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Sunshine and clouds mixed. High 68F. Winds SSW at 10 to 15 mph..
Overcast. Slight chance of a rain shower. Low 49F. Winds SSE at 5 to 10 mph.
What goes up, does come down in the dairy industry and dairy farmers know the drill all too well unfortunately.
The Agriculture Department announced the August Federal order Class III milk price at $20.10 per hundredweight, down $2.42 from July, after losing $1.81 in July, but is $4.15 above August 2021.
It’s the third monthly decline after peaking at $25.21 in May, and is the lowest Class III price since December 2021.
The eight month 2022 average stands at $22.54, up from $16.78 at this time in 2021 and $17.61 in 2020.
Friday’s Class III futures settlements portend a September price at $19.79; October, $20.93; November, $21.55; and December at $21.58.
Break even prices in California are right around $23.50 per cwt. and $22.50 in Idaho, according to the Aug. 12 Dairy and Food Market Analyst.
The August Class IV price is $24.81, down 98 cents from July, $8.89 above a year ago, and the lowest it has been since February.
Dairy farmers got a small break on the price of corn and soybeans in July but a big jump in hay prices and a drop in the all-milk price pulled the month’s milk feed ratio lower for the sixth month in a row. The latest Ag Prices report shows the July ratio at 1.79, down from 1.93 in June, but compares to 1.52 in July 2021.
The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk would only purchase 1.79 pounds of dairy feed of that blend.
The All Milk Price average fell to $25.70 per hundredweight, down $1.20 from June, after dropping 40 cents the previous month, but is $7.90 above July 2021.
The July national average corn price slipped to $7.25 per bushel, down 12 cents from June, but was $1.13 above July 2021.
Soybeans, after hitting a record $16.40 per bushel in June, fell 90 cents in July to $15.50, but are still $1.40 per bushel above July 2021.
Alfalfa hay averaged a record $276 per ton, up a whopping $31 from June, and a budget busting $70 per ton above a year ago.
U.S. milk production is recovering slowly, very slowly. The Agriculture Department’s latest data shows July output hit 19.14 billion pounds, up just 0.2% from July 2021, and the first gain since October 2021. Revisions lowered the 50-State June estimate by 45 million pounds to 18.93 billion, 0.1% below a year ago instead of the 0.5% increase originally reported.
July cow numbers totaled 9.416 million, up 1,000 head from June numbers which were revised down 8,000 head. The July herd was down 67,000 from July 2021.
Output per cow averaged 2,033 pounds, up 19 pounds or 0.9% from July 2021.
California cows put 3.52 billion pounds of milk in the tank, up 77 million or 2.2% from a year ago. Cow numbers were up 4,000 while output per cow jumped 40 pounds. Wisconsin produced 2.72 billion pounds, down 7 million or 0.3%. Cow numbers were down 6,000 but output per cow was up 5 pounds from a year ago.
Idaho was up 1.5% on a 25 pound gain per cow and 2,000 more cows. Michigan was down 3.8% on 19,000 fewer cows, while output per cow was up 10 pounds. Minnesota was down 1.1% on a 12,000 cow loss, while output per cow was up 30 pounds.
New York was unchanged, thanks to a 25 pound gain per cow offsetting a loss of 7,000 cows. Oregon was up 0.9% on 1,000 more cows. Output per cow was unchanged. Pennsylvania was off 0.9%, on 8,000 fewer cows, though output per cow was up 15 pounds.
South Dakota showed the biggest gain, up 13.1%, thanks to 20,000 more cows and a 10 pound gain per cow. Texas was up 6.0%, on 25,000 more cows and a 40 pound gain per cow. Washington State was down 2.9% on 9,000 fewer cows, with output per cow up 10 pounds.
As I pondered the data, I was reminded of the old “Got Milk” campaign which endeavored to portray what life would be like if we ever ran out of milk.
We’re not even close to that, according to Matt Gould, analyst and editor of the Dairy and Food Market Analyst newsletter in the Aug. 29 Dairy Radio Now broadcast. But he quickly added “We’re not facing a gusher or a wall of milk either.” He talked about USDA revisions in the report and the fact that July output was only up 0.2%. He spoke of the stress that dairy farm profit margins are under, particularly those in the west where draught has ravaged feed production and lifted hay prices. “We’re not short of milk right now,” he said, “But the outlook isn’t exactly like we’re going to have a surplus any time soon.”
There’s no shortage on cheese. The latest Dairy Products report shows July output totaled 1.158 billion pounds, up 0.5% from June and 1.1% above July 2021. Output year to date stands at 8.1 billion pounds, up 2.2% from a year ago.
Wisconsin produced 289.7 million pounds of the July total, up 0.3% from June but 1.2% below a year ago. California vats produced 208 million pounds, up 2.2% from June and 2.5% more than a year ago. Idaho contributed 85.8 million pounds, up 1.9% from June, but 0.5% below a year ago.
Wisconsin remains the biggest cheese producer in the U.S., followed by California, then Idaho, New Mexico, New York, Minnesota, Pennsylvania, Iowa, Ohio and Vermont.
Dairy prices started September with butter in the spotlight. The wholesale price set a new record high in the Labor Day holiday shortened week, with 1 sale Friday soaring to $3.1825 per pound. It closed at $3.17 per pound, up 7 cents on the week, besting the Sept. 25, 2015, record by 3.50 cents, and is $1.3850 above that week a year ago.
StoneX reminds us that the 2015 record lasted for just one day. Three days later the price had dropped by 51 cents, to $2.6250. That obviously didn’t happen this week but their warning remains; “Big prices can result in big price swings.”
Butter manufacturers tell Dairy Market News that butter demand is steady.
“Customers are hesitant, but markets have shown few signs of backsliding coming into the busiest butter season of the year.”
Global values of butter are notably lower than domestic values, but are starting to pivot upward as well.
High temperatures in the west are lowering farm milk production and component content. Demand for cream is steady to lighter, as some Class II producers are running lighter schedules. Butter churns are active. Some plant managers say limited tanker availability and labor shortages are preventing them from increasing output. Demand for butter is unchanged in retail and food service markets. Bulk sales are strong and inventories remain tight.
The CME Cheddar blocks closed Friday at $1.9175 per pound, up 15.25 cents on the week, highest since July 27, and 12.75 cents above a year ago. The barrel’s Friday finish was at $1.9325, 0.75 cents higher on the week, 45.50 cents above a year ago, and an inverted 1.50 cents above the blocks.
Midwestern cheesemakers say business is steady or picking up. Some continue to be behind on orders and are limiting them.
Milk availability at mid-week was somewhat different than other holiday shortened weeks, as spot milk discounts were not being offered, according to DMN.
Western retail cheese demand was unchanged in domestic markets. Food service is trending higher, with increased mozzarella sales to pizza makers. Domestically produced cheese is competitively priced for international markets, and contacts say this is contributing to strong demand. Cheese makers are running near capacity, though some plants reported lighter output due to continuing labor shortages and delayed deliveries of production supplies.
Grade A nonfat dry milk closed at $1.5750 per pound Friday, up 5.50 cents on the week and 21.75 cents above a year ago. There were 34 sales on the week.
Dry whey closed the week at 45.75 cents per pound, 0.75 cents lower and 7.25 cents below a year ago, with 9 sales reported on the week at the CME.
-- Lee Mielke, of Lynden, is editor of the Mielke Market Weekly.