Mielke Market Weekly: Ag Department's benchmark milk price at highest in over a year
The Agriculture Department’s monthly benchmark milk price has reached the highest level in over a year and a half and saw its third consecutive rise. The May Federal order Class III price was announced at $16.38 per hundredweight, up 42 cents from April, $1.20 above May 2018, and the highest since November 2017.
Late Friday morning Class III futures portended a June price at $16.26; July, $16.64; and August at $16.96, with a peak of $17.25 in September.
The May price equates to $1.41 per gallon, up from $1.37 in April and $1.31 a year ago. The Class III average stands at $15.05, up from $14.25 a year ago but compares to $16.05 in 2017. By the way; California’s 4b cheese milk price was $14.90 in May 2018.
The May Class IV price is $16.29, up 57 cents from April, $1.72 above a year ago, and the highest it has been since August 2017. Its five month average stands at $15.81, up from $13.42 a year ago and compares to $14.92 in 2017.
June’s first Global Dairy Trade auction (GDT) was a second consecutive session of decline. The weighted average of products offered fell 3.4%, following a 1.2% drop on May 21. Sellers brought 43.8 million pounds of product to the market, up from 34.2 million in the last event.
The losses were led by cheese and butter. GDT Cheddar was down a whopping 14.0% following a 15.2% rise last time. Butter was down 10.3%, after a 3.2% loss last time. Buttermilk powder was down 10.1%, anhydrous milkfat was down 5.7%, after it slipped 1.4%. Skim milk powder was down 4.0%, following a 0.5% rise, and whole milk powder was off 1.5%, following a 2.1% loss last time.
Rennet casein and lactose were the only gains, up 4.2% and 0.4% respectively.
FC Stone equates the GDT 80 percent butterfat butter price to $2.1262 per pound U.S., down a hefty 21.8 cents from the last session. CME butter closed Friday at $2.3975. GDT Cheddar cheese equated to $1.7918 per pound, down 40.9 cents from the last event and compares to Friday’s CME’s block Cheddar at $1.7525. GDT skim milk powder averaged $1.1051 per pound, and compares to $1.1471 last time. Whole milk powder averaged $1.4232, down from $1.4423 last time. CME Grade A nonfat dry milk closed Friday at $1.0550 per pound.
In other trade news, Cooperatives Working Together members accepted 12 offers of export assistance this week to sell 1.27 million pounds of cheese, 264,555 pounds of cream cheese, and 855,394 pounds of whole milk powder. The product will go to customers in Asia and Central and South America.
The USDA’s April export data shows that “With the exception of the Caribbean, Middle East and South America, the U.S. recorded lower dairy export volumes into every primary region, with the most notable declines to East Asia and North America, according to HighGround Dairy.
“Dairy shipments to China continue to grind lower with combined volumes dropping to eight-year lows in April. Other regions recording losses were Southeast Asia, Oceania, Central American, South Asia, EU and North Africa.”
“The U.S. remained a strong net importer of butter into April as imports jumped 49% and exports dropped 33% YoY. Butter export volumes were the lowest since September 2017 as exports to Canada moved to the lowest since August 2016.”
You’ll recall that preliminary data showed April’s 50-State milk output at 18.43 billion pounds, up just 0.1% from April 2018. That lowered the month’s butter and milk powder production, according to the April Dairy Products report.
Starting with cheese, total April output came in at 1.08 billion pounds, down 3.6% from March but 0.2% above April. Year-to-date cheese output stood at 4.29 billion pounds, up 0.3% from a year ago.
Revisions added nearly 20 million pounds to the original March cheese estimate, according to the Daily Dairy Report, “enough to swing March production from a 0.7% year-over-year deficit to a 1.1% increase.
Wisconsin produced 279.5 million pounds of April’s cheese, down 4.6% percent from March and 2.1% below a year ago. California produced 212.2 million pounds, down 1.6% from March but 0.7% above a year ago. Idaho contributed 83.7 million pounds, down 6.7% from March and 2.2% below a year ago. Minnesota’s 59.3 million, was down 5.4% from March and 4.2% below a year ago
Italian cheese totaled 474.3 million pounds, down 4.2% from March but 2.9% above a year ago. YTD Italian stands at 1.9 billion pounds, up 2.4%. Mozzarella output jumped in April, totaling 372.7 million pounds, up 4.0% from a year ago, with YTD now at 1.5 billion pounds, up 4.7%.
