Milk price slips
The Agriculture Department announced the February Federal order Class III benchmark milk price at $13.89 per hundredweight, down 7 cents from January but 49 cents above February 2018 and the first month that the Class III price topped the previous year’s price since November 2017. It equates to $1.19 per gallon, down from $1.20 in January and compares to $1.15 a year ago.
Class III futures late morning on March 1 portended a March price at $15.22; April, $15.12; May, $15.19; and June at $15.50, with a peak of $16.33 in September.
The February Class IV price is $15.86, up 38 cents from January, $2.99 above a year ago, and the highest Class IV price since August 2017.
The USDA issued its delayed December Dairy Products report on Feb. 28 and pegged December cheese output at 1.09 billion pounds, up 1 percent from November but 1.2 percent below December 2017, ending 68 consecutive months that cheese output exceeded that of a year ago. Total cheese output for 2018 hit 12.93 billion pounds, up 2.1 percent from 2017.
Italian cheese totaled 479.4 million pounds, up 3 percent from November and 2 percent above a year ago. Year to date (YTD) Italian hit 5.5 billion pounds, up 2.8 percent from 2017. Mozzarella, at 378.7 million pounds, was up 3.7 percent from a year ago, with output for the year at 4.3 billion pounds, up 4.1 percent.
American type cheese totaled 424.6 million pounds, up 0.6 percent from November but 4.4 percent below a year ago, with the year’s total at 5.2 billion pounds, up 1.7 percent from 2017.
Cheddar cheese, the kind traded at the Chicago Mercantile Exchange, totaled 306.3 million pounds, up 4.5 million pounds from November but 20.8 million or 6.3 percent below a year ago. Output for 2018 totaled 3.7 billion pounds, virtually unchanged from 2017.
U.S. churns produced 171 million pounds of butter, up 25 million pounds or 17 percent from November but 0.1 percent below a year ago. Total butter output for 2018 was at 1.88 billion pounds, up 2 percent from 2017.
Yogurt output hit 344.9 million pounds, was down 2.2 percent from a year ago, with YTD output at 4.4 billion pounds, down 2 percent.
Dry whey totaled 74.5 million pounds, down 13.4 percent, with YTD at 1 billion pounds, down 2.8 percent. Dry whey for human consumption totaled 73.2 million pounds, up 0.2 percent from November but 13.3 percent below a year ago. Stocks totaled 65.1 million pounds, up 1 percent from November but 32.9 percent below those a year ago.
Nonfat dry milk production totaled 142.6 million pounds, up 8.3 percent from November but 13.3 percent below a year ago. YTD output hit 1.7 billion pounds, down 5 percent. Stocks slipped to 275.3 million pounds, down 14.2 million pounds or 4.9 percent from November but 44.7 million pounds or 14 percent below the 2017 levels.
Skim milk powder totaled 50.8 million pounds, up 69.9 percent from November and 1.8 percent above a year ago. Skim milk powder output totaled 544 million pounds in 2018, up 2.7 percent from 2017.
Cheese traders took the Cheddar blocks higher for the fifth week in a row, closing March 1 at $1.61 per pound, up 11/2 cents on the week, highest they have been since October 2018, and 5 cents above a year ago. The barrels finished at $1.41, up a half-cent on the week, 61/2 cents below a year ago, and 20 cents below the blocks. There were two sales of block on the week and 30 of barrel.
Cheese demand reports vary, according to Dairy Market News, but a growing segment of Midwestern cheesemakers reported a seasonal shift slower. A lot of them are not on the spot milk marketers and those who are open to extra milk are generally finding it at a discount. Cheese inventory is unchanged but long. Continuing winter weather was causing issues with delivery of milk, cheese and whey in the region. Plant managers report that long-haul trucking has been somewhat difficult to manage as snow and ice led to closed roads in Wisconsin and Minnesota.
Milk is readily available in the West and vats are at or near capacity. Cheese makers are employing several strategies to control the size and type of inventory, with some placing more cheese into aging programs as a hedge while cheese prices are low. Others are making more barrels and a few have slowed production to conduct maintenance and limit the growth of stocks. Inventories are still heavy and manufacturers want to keep stocks in check as the spring flush nears. Cheese is moving well through contracts, but extra business is hard to come by. Demand from a few export channels is strong for some, said DMN.
Butter closed March 2 at $2.2875 per pound, up 23/4 cents on the week, highest since Feb. 1, 2019, and 83/4 cents above a year ago, with five cars sold.
Central butter plant managers continue reporting widely available cream for the churns, as production marches on but demand is picking up ahead of the spring holidays. Salted and unsalted loads are both selling at premiums and 82 percent butterfat orders have increased. Butter inventories are plentiful, but contacts suggest they are in a good place ahead of increasing seasonal demand.
Western churning continues at a full and fast pace so some processors have stopped buying cream as they do not have enough capacity. Mechanical issues at one plant caused the manager to stop butter production and redistribute their cream to whoever could take it. Butter supplies are plentiful and stocks continue to increase but butter sales are generally stable, according to DMN.
Spot Grade A nonfat dry milk saw a close March 1 at 981/2 cents per pound, down 11/4 cents on the week but 321/4 cents above a year ago, with 30 carloads exchanging hands on the week.
Dry whey saw some ups and downs but finished March 1 at 36 cents per pound, 11/4 cents higher on the week, with a whopping 47 cars sold at the CME.
Dairy cow culling was down a bit in December but well above a year ago. The Agriculture Department’s latest Livestock Slaughter report shows an estimated 261,200 head slaughtered under federal inspection, down 6,800 from November but 13,900 or 5.6 percent above a year ago. A total 3.15 million head were culled from the nation’s dairy herd in the year, up 164,600 or 5.5 percent from 2017.
Culling data is indicative of what’s happening economically on U.S. dairy farms. Margins were relatively flat over the first half of February with values still projected below breakeven over the first half of the year, according to the latest Margin Watch from Chicago-based Commodity & Ingredient Hedging LLC.
The MW stated that “While the milking cow herd has become more efficient to allow for modest production gains, the latest Milk Production report reflected continued contraction with a drop of 3,000 head from November to December at 9.351 million. This was the smallest since November 2016 and down 49,000 head from the previous year.”
“A tough margin environment is prompting more producers to cull cows. Dairy cow slaughter reached above 70,000 head for the latest week of slaughter data ending Jan. 19. This was the largest single week of dairy cow kill since January 2013. Fourth quarter dairy cow slaughter was up 8 percent from 2017, and some weeks towards year-end were as much as 14 percent higher than year ago comparable figures,” the MW reported.
“Feed markets meanwhile continue to be subdued, with hopes for a trade deal between the U.S. and China. The March 1 deadline was expected to slide in order for a summit to be scheduled between Presidents Trump and Xi in Mar-a-Lago towards the end of March. A Bloomberg report cited that China has pledged to secure $30 billion of new U.S. agricultural trade annually, above and beyond pre-trade war levels,” the MW concluded. ❖