Mielke Market Update June 2 – Lee Mielke

Lee MielkeLee Mielke is a veteran dairy journalist and broadcaster, currently carried in a dozen Ag newspapers nationally. This column is prepared especially for the readers of DairyBusiness. Based in Lynden, Wash., he can be reached by email at [email protected] or by phone 360.201.4033.

Happy June Dairy Month, which is an annual reminder to consumers of the wonderful contributions milk and dairy products make to health and well-being.

Meanwhile; the benchmark Federal order Class III milk price for May crept 35 cents higher, to $15.57 per hundredweight (cwt.), $2.81 above May 2016, and equates to $1.34 per gallon, up 3 cents from April.

The five month average stands at $16.05, up from $13.53 at this time a year ago and compares to $15.84 in 2015 and $22.94 in 2014.

Class III futures late Friday morning portended a June price of $16.51; July, $16.93; August, $17.18; and a peak of $17.26 in September.

FC Stone’s Dave Kurzawski wrote in his June 2 Early Morning Update (EMU) that “Producers seem to be locking in attractive second half margins a little more aggressively at the moment, but commercial buyers have a ‘buy the dip’ mentality. Throw in the speculative community who is continually hedging off new option positions with futures and a volatile two-sided trade is the net result.”

The Class IV price is $14.49, up 48 cents from April and $1.40 above a year ago. Its five month average is at $14.92, up from $13.06 in 2016 and $13.65 in 2015.

The Ag Market Service-surveyed cheese price used in calculating the Class milk prices averaged $1.5390 per pound, up 4.3 cents from April. Butter averaged $2.1644, up 4.8 cents. Nonfat dry milk averaged 87.04 cents per pound, up 3.2 cents, and dry whey averaged 50.94 cents per pound, down 1.5 cents from April.

California’s comparable May Class 4b cheese milk price is $15.25 per cwt., up 95 cents from April and $3.88 above a year ago, but is 32 cents below the comparable Federal order Class III price, smallest gap since June 2016.

The 4b average stands at $15.02, up from $12.69 a year ago, $14.07 in 2015, and compares to $20.94 in 2014.

The May 4a butter-powder milk price is $14.43, up 70 cents from April, $1.86 above a year ago, and reversed three months of decline. The 2017 average now stands at $14.64, up from $12.81 a year ago and $13.45 in 2015.

Cash butter soared in the Memorial Day holiday shortened week, skyrocketing to $2.41 per pound Wednesday and closed Friday at $2.4850. That’s the highest spot price since December 9, 2015, up 12 1/2-cents on the week, up 39 1/4-cents since May 1, and is 38 1/2-cents above a year ago. Fourteen cars were sold on the week at the CME.

Dairy Market News (DMN) says churns are active, as Central region producers are looking to pack away butter for the late summer and early fall. Adding to the mix is post-holiday cream availability, which had some producers opting to churn more cream as opposed to offering it on the spot market. Retail and food service demand continues to be strong and the butter market tone is “steady.”

Western butter makers are also steadily churning but holding back when they can. Cream is generally plentiful, but a number of processors anticipate cream supplies will tighten as summer takes hold and ice cream manufacturers pull more cream. Stocks are “comfortable” however, in some secondary markets, butter supplies are tight. Buyers are looking for butter at favorable prices and store. Some end users are eager to cover late year needs. Demand is steady with a few describing demand to be “better than expected for this time of year.”

Block Cheddar cheese climbed to $1.7450 per pound Wednesday, highest spot price since February 2, 2017, but closed Friday at $1.70, down 3 1/4-cents on the week and ending four weeks of gain, but is 26 cents above a year ago. The barrels climbed to $1.5450 Wednesday, highest price since February 22, 2017, but closed the week at $1.49, up a penny, 4 1/2-cents above a year ago, and still at an unsustainable 21 cents below the blocks. Fourteen cars of block traded hands on the week at the CME and 35 of barrel.

DMN says milk continues to be readily available for cheese production in the Midwest, where cheese has become Wisconsin’s “official State dairy product.” Spot milk prices ranged $3.50 to $6.00 under Class. Packaged retail cheese, pizza cheese and specialty type cheeses are selling well. Some process cheese producers report contractually steady demand, but barrel sales are expected to pick up in line with warming temperatures.

The barrel inventory is “generally long.” Some block producers report balanced inventories while others are concerned about limited storage space. The cheese market tone is “mixed” as many contacts are anxious about the large spread and consider a gap above 10 cents “a sign of instability.”

Western contacts report that cheese is moving well, but buyers are not seeking a lot of additional loads. Export opportunities are developing as U.S. cheese prices coincide with international prices and the dollar has weakened some against other currencies. A few contacts say warehouses are full and premiums are being charged for additional space. Barrels are reportedly heavy but blocks are tight. Cheese with age is harder to move and cheese output is active, “following the wave of milk production,” according to DMN.

Cash Grade A nonfat dry milk hit the highest price since February 9, 2017 on Wednesday, but closed Friday at 94 3/4-cents per pound, up 2 cents on the week and 13 1/2-cents above a year ago, with 18 cars exchanging hands on the week at the CME.