American type cheese totaled 431.9 million pounds, down 1.9% from March and 2.8% below a year ago, with YTD at 1.7 billion pounds, down 2.3%.
Cheddar output was also down, the cheese traded at the CME. It totaled 308.5 million pounds, down 4 million pounds from March and 10.7 million or 3.3% below a year ago. YTD Cheddar hit 1.2 billion pounds, down 3.7% from 2018.
Butter churns produced 166.7 million pounds, down 6.9 million pounds or 3.9% from March and 8.5 million pounds or 4.8% below a year ago. YTD output is at 694.5 million down 1.8% from 2018. Revisions lowered the March total 1.3 million pounds, down 4.6% from a year ago compared to the originally reported 3.9%.
Dry whey totaled 74.0 million pounds, down 3.1% from March and 13.7% below a year ago, with YTD at 306.5 million pounds, down 14.2%. Stocks totaled 74.8 million pounds, up 8.9% from March but 10.5% below those a year ago.
Nonfat dry milk production totaled 165.0 million pounds, up 0.7% from March but 2.6% below a year ago. YTD powder is at 655.5 million pounds, down 1.3%. Stocks fell to 277.6 million pounds, down 12.4 million pounds or 4.3% from March but 4.3 million pounds or 1.6% above the 2018 level.
Skim milk powder totaled 45.0 million pounds, down 3.6% from March and 9.0% below a year ago. YTD skim hit 167.1 million, down 3.7% from a year ago.
CME prices started June Dairy Month looking for direction. Block Cheddar slowly climbed to $1.7525 per pound by Friday, up 3 3/4-cents on the week, highest since November 1, 2017, and 11 3/4-cents above a year ago.
The barrels fell to $1.4850 Tuesday, lowest price since March 13, and 25 1/2-cents below their May 7 $1.74 peak. They finished Friday at $1.5350, a half-cent lower on the week, 3 cents below a year ago, and 21 3/4-cents below the blocks. 10 cars of block were traded on the week and 63 of barrel, highest weekly barrel total this year.
Dairy Market News reports that cheese orders are picking up “noticeably,” according to producers of multiple varieties. Milk suppliers say some cheesemakers are looking to take more milk for the near term. Milk supplies were comparatively snug and reported prices ranged from Class III to $1.50 under. Week 23 in 2015 to 2018, saw discounts average roughly $3.75 under Class.
Some cheesemakers attempted to sell extra milk loads back onto the market at overages but no takers were reported. The wide price spread between the blocks and barrels “puts plant managers in a predicament of booking milk in the near term,” according to DMN.
“They reported recent production upticks, some at seven-day workweeks, but question how long that will last.”
Western cheese makers have mixed views on demand. Specialty and value-added cheeses have strong buyer interest and overall domestic retail demand is steady. However, shifts in consumer preferences from processed to natural cheeses continues to pressure barrel prices versus blocks. The spread is also creating challenges for Western barrel makers to purchase affordable milk.
A few contacts report that some discounted milk is available at $2 to $4 under Class but they are competing with butter powder plants for the milk. DMN says “Higher prices are creating headwinds for block producers, as buyers shy away from purchases at prices at or above $1.70. Adding to the challenge are the ongoing trade issues with our primary trade partners.” “International cheese demand seemingly ebbs and flows with the perception of whether trade talks are going well or not.” Cheese output is steady but cheese stocks are heavy, though end users say they are not getting inundated with offers.
FC Stone’s Dave Kurzawski said the “tighter than expected milk supplies” are “the main underling factor for the market” in the June 10 Dairy Radio Now broadcast. He sees 2019 milk output as only being up 0.2% from 2018.
Butter closed the week at $2.3975, up 3 3/4-cents, three-quarter cents above a year ago, and a penny shy of the year’s high on May 27. 9 cars sold on the week.
