Cheese prices moved back to $2 by the end of the week as buyers stepped back in to purchase supply for filling orders. This allows for milk futures to remain steady to higher in closer months as the price outlook improves.
Later contracts continue to increase as the price discount is slowly removed. Cheese production is slower as milk receipts decline. Lower components keep manufacturers adding condensed skim milk and non-fat dry milk to vats to boost cheese production.
Domestic demand remains strong keeping buyers stepping in when prices decline in order to expand ownership for upcoming demand. Export demand is slowing primarily for butter due to exceptionally high price in relationship to world price.
For the week ending Aug. 1, butter price declined each day of the week falling to $2.40, down 19 cents with 26 loads traded. Price has now declined 22 cents from the peak on July 24.
Cheddar blocks closed at $2, up 3 cents with 10 loads traded, barrels increased 4.75 cents to $2 with six loads traded and Grade A non-fat dry milk closed at $1.65, down 2.50 cents with no loads traded.
U.S. Department of Agriculture announced the July Class II price at $24.41, up 47 cents; Class III price was $21.60, up 24 cents; and Class IV was announced at $23.78, up 65 cents.
Slaughter declined
Dairy cattle slaughter in June totaled 199,000 head, down 10,000 head from the previous month and the lowest slaughter for the month of June since 2008 and also the lowest slaughter for any month since June 2008.
Slaughter was down 21,000 head from last year. Year-to-date slaughter is down 11.2 percent than the same period of time last year.
USDA’s bi-annual cattle inventory report showed dairy cow numbers at 9.27 million head, up one percent from July 2012. There was no report in 2013 due to budget sequestering.
Replacement heifers totaled 3.9 million head, down 5 percent from July 2012. This puts the percentage of replacement heifers to cows at 42.1 percent. It is not unusual to see a decline from January, but it is the lowest replacement to cow ratio since 2006.
Milk to feed ratio improves
Farm profitability remains strong and looks a bit better this month than last. The milk to feed ratio in July improved to a ratio of 2.44. This compares with a June ratio of 2.20 and ratio of 1.53 a year ago.
Feed prices declined while milk price increased allowing for the better ratio. Corn price declined 69 cents per bushel to $3.80. Soybean price fell 1.70 per bushel to $12.70. Alfalfa hay price declined $6 per ton to $216. The all-milk price increased 20 cents per cwt reaching $23.40.
This puts income over feed cost at $13.81, $1.11 above June and the highest since April.
Butter imports jump
Quota imports of cheese for the first half of the year totaled 73.9 million pounds, unchanged from last year according to the Foreign Agricultural Service.
Quota imports of butter for the first half of the year were up 73.0 percent from last year at 8.14 million pounds.
AMS prices
For the week ending July 26, Agricultural Marketing Service (AMS) prices were mixed. Prices for 40-pound cheddar blocks declined 0.1 cents to $2.01. The price for 500-pound barrels, adjusted to 38 percent moisture, averaged $2.06, up 2.5 cents. USDA grade AA butter averaged $2.41 for the week, up 4.2 cents.
Non-fat dry milk averaged $1.84, down 3.2 cents. Dry whey averaged 68.9 cents, up 0.2 cents.
Source: Agriview
