October Class III milk down 56 cents
The Agriculture Department announced the October Federal order Class III benchmark milk price at $15.53 per hundredweight (cwt.), down 56 cents from September, $1.16 below October 2017, and equates to $1.34 per gallon, down from $1.38 in September and $1.44 a year ago. The 10 month average is $14.72, down from $16.18 at this time a year ago and compares to $14.42 in 2016.
Late Friday morning Class III futures portended a November Class III at $14.81; December, $15.23; January, $15.17; February, $15.25; and March at $15.36.
October’s Class IV price is $15.01, up 20 cents from September, 16 cents above a year ago, and the highest Class IV since September 2017. Its 10-month average is $14.10, down from $15.44 a year ago and compares to 13.65 in 2016.
California’s final Class 4a and 4b milk prices were announced Thursday by the California Department of Food and Agriculture as the nation’s Number 1 milk producer became part of the Federal Milk Market Order system on November 1.
The October 4b cheese milk price is $15.43 per cwt., down 19 cents from September, 74 cents below a year ago, and 10 cents below the Federal order Class III price. The 10 month 4b average stands at $14.45, down from $15.33 a year ago and compares to $13.72 in 2016.
The 4a butter powder price is $14.49, up 40 cents from September, 2 cents below a year ago, and the highest 4a since October 2017. Its 10 month average is at $13.66, down from $15.24 a year ago and compares to $13.25 in 2016.
Matt Gould, analyst and editor of the Dairy and Food Market Analyst newsletter, said in the November 5 Dairy Radio Now broadcast that while 2018 is the fourth year in a row of poor farm level milk prices, there are some positives; strong domestic demand for cheese and butter plus global dairy demand is “robust.”
“It’s not an issue of demand,” he explained, “It’s an issue of, can we access that demand.” The trade war with China and the tariff spat with Mexico has been the driver of low prices this year, he said, and the silver lining might be a repeal by President Trump of his tariff spat with Mexico as “That would be supportive.”
When asked about pending new trade agreements, Gould said such agreements with Japan, the Philippines, and the United Kingdom once they do Brexit, would be beneficial as they are large dairy markets.
“The tailwinds of the dairy industry are global population growth and rising per capita consumption by those that can afford dairy,” he concluded, “So the long term outlook is certainly positive.”
The USDA’s latest Dairy Products report shows more milk moved to the vat and less to churns and driers. September cheese output hit 1.06 billion pounds, down 2 percent from August but 3.1 percent above September 2017. Year-to-date output hit 9.63 billion pounds, up 2.5 percent from a year ago. September was the 66th consecutive month output exceeded that of a year ago.
Wisconsin vats contributed 280.5 million pounds, down 0.8 percent from August but 2.0 percent above a year ago. California produced 205.5 million pounds, down 2.7 percent from August but 5.9 percent above a year ago. Idaho provided 84.9 million pounds, up 10.5 percent from August and 5.4 percent above a year ago. Minnesota, with 59.1 million pounds, was down 3.6 percent from August but 5.9 percent above a year ago. New Mexico produced just under 72 million pounds, down 4.5 from August but 18.9 percent above a year ago.
Italian cheese totaled 451.2 million pounds, down 1.1 percent from August but 4.3 percent above a year ago. Year to date (YTD) Italian is at 4.1 billion pounds, up 2.8 percent from a year ago. Mozzarella, at 357.1 million pounds, was up 7.5 percent from a year ago, with YTD at 3.2 billion pounds, up 3.8 percent.
American type cheese totaled 419.4 million pounds, down 1.7 percent from August but 3.9 percent above a year ago, with YTD at 3.88 billion pounds, up 2.5 percent. Cheddar, the cheese traded at the CME, totaled 293 million pounds, down 10.6 million pounds or 3.5 percent from August but 0.4 percent above a year ago, with YTD output at 2.8 billion pounds, up 0.6 percent.
U.S. churns produced 134.4 million pounds of butter, up 0.3 percent from August but 0.1 percent below a year ago. YTD is at 1.4 billion pounds, up 3.0 percent.
