The Lee Mielke Market Update November 3

Lee 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.

The Agriculture Department announced the nation’s October benchmark Class III milk price at $16.69 per hundredweight, up 33 cents from September and $1.87 above October 2016. It is the highest Class III since February 2017 and equates to about $1.44 per gallon, up from $1.27 a year ago. The 10 month Class III average is at $16.19, up from $14.42 at this time a year ago and compares to $15.98 in 2015.

Class III futures portend a downward trend from here with nothing above $16 until August 2018. The November contract was trading late Friday morning at $16.59 and December was at $15.67, which would result in a $16.17 average for the year, up from $14.87 in 2016 and $15.80 in 2015.

The October Class IV milk price is $14.85, down $1.01 from September but $1.19 above a year ago, and the lowest Class IV since May 2017. Its average stands at $15.44, up from $13.65 a year ago and $13.97 in 2015.

California’s October Class 4b cheese-milk price is $16.17 per cwt., up $1.29 from September, $1.74 above a year ago and 52 cents below the comparable Federal order Class III price. The Class 4b 10-month average stands at $15.33, up from $13.72 a year ago and $14.63 in 2015.

The Class 4a butter-powder price is $14.51, down 18 cents from September, $1.40 above a year ago, but the lowest 4a price since May 2017. The 4a average now stands at $15.24, up from $13.25 in 2016 and $13.81 in 2015.

USDA’s preliminary data showed September milk production in the 50 states totaled 17.2 billion pounds, up 1.1 percent from September 2016. The latest Dairy Products report, which was more bearish than expected, showed where that milk went.

Total U.S. cheese output was pegged at 1.01 billion pounds, down 1.4 percent from August but 2.7 percent above September 2016. Year to date (YTD) output stands at 9.25 billion pounds, up 2.6 percent from a year ago.

California produced 194 million pounds of that cheese, down 7.1 percent from August and 4.5 percent below a year ago. Wisconsin, at 271.6 million pounds, was off 0.5 percent from August but 2.2 percent above a year ago. Idaho, at 80.6 million pounds, was up 11.9 percent from August but 1.5 percent below a year ago. Minnesota was down 3.9 percent from August but 6.6 percent above a year ago. New York was off 0.5 percent from August but 10.1 percent above 2016.

Italian cheese output totaled 435.2 million pounds, down 0.2 percent from August but 1.4 percent above a year ago, with YTD output at 4.0 billion pounds, up 1.5 percent.

Mozzarella, at 334 million pounds, was up 0.2 percent, with YTD at 3.1 billion pounds, up 0.9 percent.

Total American cheese fell to 393.8 million pounds, down 1.3 percent from August but 4.2 percent above a year ago. YTD, at 3.7 billion was up 3.4 percent.

Cheddar, the kind traded at the CME, totaled 282.8 million pounds, down 0.4 percent from August, but 4.5 percent above a year ago, with YTD at 2.7 billion pounds, up 4.6 percent.

FC Stone’s Dave Kurzawski says “We keep looking for an improvement in domestic mozzarella demand to boost mozzarella production and take some milk away from Cheddar, but it just hasn’t materialized and now Cheddar production jumped higher for September.”

U.S. churns produced 134.8 million pounds of butter, up 2.8 percent from August but 0.3 percent below a year ago. YTD totaled 1.38 billion pounds, up 0.7 percent

California butter totaled 36.1 million pounds, down 6.7 percent from August and 9.7 percent below a year ago. New York output was up 36.3 percent from August and 3.7 percent above a year ago. Pennsylvania was up 48.3 percent from August but 9.1 percent below a year ago.

Yogurt output amounted to 388.1 million pounds, down 5.6 percent from a year ago, with YTD at 3.4 billion pounds, down 1.6 percent.

Dry whey totaled 91.3 million pounds, up 20.8 percent, with YTD hitting 788.6 million pounds, up 9.6 percent. Stocks were up and HighGround Dairy’s Eric Meyer called it “the most bearish statistic of all,” as dry whey inventories stand at a record 105 million pounds, up 107.5 percent (more than double) last year.

Nonfat dry milk output totaled 133.4 million pounds, down 1.5 percent from August but 6.2 percent above a year ago, with YTD at 1.38 billion pounds, up 3.4 percent.

Skim milk powder totaled 30.4 million pounds, down 33.6 percent from August and 21 percent below a year ago. YTD output is at 417.2 million, up 0.4 percent.

The report pegged September nonfat dry milk stocks at 321.1 million pounds, up 8.2 million pounds or 2.6 percent from August and 10.5 million pounds or 48.6 percent above a year ago.

HighGround’s Eric Meyer says “Low prices have not yet cured low prices as (NFDM) inventories grew from August to September, an uncommon occurrence that has not happened since 2012.”

Meanwhile; a lower All Milk price and higher hay and soybean prices pulled the September milk feed price ratio lower. The September ratio, at 2.45, is down from 2.49 in August and 2.49 in September 2016, according to the 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. One pound of milk today purchases 2.45 pounds of dairy feed containing that blend.

