The following is from Lee Mielke, author of a dairy market column known as «Mielke Market Weekly.»
The Agriculture Department announced the August Federal Order Class III benchmark milk price last Thursday at $22.25 per hundredweight, up 65 cents from July, $4.34 above August 2013, and equates to about $1.91 per gallon. There’s more to come next month as the September futures contract was trading last Friday morning at $24.25 before heading back down in its seasonal descent. The 2014 Class III average now stands at $22.49, up from $17.72 at this time a year ago and $16.23 in 2012.
Looking beyond September, the October contract was trading last Friday morning at $22.53; November, $20.41; and December, $19.37. That would result in a 2014 average of $22.21, up from $17.99 in 2013 and $17.44 in 2012.
The August Class IV price is record high $23.89 per hundredweight, up 11 cents from July and $4.82 above a year ago. The Class IV eight-month average now stands at $23.28, up from $18.37 a year ago and $14.95 in 2012.
The four-week, NDSPR-surveyed cheese price average used to calculate this month’s class prices was $2.1074 per pound, up 5.9 cents from July. Butter averaged $2.5206, up 17.3 cents. Nonfat dry milk averaged $1.7887, down 7.3 cents, and dry whey averaged 68.80 cents per pound, down fractionally.
Meanwhile, milk prices will remain strong for awhile, as cash cheese prices strengthened in the shortened Labor Day holiday week, a sixth week of gain while cash butter set a new record high. The 40-pound block Cheddar closed that Friday at $2.35 per pound, up 2 cents on the week and 54 cents above a year ago. The 500-pound Cheddar barrels moved higher last Tuesday, plunged 6¼ cents last Wednesday, inched up a half-cent last Thursday and another 2 cents last Friday to close at $2.3250 per pound, down 2 cents on the week but 52½ cents above a year ago. Only four cars of barrel traded hands on the week. The lagging NDPSR-surveyed U.S. average block price hit $2.1618, up 6.9 cents, and the barrels averaged $2.2403, up 5.8 cents.
The state of the Midwest cheese industry is similar to the previous week, according to Dairy Market News, notwithstanding the psychological dimension of having just completed the Labor Day holiday weekend. Most cheese plants are near full production and buyer demand is characterized as «hungry.»
As expected, with most cheese production schedules already so full before the holiday, little changed during the weekend. Milk supplies to cheese plants remained on schedule to maintain planned cheese production. Strong orders are keeping plants busy. In some cases, plants with any ability to handle slightly increased cheese production are diverting milk from nonfat dry milk production as a strategy to produce more cheese.
Western cheese production is strong. Increased milk supplies are being directed to cheese to meet demand. Domestic demand is good with retail orders steady to strong and institutional food service demand increasing as schools return. Export sales have slowed as U.S. prices are above international prices. Cheese stocks are tight for barrels. Blocks supplies are adequate for current demand.
Butter Hits Record Highs
Cash butter sustained last week’s rebound and then some after setting a new record high last Thursday at $2.84 per pound, only to add another half-cent last Friday and close at $2.8450 per pound, up 9 cents on the week and $1.4150 per pound above a year ago. Seventeen cars were sold on the week. NDPSR butter averaged $2.6682, up 13 cents.
Butter production in the Central region increased, reflecting additional milk and cream supplies becoming available throughout the holiday weekend, according to DMN. Domestic demand is keeping pace, despite the current high prices. Some buyers noted lead times for new orders are growing. The Dutch and GDT butter markets were bearish, leaving new export sales limited. Near-record U.S. prices are keeping many manufacturers from building butter stocks effectively for upcoming fourth quarter demand.
Western butter production is good, as some increased cream volumes became available over the holiday weekend. Butter producers are increasingly concentrating on filling retail orders for upcoming fall needs.
Cash Grade A nonfat dry milk closed Labor Day Week at $1.3325 per pound, up three-quarter cents on the week but still at a two-year low. Only one car was sold in the spot market. NDPSR powder averaged $1.7223, down 6.6 cents, and dry whey averaged 68.74 cents per pound, up 1.3 cents.
July 2014 milk production hit 16.4 billion pounds, according to USDA’s preliminary data, up 4 percent compared to a year ago. USDA’s latest Dairy Products report issued last Thursday shows where it went. Following a rare revision in last month’s report, July butter production was pegged at 136 million pounds, down 3 percent from June but 2.6 percent above July 2013.
Nonfat dry milk output for human consumption totaled 166 million pounds, up 12.1 percent from June and 42.7 percent above a year ago.
American type cheese output, at 378 million pounds, was up .9 percent from June and a whopping 9.5 percent above a year ago. Italian type, at 409 million pounds, was up .6 percent from June and 4.4 percent above a year ago. Total cheese output in July came to 956 million pounds, up 1.2 percent from June and 7 percent above a year ago.
Meanwhile, the challenge remains in fluid milk. USDA reports that 3.8 billion pounds of packaged fluid milk products are estimated to have been sold in the United States in June, down 2.2 percent from June 2013.
June sales of conventional products, at 3.58 billion pounds, were down 2.9 percent from a year ago; organic products, at 199 million pounds, were up 11.3 percent. Organic represented about 5.3 percent of total sales for the month.
Fluid Milk Sales Decline
January-June 2014 total packaged fluid milk sales, at 25.01 billion pounds, were down 2.5 percent from the same period a year earlier. Year-to-date sales of conventional products, at 23.77 billion pounds, were down 3.1 percent; organic products, at 1.24 billion pounds, were up 12.2 percent. Organic represented about 4.95 percent of total sales. The figures represent consumption of fluid milk products in Federal Milk Order marketing areas and California, which account for approximately 92 percent of total fluid milk sales in the U.S.
The world dairy market continues to pull away from the U.S. dairy market, or is it the other way around? At any rate, last Tuesday’s Global Dairy Trade auction fed the bears. The weighted average for all products plunged 6 percent, following the .6 percent decline Aug. 19, 8.4 percent loss Aug. 5, and 8.9 percent in session before that. All offered products were down. The price index has pretty much seen declines since reaching its high on Feb. 4.
The downfall last Tuesday was led by a 14.3 percent plunge in rennet casein, down just .8 percent in the last event, followed by buttermilk powder, down 12.9 percent, off 2.5 percent last time. Skim milk powder fell 9.5 percent, following a 6.5 percent fall in the last event. Anhydrous milkfat was down 5.8 percent, after jumping 3.6 percent last time. Butter was next, down 5.6 percent last Tuesday, following a 4.9 percent jump in the last event. Cheddar cheese followed, down 4.9 percent after a 7.9 percent drop last time, and whole milk powder was off 4.3 percent, following a 3.4 percent increase in the last event.
Source: Farmers Exchange