California butter output totaled 43.7 million pounds, up 5.3 percent from August and 21.0 percent above a year ago. Pennsylvania output fell to 4.6 million pounds, down 17.0 percent from August and 28.0 percent below a year ago.
Yogurt output, at 371.4 million pounds, was down 5.6 percent from a year ago, with YTD at 3.36 billion pounds, down 2.4 percent.
Dry whey totaled 71.3 million pounds, down 21.9 percent, with YTD at 771.9 million pounds, down 2.1 percent. Dry whey for human consumption totaled 70.1 million pounds, down 9.7 percent from August and down 21.7 percent from a year ago. Dry whey stocks totaled 67.5 million pounds, down 5.1 percent from August and a whopping 36.5 percent below those a year ago.
Nonfat dry milk totaled 106.3 million pounds, down 13.2 percent from August and 21.0 percent below a year ago. YTD output stands at 1.3 billion pounds, down 3.2 percent. Stocks fell to 262.1 million pounds, down 19 million pounds or 6.7 percent from August and 58.7 million pounds or 18.3 percent below 2017.
Skim milk powder totaled 48.7 million pounds, up 2.4 percent from August and a hefty 67.3 percent above a year ago. YTD skim is at 428.0 million pounds, up 3.8 percent from a year ago.
Cash dairy prices started November looking for direction. The Cheddar blocks fell to $1.4550 per pound Thursday, lowest level since June 25, 2018, but closed Friday at $1.4575, down 5 3/4-cents on the week, 25 3/4-cents below a year ago, and 29 cents lower than they were October 1.
The barrels jumped 8 1/4-cents Wednesday, climbed to $1.3750 Thursday, but closed Friday at $1.34, 9 cents higher on the week, 37 1/2-cents below a year ago, 8 cents lower on the month, and 11 3/4-cents below the blocks. The spread is closer to the normal 3 to 5 cents but is still too high. Lots of cheese came to Chicago with 14 cars of block trading on the week, 82 on the month, and 23 cars of barrel; 183 on the month.
The spread had seen 31 straight trading days at 20 cents or more and FC Stone says the excess milk continues to move into barrels and invariably many of those barrels continue to find their way to the exchange.
Dairy Market News says “Choppy cheese markets continue to permeate the narrative in the Midwest. However, there was a sign of positivity midweek, as CME barrel prices jumped up to over $1.30 for the first time since mid-October.” Specialty cheese producers suggest demand is near peak ahead of the fall holidays. Mozzarella and provolone producers also suggest demand is steady to up. Supplies are mixed but freshly produced cheese is moving well.
Western cheese production is “within the norm of what the industry anticipated,” says DMN. With ample manufacturing milk available, cheese output is ongoing. Cheese stocks are above previous year levels, according to some but overall inventories seem mixed. Export sales to the Middle East are up.
Cash butter shot up mid-week and closed Friday at $2.30 per pound, up 6 3/4-cents on the week, 6 3/4-cents above a year ago, and a quarter-cent higher than October 1. There were 28 sales reported on the week and 173 on the month.
Cream supplies have diminished, says DMN. Bulk butter remains available but some contacts suggest supplies may be tight by the end of the year. Cream prices have trended up sharply for two consecutive weeks. Analysts suggest if butter is to reach the $2.40 range, it will have to be soon as the holidays approach. They also suggest imports from Oceania may have a larger effect in 2019 than they have in recent years.
Western butter markets are steady ahead of the holiday baking season. Cream is in adequate supply. After a flurry of activity to get butter on hand, retail orders have backed off a little as marketers wait to see how the market responds. Butter makers are eager for stores to kick start their holiday butter promotions and make additional restock orders. Inventories are heavy but getting pulled lower as one would expect during the season. Some western butter makers report inquiries from other parts of the country for bulk butter, but truck and driver availability makes this challenging.
Grade A nonfat dry milk closed Friday at 90 cents per pound, up 3 1/4-cents on the week, up 2 cents on the month, and 18 cents above a year ago, with 30 cars finding new homes on the week and 54 on the month.
