Happy New Year, 2011 is here!

It’s not the best way to end one year and start a new one but farm gate milk prices continue to slide. The Agriculture Department announced the December Federal order Class III benchmark milk price on December 30 at $13.83 per hundredweight, down $1.61 from November, and $1.15 below December 2009. That pulled the 2010 average down to $14.41, up from $11.36 in 2009, but compares to $17.44 in 2008.

The Class III futures settled Friday morning with January at $13.22, February $13.72, March $14.06 and April at $14.55, with the peak at $15.69 in October.

The December Class IV price is $15.03, down $1.65 from November, but 2 cents above December 2009. It averaged $15.09 in 2010, up from $10.89 in 2009, and compares to $14.65 in 2008.

The four-week NASS surveyed cheese price averaged $1.4606 per pound, down 15.5 cents from November. Butter averaged $1.6539, down 36.9 cents. Nonfat dry milk averaged $1.1848, down a penny, and dry whey averaged 37.89 cents, up fractionally. California’s December prices will be announced January 3.

The cash cheese market showed a little strength the last week of 2010. The blocks closed the week and the year at $1.3425 per pound, up 2 cents on the week, but 10-3/4-cents below that week a year ago when they lost almost 12 cents. Barrel, after starting the week with continued losses, regained some ground and closed Friday at $1.34, down a penny and a half on the week, and 9 cents below a year ago. Twenty two cars of block were traded in the final week of the year and 14 of barrel. The lagging NASS-surveyed block price average lost 5.9 cents, slipping to $1.4238. Barrel averaged $1.3899, down 2.7 cents.

The cash butter market ended the year at $1.67, up 1-3/4-cents on the week, and 34-1/4-cents above a year ago. Four cars were sold on the week. The NASS butter price averaged $1.6425, down 0.6 cent. NASS nonfat dry milk averaged $1.1417, down 7-1/2-cents, and dry whey averaged 38.22 cents, up 0.4 cent.

Market analyst Alan Levitt said in Tuesday’s DairyLine that the pattern for most of 2010 was that, when cheese neared $1.40, buyers returned, but when prices got near $1.40 in December, “people had pretty much bought what they needed for the holiday season, weren’t interested in accumulating inventory going into the end of the year, and wanted to see how sales went over the holidays.”

When asked about the lack of reaction in the market to the November Milk Production and Cold Storage reports, Levitt pointed out that cheese inventories are still well above historic levels. They dropped some in November, he said, but didn’t drop much in the fall and are still overhanging the market.

Butter stocks are at a historically low level, according to Levitt, roughly two and a half week’s worth of use, and the smallest figure in five years so that will be a factor in 2011. He added that we don’t see the immediate impacts from those reports like we used to but, going into next year, butter is going to be short again.

Weather was another topic of discussion, with rains in California and snowstorms in the Northeast. California has been getting dumped on, he said. Tulare County received more than triple the normal level of rain, and a lot of fields are under water but farmers have got better prepared in recent years in terms of cow comfort and have done what they can to minimize the effect.

A lot of those farms are under cover, he said, and while we might expect to see some impact on milk production, it probably won’t be as much as we might have seen 10 years ago.

As to the Northeast, Levitt said it was too early to tell because we’re over the holiday period and we haven’t received all of the reports yet but certainly the weather affects people’s ability to get out and buy milk from the stores and it affects farm pickups.