Monthly Dairy Prices 11-9-09
Farm milk prices took another badly needed jump. The Agriculture Department announced the October Class III benchmark milk price Friday morning at $12.82 per hundredweight (cwt.), up 71 cents from September but still $4.24 below October 2008 and $5.88 below October 2007. That brings the 2009 average to $10.72, down from $17.84 a year ago and $17.66 in 2007. The Class IV price is $11.86, up 71 cents from September, but $1.76 below a year ago.
Class III futures portend further gains to come. The November contract settled Friday at $13.93 and December at $14.87. That would result in an $11.34 average for 2009, down from $17.44 in 2008 and $18.04 in 2007.
The NASS-surveyed cheese price averaged $1.4110 per pound, up 5.9 cents from September. Butter averaged $1.2245, up 4.3 cents. Nonfat dry milk averaged $1.0270, up 6.1 cents, and dry whey averaged 31.83 cents, up 2 cents.
Another 26,412 dairy cows are taking early retirement from the dairy industry, along with 465 bred heifers. That’s the tally in the latest Cooperatives Working Together (CWT) herd retirement, the fourth such program in the last 12 months.
The cows came from 154 accepted bids and represent about 517 million pounds of milk, according to National Milk’s Chris Galen in Thursday’s DairyLine. Added with the previous buyouts since December 2008, 252,000 cows representing 5 billion pounds of milk will have been removed, he said.
CWT economists had estimated, coming into 2009 that about 250,000 cows representing 5 million to 6 billion pounds of milk would have to be removed from the market to bring supply and demand into balance and strengthen farm milk prices, according to a CWT press release.
CWT members in 33 states submitted 168 herd retirement bids, down from the 312 bids submitted in the last buyout, but Galen pointed out that this was the third such program this year so “we knew that there would be less demand,” this time and, if you factor in the previous programs, “that’s an enormous amount of milk that we’re removing so CWT has definitely done the heavy lifting, not only last year but especially in 2009, in the face of this terrible price trough to reduce the herd size to where prices can now start recovering.”
There were no surprises in this latest round, according to Galen. Most of the cows and milk removed was from the West, he said, where the pain has been most pronounced. Field auditors will begin visiting the farms whose bid was accepted to verify production records, inspect the herds, and tag each cow for slaughter. Those farmers will be notified no later than November 16, as to whether their bid was accepted, he said.
Cash cheese prices saw little change the last week of October as the temporary increased government purchases prices were likely returned to their previous levels on Halloween Day. The block cheese closed Friday at $1.51 per pound, up a penny on the week but 9 3/4-cents below that week a year ago when they plunged 13 cents, to $1.6075. Barrel closed Friday at $1.4875, down a half-cent on the week and 19 3/4-cents below a year ago. Eleven cars of block traded hands this week and one of barrel. The NASS-surveyed U.S. average block price hit $1.4523, up 3.2 cents. Barrel averaged $1.4592, up 3 cents.
Butter closed at $1.41, up 6 cents on the week, but 27 1/2-cents below a year ago. Fourteen cars were sold. NASS butter averaged $1.2473, up 2.6 cents.
Grade A nonfat dry milk gained a penny this week, closing at $1.3350, while Extra Grade remained at $1.27. NASS nonfat powder averaged $1.0345, down 1.2 cents, and dry whey averaged 32.64 cents per pound, up 0.6 cent.
The University of Wisconsin’s Dr. Brian Gould, said in Tuesday’s DairyLine that people are trying to catch their breath from the dramatic changes of the previous week. He believes the market will closely watch what’s happening in the European Union because of the elimination of export subsidies on skim milk powder, which used to be about 13 cents per pound. The Whole milk powder subsidy was halved, according to Gould, and is now just 10 cents per pound, and the butter subsidy was reduced from 44 cents to 26 cents, a drop of 18 cents.
That’s good news for U.S. producers, he said, as it makes U.S. dairy products more competitive, not only with the reduced export subsidies, but the U.S. dollar is falling in value relative to EU and New Zealand dollars and most major currencies, “so our exports are getting cheaper,” he said.
It could also mean a reduction in the use of the Dairy Export Incentive Program by the U.S., according to Gould, which has been very active from July onward and significant tonnage was subsidized and exported.
A year ago, U.S. dairy exports were on fire and that situation could return. Gould pointed out that in June and July there was significant improvement in U.S. dairy exports and, in second quarter 2009, the U.S. was a net dairy exporter. That slowed in August for some commodities, he said, but skim milk powder and lactose exports remained strong so, “Things are looking up in terms of exports and that’s good news for U.S. dairy producers.”