Class 3 Milk Price a Dollar Better Than Last Year, Highest in 2 Years
Published: Friday, July 12, 2019
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Agriculture Department announced the June Federal order benchmark milk price at $16.27 per hundredweight, down 11 cents from May but $1.06 above June 2018. While down from May, it's the highest Class III price since November 2017.
The $16.27 price equates to $1.40 per gallon, up from $1.31 a year ago, and put the 2019 Class III average at $15.25, up from $14.41 at this time a year ago and compares to $16.12 in 2017.
Last Friday morning, Class III futures portended a July price at $17.34; August, $17.84; with a peak at $17.96 in September before heading back down.
The June Class IV price is $16.83, up 54 cents from May, $1.92 above a year ago, and the highest Class IV price since November 2015. Its 2019 average now stands at $15.98, up from $13.67 a year ago and $15.08 in 2017.
The descent in the previous three Global Dairy Trade auctions (GDT) slowed in the Fourth of July week. While it was the fourth consecutive decline, the weighted average of products offered inched just .4 percent lower after dropping 3.8 percent on June 18, 3.4 percent on June 4 and 1.2 percent on May 21. Sellers brought 54.5 million pounds of product to the market, up from 53.4 million in the last event.
Buttermilk powder led the losses, down 11.9 percent, followed by butter with a 4.8 percent decline. Butter was down 5.7 percent last time. Rennet casein was down 3.9 percent, anhydrous milkfat was down 1.9 percent, following a 3.3 percent decline, and GDT Cheddar was down 1.5 percent, which follows a 4.3 percent decline. Lactose was off 1.1 percent.
Like the June 18 event, there was only one product in the black, but this time it was skim milk powder, up 3.2 percent, after a 3.5 percent decline last time.
FC Stone equates the GDT 80 percent butterfat butter price to $1.9199 per pound U.S., down 9.5 cents from the June 18 event. CME butter closed last Friday at $2.4050. GDT Cheddar cheese equated to $1.7037 per pound, down 1.1 cent from the last event and compares to last Friday's CME's block Cheddar at $1.8475. GDT skim milk powder averaged $1.1020 per pound, and compares to $1.0696 last time. Whole milk powder averaged $1.3465, down from $1.3637 last time. CME Grade A nonfat dry milk closed last Friday at $1.04 per pound.
Just in case you're wondering, buttermilk powder is used in baked goods, biscuits, cakes, as well as soups and sauces.
Meanwhile, U.S. cheese exports remained the small bright spot in May export data, according to HIghGround Dairy (HGD), "climbing back higher versus the prior year after an April decline but remaining stronger year to date, even when compared to good exports during first half 2018."
"Mexico remained the top destination for U.S. cheese even as exports slipped 10 percent, or 2 million pounds, year over year (YoY). South Korea was up 18 percent YoY, and Japan was up 47 percent," said HGD, but Indonesia was in a "surprise fourth place," with total cheese exports up 407 percent, or 2.3 million pounds.
"Nonfat dry milk exports were below a year ago for the seventh consecutive month but total volumes shipped in May represented the strongest monthly exports since May 2018. Mexico remained the top destination for U.S. shipments with 52 percent market share even as exports remained down YoY for the third consecutive month, falling 1 percent."
May butter exports continued sharply lower, posting the steepest year over year decline since August 2016. HGD said "Canada continues to drive the decline, with May exports traveling north down 41 percent YoY. Year to date exports to Canada are down 26 percent, or 2.7 million pounds, versus January-May 2018. On a positive note, South Korea continued to be a large buyer of U.S. butter into May, up 96 percent YoY in the month and up 129 percent year to date."
The report also showed U.S. butter imports were up 15.4 percent from April and 105.8 percent above May 2018, with YTD imports up 61.7 percent from a year ago.
Matt Gould, editor and analyst with the Dairy and Food Market Analyst newsletter, said the "sluggish" butter production in the U.S. stood out in the May Dairy Products report issued July 3 but added that butter imports remain "relatively minor." The exception is Irish butter, which he called "a premium product that doesn't do much to influence prices."
Speaking in the July 8 Dairy Radio Now broadcast, Gould also pointed out that while U.S. cheese exports, were "robust," considering how much higher U.S. cheese and butter prices are to the rest of the world, overall exports only accounted for 14.4 percent of U.S. milk production. A year ago, it was about 18.6 percent.
You'll recall that preliminary data showed May 50-state milk output hit 19.06 billion pounds, down .4 percent from May 2018. The July 3 Dairy Products report shows that more milk went to the cheese vat. Total cheese output climbed to 1.10 billion pounds, up 1.5 percent from April and 1.6 percent above May 2018. Year-to-date total cheese output stands at 5.4 billion pounds, up .7 percent from a year ago.
Wisconsin produced 287.8 million pounds of the May total, up 2.2 percent percent from April and virtually unchanged from a year ago. California produced 211.3 million pounds, down .4 percent from April and 2.6 million pounds below a year ago. Idaho contributed 78.2 million pounds, down 6.7 percent from April but 1 percent above a year ago. Minnesota, with 63 million pounds, was up 6.1 percent from April but 1 percent below a year ago. New Mexico vats provided 81.8 million pounds, up 3.5 percent from April and 6.9 percent above that of a year ago.
