Higher Milk Prices Arrive Just in Time for June Dairy Month
Published: Friday, June 11, 2021
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
U.S. milk prices are making June Dairy Month a little happier for farmers. The Agriculture Department announced the May federal order Class III benchmark milk price at $18.96 per hundredweight, up $1.29 from April, $6.82 above May 2020 and the highest Class III since November 2020. The five-month average is at $16.91, up from $15.10 at this time a year ago and $15.05 in 2019.
Last Friday morning Class III futures had the June price at $17.29; July, $17.82; August, $18.33; September, $18.73; October, $18.86; November, $18.75; and December at $18.45.
The May Class IV price is $16.16 per hundredweight, up 74 cents from April, $5.49 above a year ago, and the highest since February 2020. Its average now stands at $14.54, up from $13.96 a year ago, and compares to $15.81 in 2019.
A jump in the April all milk price helped offset increased feed costs to pause the slide in the U.S. milk feed ratio. The USDA's latest Ag Prices report shows April at 1.75, same as March, but down from 1.85 in April 2020.
The index is based on the current milk price in relationship to feed prices for a ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. In other words, one pound of milk would purchase 1.75 pounds of dairy feed of that blend.
The U.S. all milk price averaged $18.40 per hundredweight, up $1 from March and $4 above the March 2020 average. California's all milk price climbed to $16.70, up 90 cents from March and $2.80 above a year ago. Wisconsin's, at $18.80, was up $1.30 from March and $4 above a year ago.
Unfortunately, the national average corn price hit $5.31 per bushel, up 42 cents per bushel from March and a pricey $2.02 per bushel above April 2020.
Soybeans averaged $13.90 per bushel, up 70 cents from March and a whopping $5.55 per bushel above April 2020.
Alfalfa hay averaged $187 per ton, up $6 from March and $7 above a year ago.
Looking at the cow side of the ledger, the April cull price for beef and dairy combined averaged $71.10 per hundredweight, up $4 from March, $7.10 above April 2020, and 50 cents below the 2011 base average of $71.60 per hundredweight.
Milk cow replacements averaged $1,310 per head in April, down $50 from January but $60 per head above April 2020. Cows averaged $1,400 per head in California, up $50 from January and $100 per head above a year ago. Wisconsin's average, at $1,490 per head, was up $20 from January and $240 per head above April 2020.
In the week ending May 22, 53,500 dairy cows were sent to slaughter, down 1,900 from the previous week and 2,200, or 3.9 percent, below that week a year ago.
International dairy values continue to slip. Last week's Global Dairy Trade auction saw the weighted average down .9 percent, following a .2 percent slip on May 18 and .7 percent loss on May 4. While the slippages are small, due to China remaining in the market as well as stepped-up trade from other regions, it was the fourth consecutive event to lose ground. Traders brought 50.3 million pounds of product to market, up from 46.6 million in the last event. This was the first auction of New Zealand's new market year.
Buttermilk powder led the losses, down 7.5 percent, after not trading in the last event. Butter was down 5.4 percent, after dropping 2.2 percent. Anhydrous milkfat was off .8 percent, after inching .1 percent lower. Lactose was down 1.6 percent, following a rise of 1.6 percent last time. Skim milk powder and whole milk powder were both down .5 percent, after skim powder inched up .7 percent last time and whole milk powder was off .2 percent. GDT Cheddar was up .5 percent, following a 1 percent rise last time.
StoneX Group says the GDT 80 percent butterfat butter price equates to $2.0757 per pound U.S., down 10.6 cents, and compares to CME butter, which closed last Friday at $1.7750. GDT Cheddar, at $1.9615, was up fractionally, and compares to last Friday's CME block Cheddar at $1.50. GDT skim milk powder averaged $1.5491 per pound, down from $1.5634, and whole milk powder averaged $1.8426 per pound, down from $1.87. CME Grade A nonfat dry milk closed last Friday at $1.26.
