Monthly Dairy Prices 8-10-09
August 10, 2009
The nation’s July benchmark milk price was unchanged from June. The Agriculture Department announced the July Class III price at $9.97 per hundredweight but that’s $8.27 below July 2008. Class III futures settled Friday with a rebound in August to $11.05, then $12.40 in September, $12.96 in October, $13.50 in November, and $13.80 in December. The 2009 average now stands at $10.16, down from $18.25 a year ago and $16.86 in 2007. The July Class IV price is $10.15, down 7 cents from June and $6.45 below a year ago.
The NASS-surveyed 4-week cheese price averaged $1.1334 per pound, down 1.3 cents from June. Butter averaged $1.1986, down almost a penny. Nonfat dry milk averaged 84.22 cents, down fractionally, and dry whey averaged 29.12 cents, up 2.2 cents.
Enter … Uncle Sam to the rescue. The Agriculture Department announced Friday that it will temporarily raise purchase prices under its Dairy Price Support Program to help boost farm income, beginning August 1 through October 31. The block cheese price will rise from $1.13 per pound to $1.31, an 18 cent increase. The barrel price will rise from $1.10 to $1.28, and nonfat dry milk will go from 80 cents per pound to 92 cents. USDA believes the action will raise farmer income by $243 million.
“Congress gets it,” said National Milk’s Chris Galen in his Thursday report. Galen reacted to Wednesday’s Congressional Dairy Caucus press conference 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.”
Galen said Congress understands there is a crisis on farms and that’s the reason for this “very broad bipartisan group of representatives coming together to look for policy solutions that the House and Senate can engage in to help farmers.”
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Market reaction to USDA’s increased purchase prices was instant Friday morning with block cheese jumping 6 cents and barrels up seven. The block price closed at $1.2850 per pound, up 8 1/2-cents on the week but 2 1/2 cents below the new temporary support price, and 55 cents below a year ago when the blocks tumbled 23 1/4 cents to $1.8350.
Barrel closed out July at $1.26, up 9 cents on the week, 2 cents below the new support price, and 54 cents below a year ago. Only eight cars of block traded hands on the week and seven of barrel. The lagging NASS-surveyed U.S. average price on block cheese inched up 0.3 cent, to $1.12. Barrel averaged $1.1254, up 1.4 cents.
Cash butter closed out the week and the month at $1.2450, down a penny and a half on the week and 33 cents below a year ago. Forty two cars were sold on the week. The price support on butter was not changed. NASS butter averaged $1.2290, up 4.1 cents.
Cash Grade A nonfat dry milk jumped 2 cents Friday, to 91 cents per pound, and Extra Grade gained 2 1/2, closing at 90 cents, on two unfilled bids of each. NASS nonfat dry milk averaged 84.99 cents, up 1.3 cents, and dry whey averaged 29.53 cents, down 0.1 cent.
Uncle Sam’s price support program purchased 868,904 pounds of nonfat dry milk on the week but exported 11.9 million via the Dairy Export Incentive Program.
Dr. Robert Cropp, Emeritus Professor at the University of Wisconsin at Madison, said in Tuesday’s DairyLine that cheese prices are not great but are improved and above support. Cow numbers are going down, he said, and milk production is inching lower so things may be a little tighter but there’s a lot of cheese in storage, according to the last Cold Storage report.
Cheese stocks are up 7 percent from a year ago, he said, and there’s a lot to move yet. Buyers are looking at these prices and may be buying ahead a little, according to Cropp, particularly on butter which can be stored a little longer.
Cream supplies are slipping as more goes into the cone instead of the churn. You need to have butter for fall sales, he said, so some advance purchases are likely being made as “It’s a safe bet that butter will be higher than $1.26 by fall.”
When asked what he would advise Agriculture Secretary Tom Vilsack to do to turn things around for dairy farmers, Cropp said, we have to get milk production down below year ago levels by 2 or 3 percent “But, what the Secretary can do, I’m not sure.”
Short term Cropp suggests the government buy more product through the price support program, buying ahead for school lunch and feeding programs and using the Dairy Export Incentive program helps a little, he concluded, “We have to get production down.”