to $8 under Class III. Cheese manufacturers picked up a few extra loads at discounted prices to fill processing runs, said DMN, others scheduled downtime, while other plants ran straight through the week.

Western cheese output is also active amid ample amounts of milk. Contacts reported discounted milk was still available in parts of the region. Cheese orders slowed during the Christmas and New Year’s weeks but retail demand leading up to the festivities pulled at cheese stocks. Cheese makers are hopeful that the pro football playoffs will spur the need for more cheese for pizza. Cheese inventories are “in good balance with customer needs,” DMN said.

Butter fell below the $2 per pound price tag again, closing the week at $1.95, 8.5 cents lower on the week and 30 cents below a year ago.

Readily available cream was driving production at butter plants in the Central region, according to DMN, and a slowdown is not likely as manufacturers expect to see high butter output well into the week after New Year’s. Demand varies from flat to sluggish, as domestic buyer interest remained light early in the week. Retail orders improved slightly from Christmas week. Bulk interest was light to moderate as buyers continue to assess their supply situation following the year-end holidays. The market is “unsettled” as prices edge lower, DMN said.

Western butter manufacturing was active due to increased cream offers in the New Year’s week. Cream was moving to any processing plant that had room and was willing to take it. Butter inventories are adequate to satisfy the needs of buyers, DMN said, and demand for the holiday was good. “The condition of the butter market is within seasonal expectations,” DMN concluded.

Spot Grade A nonfat dry milk saw a Jan. 3 closing at $1.2325 per pound, unchanged on the week but 25.75 cents above a year ago.

CME dry whey finished Jan. 3 at 31.5 cents per pound, also unchanged on the week but 17.5 cents below a year ago. ❖




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