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August Milk Prices Higher Than '19

Published: Friday, September 11, 2020

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 at $19.77 per hundredweight, down $4.77 from July but still $2.17 above August 2019 and the highest August Class III since 2014. The 2020 Class III average sits at $17.61, up from $15.83 a year ago and $14.44 in 2018.

Last Friday morning, Class III futures showed September at $16.99; October, $18.73; November, $17.47; and December at $16.69.

The August Class IV price is $12.53 per hundredweight, down $1.23 from July, $4.21 below a year ago, and the lowest August Class IV since 2009. Its 2020 average is at $13.62, down from $16.19 a year ago and $13.85 in 2018.

Farm cash receipts are expected to decrease $12.3 billion (3.3 percent) to $358.3 billion in 2020, according to the USDA's Farm Sector Income forecast issued Sept. 2. Total animal-animal product receipts are expected to decrease $14.3 billion (8.1 percent) following declines for broilers, cattle-calves, hogs and milk.

Milk receipts were projected to decrease $900 million (2.2 percent) during the year. The Dairy Margin Coverage Program was forecast to make net payments of $200 million to dairy operators in 2020.

Direct government farm payments, including federal farm program payments paid directly to farmers and ranchers but exclude USDA loans and insurance indemnity payments made by the Federal Crop Insurance Corp., were forecast at $37.2 billion, a $14.7 billion increase (65.7 percent). The expected increase is due to supplemental and ad hoc disaster assistance for COVID-19 relief.

You'll recall that July milk production hit 18.6 billion pounds, up 1.5 percent from July 2019. The July Dairy Products report shows where that milk went.

Total cheese output slipped to 1.106 billion pounds, down .4 percent from a revised June total of 1.111 billion, but was 1.8 percent above July 2019. Year-to-date production stood at 7.65 billion pounds, up .8 percent from a year ago.

Wisconsin produced 288.6 million pounds of the total, down .6 percent from June but 1.2 percent above a year ago. California output, at 202.5 million pounds, was down .6 percent from June and 3.8 percent below a year ago. Idaho vats contributed 89.2 million pounds, up 2.2 percent from June and 2.4 percent above a year ago.

Italian-type cheese totaled 457.1 million pounds, down 4.2 percent from June and 1.5 percent below a year ago. YTD Italian output was at 3.3 billion pounds, down .2 percent.

American-type cheese jumped to 451.7 million pounds, up 3.5 percent from June and 4 percent above a year ago. YTD American was at 3.1 billion pounds, up 1.8 percent.

Mozzarella output slipped to 368.8 million pounds, down 3.5 percent from June but .2 percent above a year ago, with YTD at 2.6 billion pounds, unchanged from 2019.

Cheddar, the cheese traded at the CME, climbed to 321.2 million pounds, up 12.2 million pounds, or 3.9 percent, from June and 15.3 million, or 5 percent, above July 2019. Year to date Cheddar stood at 2.2 billion pounds, up 1.7 percent from a year ago.

Butter production hit 151.8 million pounds, up 1.6 million pounds or 1.1 percent from June and 1.1 million pounds, or .7 percent, above a year ago. YTD butter output was at 1.27 billion pounds, up 6.2 percent from 2019.

Dry whey totaled 84.5 million pounds, down .3 percent from June but 1.9 percent above a year ago, with YTD whey at 576.6 million pounds, up 3.7 percent. Dry whey stocks totaled 84.5 million pounds, down .1 percent from June but 24.9 percent above a year ago.

Nonfat dry milk totaled 163.4 million pounds, up 16.3 million pounds, or 11.1 percent, from June but 8.9 million, or 5.2 percent, below a year ago. YTD powder sits at 1.17 billion pounds, up .7 percent from 2019. Stocks climbed to 309.6 million pounds, up a bearish 20.6 million, or 7.1 percent, from June and 17.5 million, or 6 percent, above 2019.

Skim milk powder output fell to 51.2 million pounds, down 10.1 million pounds, or 16.4 percent, from June but 4.5 million pounds, or 9.7 percent, above a year ago. YTD skim milk powder hit 319.3 million pounds, up 10.1 percent from a year ago.

Whole Milk Sales

The Agriculture Department finalized 2019 fluid milk data, reporting that sales for the year totaled 46.4 billion pounds, down 828 million pounds, or 1.8 percent, from 2018. Whole milk sales totaled 16.1 billion pounds, up 218 million pounds, or 1.4 percent, from 2019 and made up 34.7 percent of the year's total beverage milk sales, up from 33.7 percent in 2019. Skim sales totaled 3.5 billion pounds, down 424 million pounds, or 10.7 percent, from 2019 and made up 7.6 percent of total milk sales, down from 8.4 percent in 2019.

Dairy and Food Market Analyst editor Matt Gould informs us that 2019 was the sixth consecutive year that whole milk sales topped the previous year and the sixth consecutive year that skim sales dropped by double digits.

The Sept. 1 Global Dairy Trade auction (GDT) saw a 1 percent decline in its weighted average, which followed the 1.7 percent decline on Aug. 18. Sellers brought 78.6 million pounds of product to market, up from 69.1 million on Aug. 18, and the highest total since Dec. 17, 2019.

The declines were led by whole milk powder, down 2 percent, after dipping 2.2 percent on Aug. 18. Butter was down 1.2 percent, following a 2 percent slip, and anhydrous milkfat was off .5 percent, following a 2.9 percent drop. GDT Cheddar was down .4 percent after dropping 3.6 percent in the last event.

Buttermilk powder was up 3.9 percent. It did not trade last time. Skim milk powder was up 1.8 percent, after a 1.1 percent rise, and lactose was up .8 percent, after falling 3.3 percent last time.

StoneX equated the GDT 80 percent butterfat butter price to $1.4753 per pound U.S., down 1.6 cents from the last event. CME butter closed last Friday at $1.4925. GDT Cheddar cheese equated to $1.5551 per pound, down 6.3 cents after losing 5.7 cents in the last event, and compares to last Friday's CME block Cheddar at $2.1250. GDT skim milk powder averaged $1.2080 per pound, up from $1.1831, and whole milk powder averaged $1.3080, down from $1.3317. CME Grade A nonfat dry milk closed last Friday at $1.03 per pound.

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