Higher Shipping Costs
We talked about the congestion at U.S. ports and truck shortages within the U.S. and what they mean to the dairy industry in the June 7 Dairy Radio Now broadcast with Matt Gould, editor of the Dairy and Food Market Analyst.
Gould said that shipping costs from California to the Midwest have surged as have the costs from the middle of the country to Mexico. Securing a ship at West Coast ports has also become more difficult in the last six months, he said.
The port congestion started in November last year, according to Gould, where ships had to wait to be unloaded in southern California. That congestion peaked in February but has since slowly improved, but the situation isn't over yet.
He blamed the congestion on "people staying home and spending their money on things, but those things have to be made somewhere, typically overseas, so that demand filled the ships."
The port improvement is much needed, says Gould, because "we have booming supplies of cheese and we have booming supplies of milk. At this point we're very dependent on those export markets because we have to balance our market by shipping products overseas."
CME block Cheddar closed the Memorial Day holiday shortened week at $1.50 per pound, as traders anticipated the afternoon's April Dairy Products report. The blocks were down for the fifth week in a row, losing 30 cents in that time period, falling to their lowest level since May 12, 2020, and were $1.0525 below a year ago when they gained 32.25 cents, hitting $2.5525.
The barrels finished at $1.6150, up 4.50 cents on the week, 74.50 cents below a year ago when they shot up 33.75 cents to $2.36, and are an inverted 11.50 cents above the blocks. Thirty-three cars of block were sold on the week and 20 of barrel.
The lagging NDPSR values were well above current CME values and the dry whey price saw its first decline since Christmas Week 2020.
Midwest cheese producers are busy, reports Dairy Market News, and "milk availability is evidence that peak flush season has yet to be achieved. Cool weather continued to put a surplus of milk into cheese vats. DMN said, "It is getting to a point where milk handlers are aggressively seeking out destinations for notable volumes of milk. Contacts are hopeful that heat in the forecast will begin to stanch the current flow of milk."
Western cheese demand is steady in both retail and food service markets. Milk is readily available, allowing producers to run full schedules. However, cheese output is reportedly outpacing demand. Market tones are unsteady though contacts believe the lower prices should lead to increased interest from international buyers, but port congestion and shipping issues are continuing to cause delays.
Cash butter finished last Friday at $1.7750 per pound, down 3.50 cents on the week and 15 cents below a year ago when it gained 26.50 cents and was trading at $1.9250. There 17 carloads that found new homes on the week.
Central butter contacts reported continued strength in food service demand and suggest overall demand has grown closer to pre-COVID levels. There was plenty of cream following the holiday but not as hearty as expected. Some contacts expect tightness in upcoming weeks. Market tones are quiet with some potential bullish undertones, says DMN.
Western cream loosened this week as some processors paused operations over the holiday but limited tanker availability curtailed movement out of the region. Some expect cream to tighten in the coming days, but the current supply is adequate. Butter output is steady to seasonally lower though Southwest plants are growing inventories to meet fall demand. Retail sales are lower but steady. Food service demand is healthy but cautious as customers are placing smaller, more frequent orders. Some contacts report diminished export interest.
StoneX said, "While butter does not feel bullish these days, the stocks/use ratio for the U.S. is pointing toward $2 butter in the near future."
Grade A nonfat dry milk closed last Friday at $1.26 per pound, down 3.25 cents on the week but still 28.25 cents above a year ago. Ten sales were reported.
CME dry whey fell to 60 cents per pound last Tuesday, lowest since March 16, but closed last Friday at 60.25, 2 cents lower on the week but 25.75 cents above a year ago, on two trades.
Class I demand varies from flat to lower, as schools begin to prep for summer break, says DMN. Cheesemakers were taking extra spot loads at pre-holiday discounts and spot milk prices ranged from $6 to $4.50 under Class III in the upper Midwest.
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