Monthly Dairy Prices 6-15-09
June 15, 2009
HAPPY JUNE DAIRY MONTH!
At least it’s happy for consumers! Wholesale dairy product prices remain depressed, and while retail dairy product prices are down from a year ago to the delight of consumers, dairy farm milk prices remain far below the cost of production and reports of depression and even suicide among dairy farmers is the order of the day.
The May Federal order benchmark milk price suffered a temporary relapse, making for a very exasperating June Dairy Month for farmers. The Agriculture Department announced the Class III price at $9.84 per hundredweight (cwt.) down 94 cents from April, $8.34 below May 2008, but 30 cents above California’s comparable 4b cheese milk price. The 2009 average now stands at $10.23, down from $17.86 at this time a year ago, and compares to $15.30 in 2007.
The May Class IV price is $10.14, up 32 cents from April, but $5.12 below a year ago.
Class III futures portend small rebounds ahead, with the June Class III contract settling Friday at $9.89, $10.65 for July, $11.57 in August, $12.85 in September, $13.60 in October, $14.16 in November, and $14.39 in December.
The four-week NASS-surveyed cheese price averaged $1.2159 per pound, up 4.9 cents from April. Butter averaged $1.1553, down 12.2 cents. Nonfat dry milk averaged 83.18 cents, up 1.2 cents, and dry whey averaged 23.17 cents, up 3.7 cents.
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California’s May 4b cheese milk price is $9.54 per cwt., down 87 cents from April, and $9.12 below a year ago. The 4a butter-powder price is $10.03, up 24 cents from April, but $5.16 below a year ago.
A key indicator of dairy farm profitability, the so-called Milk-Feed Price Ratio, fell to a new low of 1.47 in May, down from April’s revised estimate of 1.58, and compares to 1.81 in May 2008, according to USDA’s latest “Ag Prices” report.
Market analyst Alan Levitt warns that “the worst is still to come,” because feed costs are still going up. The June and July ratios will be “pitiful,” he said, “even lower than what we’ve seen and that’s when it’s really going to hit, and we’ll start to see this (milk) supply correction.”
The wholesale cash block cheese price closed the first Friday of June at $1.1475 per pound, down a half-cent on the week, but over a dollar below what it was a year ago. Barrel closed at $1.10, unchanged on the week, but $1.05 below a year ago. Cheese prices have hovered close to or below the government support prices for several weeks.
Butter closed at $1.2525, down 1 1/4-cents on the week, the first decline since mid March, and 22 3/4-cents below a year ago.
Government price support purchases for the week totaled 4.1 million pounds of nonfat dry milk, pushing the cumulative total to 243.6 million, compared to none a year ago.
Low cheese prices have made buyers more aggressive, according to Levitt, editor of the CME’s Daily Dairy Report (DDR) in Tuesday’s DairyLine, but prices are still close to support. Production is seasonally heavy, he said, inventories are building, and he doesn’t see that changing in the short-term.