The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Federal Order benchmark milk price saw its seventh consecutive decline. The January Class III milk price is $13.72 per hundredweight, down 72 cents from December, $2.46 below January 2015 and the lowest Class III price since January 2011. It equates to about $1.18 per gallon, down 6 cents from December and 21 cents below a year ago. It is also 64 cents above California's comparable Class 4b price, the smallest gap since August 2015.
And, while "Punxsutawney Phil" failed to see his shadow, meaning there'll be an early spring, that's not the case for the dairy world. While Class III futures have strengthened some, they still portend some tough times ahead. The February contract was trading last Friday morning at $13.84; March, $13.97; April, $14.00; May, $14.23; and June at $14.62. The peak was only $15.86 in October.
The January Class IV price is $13.31, down $2.21 from December and the lowest Class IV price since August 2015, but is 8 cents above a year ago.
Just as the political aspirations of some ended last Monday night in Iowa, so went hopes for strength in global dairy prices. The third Global Dairy Trade (GDT) auction of 2016 added to the losses of the first one. The weighted average for all products offered last Tuesday plunged 7.4 percent, the largest decline since the Nov. 17, 2015 event, and follows a 1.4 percent descent on Jan. 19.
Not one increase was registered. The losses were led by whole milk powder, down 10.4 percent, following a .5 percent slippage last time. Butter was second in line, down 8.3 percent, after dropping 5.9 percent on Jan. 19. Butter milk powder was down 6.7 percent after gaining 2.7 percent last time, and anhydrous milkfat followed close behind, down 6.6 percent, after gaining 2.4 percent last time. Cheddar cheese was down 4.2 percent, after slipping 3.4 percent last time, and rennet casein was down 3.7 percent, after dropping 7.8 percent last time. Lactose was next, down 2.6 percent, following a 1.7 percent loss last time, and skim milk powder was off 2.2 percent, after dropping 3.2 percent last time.
FC Stone reported the average GDT butter price equated to $1.3179 per pound U.S., down from $1.4341 in the Jan. 19 event. Contrast that to CME butter which plunged 12¼ cents last Monday but then rebounded some and closed last Friday at $2.17 per pound. GDT Cheddar cheese equated to $1.2731 per pound U.S., down from $1.3006 last time, and compares to last Friday's CME block Cheddar at $1.47. GDT skim milk powder, at 81.31 cents per pound U.S., is down from 83.23 cents per pound last time, and the whole milk powder average, at 88.53 cents per pound U.S., is down from 99.26 cents per pound in the last event and the lowest level since the Aug. 18, 2015 event. The CME Grade A nonfat dry milk price closed last Friday at 75 cents per pound.
Feed Costs Edge Upward
Higher feed costs and a lower All-Milk price ended four consecutive monthly gains on USDA's milk feed price ratio. The December ratio, at 2.27, is down from 2.42 in November, down from 2.29 in October, and compares to 2.40 in December 2014, according to USDA's latest Ag Prices report. The milk feed price ratio averaged 2.13 on the year, down from 2.54 in 2014, but compares to 1.75 in 2013 and 1.52 in 2012.
The index is based on the current milk price in relationship to feed prices for a dairy ration of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay, in other words, one pound of milk today purchases 2.27 pounds of dairy feed containing that blend.
The December U.S. average All-Milk price was $17.20 per hundredweight, down $1 from November and $3.20 below December 2014.
December corn, at $3.65 per bushel, was up 5 cents from November but down 14 cents from December 2014. Soybeans averaged $8.76 per bushel, up 8 cents from November, but and $1.54 per bushel below December 2014. Alfalfa hay averaged $150 per ton, unchanged from November, but $30 per ton below December 2014.
The report shows the December cull price for beef and dairy combined averaged only $74.80 per hundredweight, down $7.20 from November, $40.20 per hundredweight below December 2014, but compares to the 2011 base average of $71.60 per hundredweight.