The butter price rose 7 cents to $2.11, an increase that was seen for dairy product prices overall.
Cheese prices have risen 0.35 percent since last month to $1.45 for the nearby contract. Nonfat dry milk is up 3.4 percent, and dry whey is up 8.7 percent.
Cheese prices are apparently being buoyed by a rise in people snacking on cheese. The hectic “life on the go” has made easy-to-eat snacks especially popular, while some young people want to eat something healthier than sodas and chips.
The high butter prices, along with the strong dollar, have led to a lot of butter imports. For the first four months of 2016, butter imports were up 53 percent by quantity and 48 percent by value from last year.
Ordinarily, butter stocks are accumulated in the spring and drawn down in the winter. April butter stocks are about 14 percent higher than last year.
California’s drought continues and its butter production is down, but other states in the West and Midwest have expanded production.
The European Union’s milk production has risen since quotas ended last year, with February production up 7 percent adjusted for the leap year.
The loss of the Russian market has disrupted European dairy exports, inducing such oddities as Lithuania expanding cheese exports to the United States by 30 times since February 2014.
U.S. milk production in April was up 1.2 percent over last April, the third consecutive month of year-over-year increases greater than 1 percent.
With the exploding milk production in the EU and the strong dollar, U.S. export opportunities are limited.
The Australian dollar and the euro have fallen relative to our dollar, and the New Zealand dollar is up 2.2 percent since a month ago.
Cheese futures are 11 percent higher than current prices for contracts maturing after September. The dry product futures are also higher for the second half of the year, especially nonfat dry milk powder, which is 26 percent higher by year’s end.
These prices seem to anticipate a weaker dollar later in the year, which would greatly help the competitiveness of U.S. dairy exports.
The latest futures market for euros versus dollars does show a weaker dollar, with a stronger euro over time.
The May Class III price of $12.76 per hundredweight is 6.4 percent lower than April, while Class IV is up 3.25 percent at $13.09.
Both Class III and Class IV prices are expected to rise over the remainder of 2016, with Class IV being the higher of the two prices.
My estimates for the Pennsylvania all-milk price for the rest of 2016 show a significant rise as the year progresses, but still averaging 83 cents below the 2015 average.
As is typical, the butter price is expected to rise later this year until inventories fall near Thanksgiving and Christmas.
Although the cheese market is weak, the outlook is positive given the higher prices of cheese futures in the autumn. Cheese inventories are also high and import levels were 23 percent above last year for January through April.
As usual, the issues hanging over the dairy economy are the strong dollar, the Russian embargo on dairy imports and China’s economic doldrums.
Mexico, Canada and Latin America generally are strong customers, but sales to other countries are lagging. Overall, the outlook for 2016 milk prices remains weak.
Corn and soybean meal markets are up 12 and 21 percent in the past month, although soybean prices are up only 10 percent.
Weather is challenging the Argentinian soybean crop, and Brazil faces a multitude of political issues as well as the weather.
Nevertheless, world inventories of feed grains and oilseeds are still high, and despite the price rallies, I don’t anticipate feed prices to rise much more when there are a lot of bins full of corn and beans around the world.
Income Over Feed Costs
Penn State’s measure of income over feed costs fell by 3.45 percent from April to May as somewhat higher feed prices combined with slightly lower milk prices.
April’s income over feed cost is somewhat lower than last year’s value, but the May value of $6.13 per cow per day is a challenging margin.
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 feed costs are paid. Like income over feed costs, this measure also shows that May was 3.45 percent lower than April.
Since feed prices are expected to stay reasonable, the moderate increases in milk prices in the futures markets for the second half of 2016 should increase income over feed costs.
The latest report showed April milk production up 1.2 percent from a year earlier. This increase is problematic in the current dairy environment since the export markets are tight given the strength of the dollar.
Similarly, cow numbers increased by 0.16 percent from last year. Although these increases are small, more milk production nationally will keep milk prices from rising.
