Since peaking in early November, cheese prices have been falling, dropping 28 cents a pound during that period.
The cheese market peaked in mid-December and then dropped about 10 cents per pound. Of course, the holiday entertaining season is now over, so cheese demand in the next few months will be lackluster.
Added to these seasonal doldrums, the dollar is still strong, with the value of the euro, and Australian and New Zealand dollars all falling by 2 to 3 percent in December relative to our dollar.
Butter and skim-milk-powder prices were down 1 percent in the last month, while the cheese price was up 1.9 percent and dry whey up 4.8 percent.
Dairy exports have improved, in part because milk production is dropping in Europe, Australia and New Zealand, probably in response to low prices.
Butter and skim-milk-powder futures are stronger for most of 2017, no doubt in response to decreasing production by the other dairy exporters.
Mexico continues to be our largest dairy customer, although its purchases through October were 7 percent lower than 2015.
Canada is our third-largest customer, and the value of Canadian purchases was up 11 percent through October.
Export tonnage is greater than last year for almost all dairy product categories, although the lower prices mean revenue is down.
Class III and IV prices are expected to be higher during all of 2017 than in 2016. My estimated average for the Pennsylvania all-milk price for 2017 is $3.38 higher than the average for 2016.
Nationally, California continues to experience extreme drought in the Central Valley, and the Southeast has drought as well.
The long-term issues depressing dairy prices are the strong dollar, the Russian embargo on EU dairy imports and to some extent the struggling Chinese economy.
Overall, the outlook for milk prices for 2017 is much better. Since feed prices will remain low, there should be a marked improvement in dairy profitability this year.
Corn and soybean meal prices are essentially the same as last month, with the corn price down 0.4 percent and soybean meal down 1.7 percent.
South American corn and soybean crops are expected to have record yields and production. U.S. exports of corn and beans are large despite the strong dollar.
Income Over Feed Costs
Penn State’s measure of income over feed costs rose by 5 percent in December from its November value on higher milk prices and lower feed prices.
December’s income over feed costs was $1.01 higher than November’s and the highest value of 2016.
Income over feed costs reflects daily gross milk income less feed costs for an average cow producing 65 pounds of milk per day.
The milk margin is the estimated amount of the Pennsylvania all-milk price that remains after the feed costs per hundredweight are paid.
Like income over feed costs, this measure shows that the December Pennsylvania milk margin was 5 percent higher than in November.
The Pennsylvania drought continues, with much of the state and the region still abnormally dry.
The latest U.S. milk production report showed November production up 2.4 percent from a year earlier. This is inconsistent with the current dairy economics environment, since the export market is tight and the strong dollar is limiting exports.
Luckily, the other dairy exporters are decreasing milk production. Pennsylvania’s milk production in November increased by 2.5 percent over the 2015 level. Cow numbers grew slightly from October and increased by only 0.18 percent over November of last year.
Although this increase is small, more milk production nationally will keep higher milk prices in check even with recovering dairy exports.
Source: LancasterFarming
Link: http://www.lancasterfarming.com/farming/dairy/class-iiii-iv-milk-prices-up-in-december/article_63db0647-aa80-5001-9562-614b1fd836ea.html