Italian cheese totaled 471.5 million pounds, down 1.1 percent from April but 2.3 percent above a year ago. YTD Italian stands at 2.36 billion pounds, up 2.5 percent.
Mozzarella output was at 370.5 million pounds, up 3.2 percent from a year ago, with YTD at 1.86 billion pounds, up 4.4 percent.
American-type cheese totaled 440.7 million pounds, up 2.1 percent from April but .5 percent below a year ago, with YTD at 2.14 billion pounds, down 1.9 percent.
Cheddar output, the cheese traded at the CME, climbed to 319.4 million pounds, up 11.8 million pounds, or 3.8 percent, from April and .2 percent above a year ago. YTD Cheddar hit 1.54 billion pounds, down 3 percent from 2018.
Butter output slipped. U.S. churns produced just under 163 million pounds, down 1.7 million pounds, or 1 percent, from April and 7.1 million pounds, or 4.2 percent, below a year ago, the fourth consecutive month output was below a year ago. YTD butter output is now at 855.4 million pounds, down 2.5 percent from 2018.
Revisions lowered the April total by 2 million pounds, down 6 percent from a year ago, compared to the originally reported 4.8 percent shortfall.
Yogurt output, at 349.4 million pounds, was down 6.4 percent from a year ago, with YTD at 1.8 billion pounds, down 1.8 percent.
Dry whey totaled 78.8 million pounds, up 5.1 percent from April but 8.2 percent below a year ago, with YTD at 386.3 million pounds, down 12.8 percent. Whey stocks totaled 64.7 million pounds, down 14.2 percent from April and 5.7 percent below those a year ago.
Nonfat dry milk production totaled 173.9 million pounds, up 5.3 percent from April and 5 percent above a year ago. YTD powder is at 829.4 million pounds, virtually unchanged from 2018. Stocks grew to 281.8 million pounds, up 6.4 million pounds, or 2.3 percent, from April and 11.3 million pounds, or 4.2 percent, above the 2018 level.
Skim milk powder output fell to 30.1 million pounds, down 14.9 million pounds, or 33.1 percent, from April and 20.3 million, or 40.2 percent, below a year ago. YTD skim hit 197.2 million, down 11.9 percent from a year ago.
Cash dairy prices were lower in the shortened Fourth of July holiday week. The Cheddar blocks closed last Friday at $1.8475 per pound, down a penny on the week, ending six weeks of gain, but were 30½ cents above a year ago. The barrels found themselves at $1.78 last Friday, also a penny lower on the week, 53½ cents above a year ago, and 6¾ cents below the blocks. There were 14 cars of block traded on the week at the CME and 19 of barrel.
Dairy Market News reports that Midwestern cheese demand was generally unchanged week to week. Some cheesemakers, particularly Mozzarella and Provolone producers, are still seeing positive ordering trends. Curd and barrel producers also reported stronger sales with outside festivities in full swing. Other producers of varietal/specialty cheeses are experiencing an expected slowdown. Cheese output has picked up some and spot milk is available at discounts.
Looking westward, cheese exports were reported to be mixed while domestic demand is unchanged. Inventories are balanced to a bit tight. With declining milk components and supplies, Western cheese output fluctuates, says DMN.
Butter saw a Friday close at $2.4050 per pound, down a half-cent on the week but 23½ cents above a year ago, with only two cars trading hands on the week.
The strong U.S. price is a magnet to imports, and while imports may act somewhat as a governor on how high the U.S. price goes, it's not likely we will return to a price below $2 any time soon. The last time U.S. butter was below $2 was Nov. 15, 2016. The all-time high was $3.13 on Sept. 25, 2015.
Some Midwest butter plant managers reported finding cream at prices within their reach, at least during the holiday week. Cream was more available within the region and from the West, as both butter/other production plants took time off for the holiday weekend. As rising temperatures hit large areas of the region, cream is predicted to tighten. Butter demand is steady, keeping availability manageable.
Spot Grade A nonfat dry milk closed last Friday at $1.04 per pound, down a penny on the week but 26¾ cents above a year ago, with no sales reported on the week.
CME dry whey saw a Friday finish at 32¾ cents per pound, down three-quarter cents on the week and 6¼ cents below a year ago, on one sale for the week.
One of the biggest factors in the whey market is African Swine Fever (ASF), as whey is a big component in feeding pigs. The Food and Agriculture Organization of the United Nations reports that ASF "continues to spread within East and Southeast Asia, leading to the death and the culling of millions of pigs. The disease poses a serious threat to the livelihood and food security of large numbers of people relying on the production and processing of pigs."
World Dairy Expo is accepting entries for its 53rd annual Dairy Cattle Show, Oct. 1-5, in Madison, Wis. New this year, online and paper entry forms are due Sept. 8. Late entries may be submitted online through Sept. 19, and paper entries will be honored until the day of the show, both for an increased fee.
New to the dairy cattle show, a summer junior two-year-old cow class has been added to the International Holstein Show, International Junior Holstein Show, International Red and White Show and International Junior Red and White Show. Animals exhibited in this class are born between June 1, 2017 and Aug. 31, 2017 and in milking form at WDE.
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