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Benchmark Milk Price Climbs to Within 18 Cents of Record High

by Lee Mielke

Published: Friday, May 13, 2022

The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."

The Agriculture Department announced the April federal order Class III milk price at $24.42 per hundredweight, up $1.97 from March, $6.75 above April 2021, highest Class III since July 2020, and 18 cents shy of the record high.

Last Friday morning Class III futures portended a May price at $25.05, which would be a new record high, June at $24.47; and July at $24.19 per hundredweight.

The four-month Class III average stands at $22.04, up from $16.40 at this time a year ago, and compares to $15.84 in 2020 and $14.71 in 2019.

The April Class IV price set another new record at $25.31 per hundredweight, up 49 cents from March, and $9.89 above a year ago. Its four-month average is at $24.31, up from $14.14 a year ago, $14.78 in 2020, and 15.69 in 2019.

You'll recall March milk production was down .5 percent from March 2021 but the month's Dairy Products report shows cheese vats and churns still got a workout.

Cheese production totaled 1.197 billion pounds, up 8.3 percent from February and 1.1 percent above March 2021. Cheese stocks were down 1 percent from a year ago. Cheese output for the first three months of 2022 totaled 3.5 billion pounds, up 3 percent from the same period a year ago, so we're going through a lot of cheese.

Wisconsin produced 296.6 million pounds of the March total, up 9.6 percent from February but 3 percent below a year ago. California provided 213 million pounds, up 5 percent from February and 1 percent above a year ago. Idaho added 89.3 million pounds, up 22.2 percent from February but down 1 percent from a year ago.

Italian cheese totaled 512.8 million pounds, up 10 percent from February and 2.1 percent above a year ago. YTD Italian stands at 1.5 billion pounds, up 3.8 percent from 2021.

American-type cheese, at 473.6 million pounds, was up 7 percent from February but 1.4 percent below a year ago. YTD output, at 1.4 billion pounds is up .1 percent. Mozzarella totaled 406.4 million pounds, up 3.5 percent from a year ago, with YTD at 1.2 billion pounds, is up 4.2 percent.

Cheddar output, the cheese traded at the CME, jumped to 327.1 million pounds, up 19 million pounds, or 6.2 percent, from February's output, which was revised down 4.2 million pounds, but was down 9.7 million pounds, or 2.9 percent, below March 2021.

U.S. churns produced 202.6 million pounds of butter, up 19.1 million, or 10.4 percent, from February, and 3 million, or 1.5 percent, above a year ago. That ended eight consecutive months output topped the previous year. But, YTD butter is at 580.1 million pounds, down 5 percent from a year ago. Butter stocks were down 20 percent from March 2021, according to USDA's Cold Storage data.

March yogurt output totaled 434.7 million pounds, down 2 percent from a year ago, with YTD output at 1.2 billion pounds, down 2.5 percent.

Dry whey production climbed to 82 million pounds, up 11.7 million pounds, or 16.6 percent, from February's total which was revised 4.7 million pounds lower, and was 5.1 million pounds, or 6.6 percent, above a year ago. YTD is at 232.7 million pounds, down 1.3 percent. Dry whey stocks crept up to 68.1 million pounds, up 5.1 million, or 8.1 percent, from February, and 4.5 million, or 7.1 percent, above those a year ago.

Nonfat dry milk output climbed to 190.5 million pounds, up 19.7 million pounds, or 11.5 percent, from February but was down 7.8 million, or 3.9 percent, below a year ago. YTD powder was at 531.6 million pounds, down 10 percent. Stocks totaled 288 million pounds, down 400,000 pounds, or .2 percent, from February and down 25 million pounds, or 8 percent, below those a year ago.

Skim milk powder output climbed to 33 million pounds, up 3.4 million, or 11.4 percent, from February but was down 19.6 million, or 37.2 percent, below a year ago. YTD SMP was at 106 million pounds, down 26.7 percent from a year ago. March was the ninth consecutive month of weaker powder production, says HighGround Dairy.

Fat provided the biggest pull on last Tuesday's Global Dairy Trade auction, which saw its fourth consecutive decline. The weighted average plunged 8.5 percent, biggest drop since Aug. 4, 2015, and follows the 3.6 percent drop on April 19. Traders brought 55.5 million pounds to the market, up from 48.9 million on April 19.

HighGround's Lucas Fuess, in the May 9 Dairy Radio Now broadcast, said Fonterra increased its offer volumes last Tuesday as it attempted to clear inventories before the start of the next new milk production season.

All products offered again lost ground, led by butter, down 12.5 percent, following a 3.7 percent dip on April 19. Anhydrous milkfat dropped 12.1 percent, after slipping 1.3 percent. GDT Cheddar was down 8.6 percent, following a 3.9 percent loss, and the powders followed. Whole milk powder and skim milk powder were both down 6.5 percent, following respective 4.4 percent and 4.2 percent drops last time. Buttermilk powder was down 6.1 percent.

StoneX says the GDT 80 percent butterfat butter price equates to $2.5698 per pound U.S., down 36.9 cents, after dropping 11 cents in the last event, and compares to CME butter which closed last Friday at $2.64, 7 cents above the GDT. GDT Cheddar, at $2.5635, was down 24.2 cents after losing 13 cents last time, and compares to last Friday's CME block Cheddar at $2.35. GDT skim milk powder averaged $1.8731 per pound, down from $1.9995, a drop of 12.6 cents. Whole milk powder averaged $1.7764 per pound, down from $1.9083, a loss of 13.2 cents. CME Grade A nonfat dry milk closed last Friday at $1.74 per pound.

Nate Donnay, StoneX director of Market Intelligence, warn in last week's "Udder Intelligence" report that China's imports in March were much lower than forecast, down 28.6 percent from 2021, and "When the largest buyer in the world is down 20 percent to 30 percent, we have a significant global demand problem."

Thankfully, last week's GDT saw a bit of an uptick from China, according to StoneX. "The slowdown came from the Middle East. We don't know if that was related to Ramadan or if there is something else driving the weaker demand."

The global market is vital for U.S. farmers and processors and March provided confirmation. Cheese exports totaled a record 91.9 million pounds, up 12.9 percent from March 2021. HighGround Dairy points out that volume was driven by product moving to Mexico, up 26 percent and the second largest monthly figure on record.

Butter exports totaled 13.5 million pounds, up 47.4 percent, highest since April 2014, thanks to Canada which imported a record amount for the month, up 26 percent.

Nonfat dry milk shipments totaled 176.7 million pounds, down 7.4 percent, but was measured against a strong year in 2021. Exports were the highest of any month since June 2021, according to HGD, but a 98 percent decline in product moving to Egypt, negatively impacted the total. Powder moving to Mexico improved from the prior year and recent months, reaching the highest monthly volume since August 2021, up 9 percent, according to HGD.

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