Cheese prices have risen 0.35 percent since last month to $1.45 for the nearby contract. Nonfat dry milk is up 3.4 percent, and dry whey is up 8.7 percent.
Cheese prices are apparently being buoyed by a rise in people snacking on cheese. The hectic “life on the go” has made easy-to-eat snacks especially popular, while some young people want to eat something healthier than sodas and chips.
The high butter prices, along with the strong dollar, have led to a lot of butter imports. For the first four months of 2016, butter imports were up 53 percent by quantity and 48 percent by value from last year.
Ordinarily, butter stocks are accumulated in the spring and drawn down in the winter. April butter stocks are about 14 percent higher than last year.
California’s drought continues and its butter production is down, but other states in the West and Midwest have expanded production.
The European Union’s milk production has risen since quotas ended last year, with February production up 7 percent adjusted for the leap year.
The loss of the Russian market has disrupted European dairy exports, inducing such oddities as Lithuania expanding cheese exports to the United States by 30 times since February 2014.
U.S. milk production in April was up 1.2 percent over last April, the third consecutive month of year-over-year increases greater than 1 percent.
With the exploding milk production in the EU and the strong dollar, U.S. export opportunities are limited.
The Australian dollar and the euro have fallen relative to our dollar, and the New Zealand dollar is up 2.2 percent since a month ago.
Cheese futures are 11 percent higher than current prices for contracts maturing after September. The dry product futures are also higher for the second half of the year, especially nonfat dry milk powder, which is 26 percent higher by year’s end.
These prices seem to anticipate a weaker dollar later in the year, which would greatly help the competitiveness of U.S. dairy exports.
The latest futures market for euros versus dollars does show a weaker dollar, with a stronger euro over time.
The May Class III price of $12.76 per hundredweight is 6.4 percent lower than April, while Class IV is up 3.25 percent at $13.09.
Both Class III and Class IV prices are expected to rise over the remainder of 2016, with Class IV being the higher of the two prices.
My estimates for the Pennsylvania all-milk price for the rest of 2016 show a significant rise as the year progresses, but still averaging 83 cents below the 2015 average.
As is typical, the butter price is expected to rise later this year until inventories fall near Thanksgiving and Christmas.
Although the cheese market is weak, the outlook is positive given the higher prices of cheese futures in the autumn. Cheese inventories are also high and import levels were 23 percent above last year for January through April.
As usual, the issues hanging over the dairy economy are the strong dollar, the Russian embargo on dairy imports and China’s economic doldrums.
Mexico, Canada and Latin America generally are strong customers, but sales to other countries are lagging. Overall, the outlook for 2016 milk prices remains weak.
Corn and soybean meal markets are up 12 and 21 percent in the past month, although soybean prices are up only 10 percent.
Weather is challenging the Argentinian soybean crop, and Brazil faces a multitude of political issues as well as the weather.
Nevertheless, world inventories of feed grains and oilseeds are still high, and despite the price rallies, I don’t anticipate feed prices to rise much more when there are a lot of bins full of corn and beans around the world.
Income Over Feed Costs
Penn State’s measure of income over feed costs fell by 3.45 percent from April to May as somewhat higher feed prices combined with slightly lower milk prices.
April’s income over feed cost is somewhat lower than last year’s value, but the May value of $6.13 per cow per day is a challenging margin.
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 feed costs are paid. Like income over feed costs, this measure also shows that May was 3.45 percent lower than April.
Since feed prices are expected to stay reasonable, the moderate increases in milk prices in the futures markets for the second half of 2016 should increase income over feed costs.
The latest report showed April milk production up 1.2 percent from a year earlier. This increase is problematic in the current dairy environment since the export markets are tight given the strength of the dollar.
Similarly, cow numbers increased by 0.16 percent from last year. Although these increases are small, more milk production nationally will keep milk prices from rising.