Down on the farm; lower corn and soybean prices could not offset another drop in the All-Milk price plus the higher alfalfa hay price, so the latest milk feed price ratio headed lower for the fourth consecutive month.

The April ratio is 2.23, down from 2.39 in March, but is up from 1.99 in April 2016, according to the Agriculture Department’s latest Ag Prices report. The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. In other words, one pound of milk today purchases 2.23 pounds of dairy feed containing that blend.

The April U.S. average All-Milk price dropped to $16.50 per cwt., down 80 cents from March but $1.40 above April 2016. The price ranged from $14.50 in New Mexico to $20.50 in Florida. California’s $15.45 was down 28 cents from March but $1.82 above a year ago and $1.65 below Wisconsin’s. The Badger State saw $17.10, down 90 cents from March but $1.50 above a year ago.

April corn averaged $3.43 per bushel, down 6 cents from March and 13 cents per bushel below April 2016. Soybeans averaged $9.32 per bushel, down 37 cents from March but 31 cents per bushel above April 2016. Alfalfa hay averaged $148 per ton, up $13 from March but $6 per ton below a year ago.

Looking at the cow side of the ledger; the report shows the April cull price for beef and dairy combined averaged $72.20 per cwt., up $2.70 from March, $9.30 per cwt. below April 2016, but 60 cents above the 2011 base average of $71.60.

The April Margin Protection Program (MPP) milk-feed margin was $8.5460 per cwt. Combined with the March milk-feed margin of $9.3519 per cwt., the average dairy production margin for the two-month period was $8.9490 per cwt.

The May issue of the Dairy Market Report from Dairy Management Incorporated and the National Milk Producers Federation states that “The rate of milk production growth began to moderate during the first quarter, but additional milk production continues to generate American cheese at a faster rate than total consumption, driving up inventories and putting some pressure on cheese prices.

Still, exports of most products showed strong year-over-year growth during the first quarter of 2017. Federal order class prices have dropped month-to-month during most of 2017 and the March all-milk price was $1.60 per cwt. under January.

The March MPP margin was down $1.75 per cwt. from last December. However, a mid-May rally in cash and futures prices for butter and Cheddar cheese provided a strong indication that the milk price erosion during the first months of this year may have run its course.”

The latest Crop Progress report shows 91 percent of the U.S. corn crop is planted, as of the week of May 28, up from 84 percent the previous week, 2 percent behind a year ago, and 2 percent behind of the five year average. Seventy three percent of the corn is emerged, up from 54 percent the previous week, 2 percent behind a year ago, and 2 percent behind the five year average.

Sixty seven percent of soybeans are in the ground, up from 53 percent the previous week, 4 percent behind a year ago and 1 percent behind the five year average.

Sixty three percent of the cotton is planted, up from 52 percent the week before, 6 percent ahead of a year ago and 1 percent ahead of the average.

The April Consumer Price Index for all food is 249.7, up 0.5 percent from 2016. The dairy products index was 217.8, down 0.2 percent. Fresh whole milk was up 0.1 percent; cheese, down 0.8 percent; and butter was off 0.3 percent.

Cooperatives Working Together (CWT) accepted 25 requests for export assistance Memorial Day Week from Dairy Farmers of America, Foremost Farms USA, Northwest Dairy Association (Darigold), Tillamook County Creamery Association, United Dairymen of Arizona, and Upstate Niagara- O-AT-KA. Sales included 3.536 million pounds of Cheddar and Monterey Jack cheese and 703,275 pounds of butter to customers in Asia, Europe, the Middle East, and Oceania.

The product has been contracted for delivery through August and pushed CWT’s 2017 exports to 37.709 million pounds of American-type cheeses, and 3.016 million pounds of butter (82 percent milkfat) to 17 countries on five continents.

The National Dairy Farmers Assuring Responsible Management (FARM) Program, in collaboration with Colorado State University, is conducting a dairy farmer survey to learn more about perceptions of the FARM Program and how it can continue to improve the resources it offers producers.

The voluntary survey will probe producers’ knowledge of the program and the value they think it provides to their operations. The study will help FARM Animal Care better provide cooperatives and farmers with the appropriate guidance and materials required of FARM Program participants.

Survey questions address topics such as the producer’s familiarity with the program, where they seek additional FARM Program information, and why stewardship practices, as assessed by FARM, are important to them. Those interested in taking the survey can do so at www.nmpf.org.

And, as part of the commemoration June 1 of World Milk Day, the National Milk Producers Federation said “The public health case for the consumption of milk and other dairy foods is stronger today than ever, a fact that is increasingly recognized by health experts and consumers in the U.S. and across the globe.”

“Today’s celebration, which coincides with the start in the United States of national June Dairy Month, acknowledges the inimitable role that milk and other dairy foods play in our diets,” said Jim Mulhern, president and CEO of NMPF. “The undeniable good news about dairy products starts with its unmatched value as a superfood, no other food source comes close to providing the same nutrition.”

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