Dry whey closed at a 12 week low of 44 1/2-cents per pound, down 2 1/2-cents on the week and 10 1/2-cents lower on the month, with 26 sales reported on the week and 56 on the month.
A higher U.S. All Milk price average nudged the September milk feed price ratio a little higher, highest level since January 2018, though feed prices crept higher as well. The Agriculture Department’s latest Ag Prices report shows the September ratio at 2.10, up from 2.03 in August but down from 2.46 in September 2017.
The U.S. All-Milk price averaged $16.70 per cwt., up 80 cents from August but $1.20 below September 2017. New Mexico again had the low end at $15.00, followed by Michigan at $15.40. California was at $15.97, up 52 cents from August; and Wisconsin was at $17.40, up $1.20 from August.
The national average corn price in September averaged $3.39 per bushel, up 3 cents from August and 12 cents per bushel above September 2017. Soybeans averaged $8.77 per bushel, up 18 cents from August but 58 cents below a year ago. Alfalfa hay averaged $180 per ton, up $3 from August and $31 per ton above a year ago.
The U.S. milk-over-feed margin gained 84 cents from August, hitting $8.26 per cwt. based on the dairy Margin Protection Program calculation. While that is the highest margin of the year, the Daily Dairy Report points out that it’s still lower than any monthly margin in 2017 and $1.73 less than a year ago.
Looking at the cow side of the ledger; the September cull price for beef and dairy combined averaged $60.80 per cwt., down $2.20 from August, $9.10 below September 2017 and $10.80 below the 2011 base average of $71.60 per cwt.
Milk cows averaged $1,230 per head in October, down $90.00 per head from July, and $380 below October 2017. California cows averaged $1200 per head, down $100 from July and $400 below a year ago. Wisconsin cows averaged $1180 per head, down $70.00 July and down $430 per head in October 2017.
USDA’s latest Crop Progress report shows 63 percent of US corn was harvested as of the week of October 28, up from 49 percent the previous week and 52 percent that week a year ago, and compares to 63 percent for the latest five-year average.
Soybeans are at 72 percent harvested, up from 53 percent the previous week but compares to 81 percent a year ago and 81 percent in the five year average.
Cotton is at 44 percent, up from 39 percent the previous week and compares to 45 percent a year ago, and 43 percent for the average, with just 35 percent rated good to excellent, compared to 55 percent a year ago.
Cooperatives Working Together (CWT) members accepted 11 offers of export assistance to help capture contracts to sell 604,067 pounds of Cheddar and Monterey Jack cheese, 275,58 pounds of butter and 1.17 million pounds of whole milk powder. The product is contracted for delivery in Asia, North Africa and South America through April 2019.
The National Milk Producers Federation (NMPF) at their annual meeting this week in Phoenix called on President Trump to “recognize the significant economic losses milk producers are suffering because of the administration’s implementation of Section 232 and 301 tariffs.”
A NMPF press release stated “The duties have resulted in retaliatory tariffs against U.S. dairy exports, particularly in Mexico and China and continue to cause severe economic harm to U.S. dairy farmers.”
NMPF’s board called for aid commensurate to that damage, stating; “In light of the administration’s decision to establish a program to compensate farmers for the damage caused by these retaliatory tariffs, we call on the president to direct the USDA to provide assistance to dairy producers at a level that reflects the damage they have caused.” Farmer losses will exceed $1 billion this year, according to four separate estimates cited by NMPF.
NMPF also called on the U.S. Food and Drug Administration (FDA) to “end deceptive labeling of fake-dairy products,” citing data that NMPF said “shows consumers are being misled about the nutritional merits of cow’s milk versus plant-based imitators.”
NMPF President and CEO Jim Mulhern said “The plant-based food and beverage industry has used FDA inaction as a cover to sell consumers a product that is heavily processed to look like real milk, but doesn’t deliver what matters most: a consistent, high-quality package of nutrients.”
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.