Monthly Dairy Prices
July 14, 2008
June dairy month milk checks will help U.S. dairy farmers with rising feed costs but how much remains to be seen. The Agriculture Department announced the Federal order Class III benchmark milk price Thursday at $20.25 per hundredweight (cwt.), up $2.07 from May and eight cents above June 2007. That puts the 2008 average at $18.26, up from $16.11 a year ago and $11.63 in 2006.
Look for a dip in July, based on July 3 Class III futures. The July contract settled at $18.31, August $19.12, September $20.39, October $20.30, November $20.30, and December at $20.34. The June Class IV price is $15.92, up 66 cents from May, but $4.84 below a year ago.
The NASS-surveyed cheese price averaged $2.1609 per pound, up 20.8 cents from May. Butter averaged $1.4669, up a nickel. Nonfat dry milk averaged $1.3508, up 5.2 cents, and dry whey averaged 27.58 cents, up 0.6 cent.
California’s June 4b cheese milk price is $19.12 per cwt., up 46 cents from May, $2.06 below June 2007, and $1.13 below the comparable Federal order Class III price. The 4a butter-powder price is $15.61, up 42 cents from May, but $1.42 below a year ago.
Meanwhile, the cash cheese market continues to weaken. The block price closed the 4th of July holiday shortened week at $1.9225 per pound, up a quarter-cent on the week but 4 1/4 below a year ago. Barrel closed at $1.8750, down 8 1/2-cents on the week and a nickel below a year ago. Fifteen cars of block traded hands on the week and three of barrel. The NASS U.S. average block price fell to $2.0648, down 8.7 cents. Barrel averaged $2.0895, also down 8.7 cents.
Cash butter remains strong with ice cream manufacturers bidding cream away from the churn. The CME cash price closed Thursday at $1.5525, up three-quarters of a cent on the week and 8 3/4-cents above a year ago. Seven cars traded hands on the week. NASS butter averaged $1.4724, up 0.3 cent. NASS nonfat dry milk averaged $1.3610, up slightly, and dry whey averaged 27.58 cents, down 0.1 cent.
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The June Milk-Feed Price Ratio is 1.78, down from May’s estimate of 1.83, according to USDA’s latest “Ag Prices” report. This is the ninth consecutive month the ratio has decreased, and compares to 2.88 in June 2007. The All Milk Price was estimated at $19.40 per hundredweight, up $1.00 from last month’s estimate, but 80 cents below a year ago.
Corn averaged $6.12 per bushel, up 84 cents from May, and $2.59 above a year ago. The soybean price, at $13.50 per bushel, was up $1.40 from May, and $5.99 above a year ago.
University of Wisconsin emeritus professor, Dr. Robert Cropp, said Tuesday that it’s the lowest ratio ever and, while it shows feed costs have gone up, milk prices have held, but the returns over feed costs are still favorable. He quickly added that the milk feed ratio is “not as meaningful” as it used to be at these high prices but “the margin is shrinking.”
He also pointed out that Class III futures appear optimistic, with prices close to $20 per hundredweight into 2009 and that requires a cheese price of well over $2.00 a pound, assuming that dry whey doesn’t move much over 30 cents a pound. That, he said, seems to be pretty optimistic, based on what’s going on in milk production right now, but as we go into 2009, with high feed costs, milk production may slow a little.
Commenting on the cash cheese market, Cropp said it’s “unsettled.” Buyers are cautious and he predicted prices would come down. Manufacturers, he said, “seem to be willing to move out a little and are nervous with any extra.”
Cropp reported that butter sales are “pretty good” and cream is going to ice cream so butter stocks are being drawn down, even at a record rate recently.