Milk price jumps but dairy depression remains |

Milk price jumps but dairy depression remains

The August Federal order Class III benchmark milk price took a badly needed $1.23 jump to $11.20 per hundredweight (cwt.) but that’s a whopping $6.12 below August 2008, 9 cents below California’s comparable 4b price and still well below most dairy’s cost of production. The 2009 Class III average now stands at $10.29, down from $18.14 at this time a year ago and $17.23 in 2007.

Class III future prices portend little help ahead with Friday’s settlements as follows: September $12.13, October $12.13, November $12.84, and December at $13.15.

The August Class IV is $10.38, up 23 cents from July but $6.26 below a year ago. The 2009 average now stands at $9.92, down from $15.51 a year ago.

The four-week NASS-surveyed cheese price averaged $1.2605 per pound, up 12.7 cents from July. Butter averaged $1.2030, up fractionally. Nonfat dry milk averaged 86.88 cents, up 2.4 cents, and dry whey averaged 29.25 cents, also up fractionally from July.

California’s 4b cheese milk price is $11.29 per cwt., up $1.90 from July and $4.85 below a year ago. The 4a butter/powder price is $10.21, up 19 cents from July, but $6.03 below a year ago.

The bleeding continued in the cash cheese market, the week of August 31. The blocks closed that Friday at $1.27 per pound, down 9 3/4-cents on the week, 51 1/2-cents below a year ago, and 4 cents below the new temporary support price.

Barrels closed at $1.2475, down 9 1/4-cents on the week, 52 3/4-cents below a year ago, and 3 1/4 below support. Thirty cars of block traded hands on the week and 11 of barrel. The NASS U.S. average block price climbed to $1.3326, up 4 cents. Barrels averaged $1.3583, up 4.2 cents.

Butter held all week at $1.17, but that’s 49 cents below a year ago. Eleven cars were sold on the week. NASS butter averaged $1.1659, down 2.7 cents. NASS nonfat dry milk averaged 92.87 cents, up 4.9 cents, and dry whey averaged 29.14 cents, up 0.3 cent.

The University of Wisconsin’s Dr. Brian Gould said he wasn’t surprised by the drop in cheese prices in Tuesday’s broadcast. He pointed out that we have not seen the reductions in milk production that were expected by now. Combined with near record stock levels of total cheese and near record cheese production the last two months, Gould said, “I’m not surprised that cheese has dropped.”

What is confounding is that cheese demand appears to be good right now, though commercial disappearance is a “squishy number,” he said. Second quarter 2009 cheese demand was strong but “That was countered by what was going on in butter and powder and, when combined with cheese disappearance versus butter and powder, the disappearance of all milk is up just 0.3 percent.” “That just about equals milk production in that same period,” he said, “So, not an increase in demand, relative to the supply of milk products.”

Gould also reported USDA data which indicated that total cheese consumption in 2008 was down from 2007 and 2006. In 2008 the consumption per person was 32.48 pounds, down from 33.19 pounds in 2007 and 32.70 pounds in 2006.

A major drop was on Mozzarella and process cheese, he said. He’s not sure about 2009 but the thinking is that, with lower incomes, people are trending away from expensive eating establishments to lower cost restaurants, which would include pizzerias, so that Mozzarella number may be up in 2009, versus 2008.

In an effort to help, the Agriculture Department announced July 31 that it will temporarily raise purchase prices under its Dairy Price Support Program to help boost farm income, beginning August 1 through October 31. USDA believes the action will raise farm income by $243 million but so far, no cheese has moved to Uncle Sam.

“Congress gets it,” said National Milk’s Chris Galen in a recent DairyLine interview as he reacted to the Congressional Dairy Caucus press conference in July were Rep. Tom Perriello (D-VA) made a telling statement; “Everyone in America profits from agriculture, except farmers.”

Another representative pointed out that every dairy farmer in America is losing money, not just a few. A third lawmaker reported that a dairy farmer told him that he was “used to working for nothing but not for less than nothing.”

DairyLine marked its 21st year of service to the dairy industry and, in all those years plus the years prior to that, that I have reported dairy news, never have I seen such a lengthy, depressed situation. Dairy farmers are suffering financially like none before them have.

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