Central region butter makers are still taking on cream while it remains financially viable. Expectations lean to a tighter fall season than in previous years. The Dairy Products report’s production decreases “symbolize near-future trends,” according to some. Others warn that an increasing amount of imported milkfat will keep butter markets in check. Butter market tones are steady but some traders expect 2019 will present “a new, higher ceiling,” says DMN.
Western butter output is active with schedules booked from day to day. Cream inventories are tightening but still available to satisfy butter makers.
Grade A nonfat dry milk closed Friday at $1.0550 per pound, unchanged on the week but 25 cents above a year ago with 8 cars changing hands.
Spot dry whey saw a Friday finish at 36 1/2-cents per pound, up 1 1/4-cents on the week but 4 3/4-cents below a year ago. Only 2 cars were sold on the week.
April’s milk feed price ratio inched fractionally lower, according to the latest Ag Prices report. The April ratio was 2.11, down from 2.14 in March but up from 1.89 in April 2018. The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. One pound of milk today purchases 2.11 pounds of dairy feed containing that blend.
The U.S. All-Milk price averaged $17.70 per cwt., up 20 cents from March and $2.00 above April 2018.
The national corn price averaged $3.52 per bushel, down 9 cents from March and 6 cents per bushel below April 2018. Soybeans averaged $8.28 per bushel, down 24 cents from March and $1.57 per bushel below a year ago. Alfalfa hay averaged $199 per ton, up $15 from March and $16 per ton above a year ago.
The April cull price for beef and dairy combined averaged $61.30 per cwt., down $1.50 from March, $6.20 below April 2018 and $10.30 below the 2011 base average of $71.60 per cwt.
The April milk-over-feed margin increased 11 cents to $8.96 per cwt., according to the Daily Dairy Report, but “May’s margins will not be as favorable.” The DDR warns; “Feed prices soared in May and milk prices have leveled out. The optimum time to plant corn has long passed and soils remain saturated. The year ending in April was the wettest 12-month period in the U.S. on record.”
The Agriculture Department’s latest Crop Progress report shows 67% of U.S. corn is in the ground, as of the week ending June 2, up from 58% the previous week, but down 29% from a year ago and 29% behind the five year average. 46% of the corn has emerged, up from 32% the previous week but 38% behind a year ago and 38% behind the five year average.
Farm Journal’s AgWeb reports that a record level, 31 million acres of corn, had yet to be planted, as of June 2.
Farmers have 39% of the soybeans are in the ground, up from 29% the previous week, 47% behind a year ago, and 40% below the five year average. 19% have emerged, down from 65% a year ago and 37% behind the five year average.
The cotton crop is 71% planted, up from 57% the previous week, 3% behind a year ago, and 1% behind the five year average.
In politics, the National Milk Producers Federation weighed in on President Trump’s decision to assess Mexican imports a 5% tariff in an effort to pressure Mexico to do more to reduce the number illegal immigrants passing through the country.
A NMPF press release stated; “Senator Chuck Grassley is right: Border security issues are border security issues, and trade issues are trade issues. New tariffs against Mexico are unlikely to secure the border, but judging from reaction on Capitol Hill, they may very well jeopardize the chances of passing the USMCA, a White House priority and crucial for future agricultural prosperity.”
NMPF also commended the Environmental Protection Agency this week for issuing a final rule to codify its earlier interpretation that air emissions from manure are not reportable under the Emergency Planning and Community Right-To-Know Act. The action concludes a two-year battle.
NMPF and the International Dairy Foods Association (IDFA) praised a bipartisan bill to codify into law current milk varieties that schools may offer and reaffirm the long-standing requirement that milk served in schools be fully consistent with the most recent version of the Dietary Guidelines for Americans. The School Milk Nutrition Act of 2019 preserves current policy which allows schools to offer students low-fat and fat-free milk, including low-fat (1%) flavored milk.
Lee Mielke is a graduate of Brown Institute in Minneapolis, MN. He’s formerly the voice of the radio show “DairyLine,” and his column appears in agricultural papers across the U.S. Contact him at email@example.com.