The U.S. average All-Milk price was $17.80 per hundredweight (cwt.), down 20 cents from August but 40 cents above September 2016. California showed the lowest, at $16.45 per hundredweight, down 62 cents from August, but 51 cents above a year ago. Wisconsin’s averaged $18.30, up a dime from August, 30 cents above a year ago, and $1.85 above California’s.

September corn averaged $3.27 per bushel, unchanged from August but a nickel per bushel above September 2016. Soybeans averaged $9.35 per bushel, up 11 cents from August but 6 cents per bushel below a year ago. Alfalfa hay averaged $149 per ton, up $2 per ton from August and $13 per ton above September 2016.

The September cull price for beef and dairy combined averaged $69.90 per cwt., down $6.40 from August, after dropping $1 the previous month, and is $4.60 per cwt. below September 2016, and $1.70 below the 2011 base average of $71.60.

Dairy Farmers of America points out this is the 15th consecutive month the milk feed margin is above any payout in the Margin Protection Program.

Checking the week’s prices; CME block Cheddar climbed to $1.76 per pound on Halloween but closed the first Friday of November at $1.7150 per pound, as traders absorbed the September Dairy Products report. That’s down 3 cents on the week, 18 1/2-cents below a year ago, and compares to $1.7275 on the first trading day of October. The Cheddar barrels also finished at $1.7150, up a penny on the week, 14 1/2-cents below a year ago when they jumped 26 1/4-cents, and are 2 1/2-cents above their October 2 perch. Three cars of block traded hands on the week at the CME and 14 of barrel.

Dairy Market News reports that cheese demand has ebbed slightly for some Midwest cheesemakers who had reported upswings in orders in recent weeks. Others report sales remained fairly steady. Spot milk loads were slightly more difficult to locate and prices ranged from flat to $1 over Class III. Some contacts expect that discounted milk prices will return during the holidays. Cheesemakers continue to report that they are using nonfat dry milk to free up storage space and to circumvent the spot milk market. The cheese market tone has improved and the once large chasm between CME block and barrel prices has compressed and contacts “generally believe this to be a bullish indicator of general market health. “

The Western cheese market seems to be following its normal seasonal trend for this time of the year. Contacts suggest that current cheese prices are set at a premium to CME, but are below a year ago and projected to stay firm throughout November. Cheese production is steady, supplies are substantial, but are not causing major concern. Overall, current international sales are good and manufacturers hope that will help reduce inventories.

“Cheese sales are active in the domestic market as the pizza season draws more loads of mozzarella. The football season at many schools has also created an increased cheese intake,” although Papa Johns founder, John Schnatter, claims the NFL’s national anthem controversy is hurting pizza sales. Hurting pizza sales would surely slow cheese consumption.

Cash butter fell to $2.2225 per pound Thursday, lowest price since May 10, 2017, but it closed Friday at $2.2325, down 7 cents on the week but 34 cents above a year ago, with 22 cars finding new homes on the week.

Cream continues to be available for Central region butter producers, according to DMN. Cream from across the nation is finding its way to upper Midwestern churns at prices reasonable to buyers. Butter market prices are experiencing downward pressure and contacts suggest weakening European butter markets are bringing U.S. prices down.

Western better makers report holiday orders are upon them. Buyers are still somewhat restrained but processors believe that shoppers will buy according to their holiday needs regardless.

Cash Grade A nonfat dry milk closed Friday at 72 cents per pound, down 3 cents on the week, 12 3/4-cents below a year ago, and the lowest spot price since April 14, 2016. Thirty eight cars were traded on the week at the CME, 24 on Friday alone.

The Agriculture Department’s latest Crop Progress report shows 54 percent of U.S. corn has been harvested, as of the week ending October 29, up from 38 percent the previous week but 19 percent behind a year ago and 18 percent behind the five year average. Sixty six percent is rated good to excellent, unchanged from the previous week but 8 percent behind a year ago.

The report also shows 83 percent of the soybean crop is harvested, up from 70 percent the previous week, 2 percent behind a year ago, and 1 percent behind the five year average.

Forty six percent of the cotton is harvested, up from 37 percent the previous week, 1 percent ahead of a year ago and 1 percent ahead of the five year average. Fifty five percent is rated good to excellent, up 1 percent from the previous week, and 6 percent ahead of a year ago.

Cooperatives Working Together (CWT) accepted two requests for export assistance from members that had contracts to sell 41,888 pounds of Cheddar cheese and 49,604 pounds of butter to customers in the Asia and Oceania.

The product has been contracted for delivery from November through December and put CWT’s 2017 export sales at 57.94 million pounds of American-type cheeses, and 4.75 million pounds of butter (82 percent milkfat) to 22 countries.

Dairy producers and industry leaders gathered the week of October 30 for the 101st annual meeting of the National Milk Producers Federation (NMPF). In a joint meeting with the National Dairy Board and the United Dairy Industry Association, the 800 attendees heard about “the importance of increased collaboration across the dairy community, defending the good name of dairy foods, and pursuing innovative new marketing strategies,” according to NMPF.

“We have to stop looking at other U.S. cooperatives as if we’re competitors,” said NMPF Chairman Randy Mooney. “We have to recognize that in a globalized dairy market, our competitors are outside of America’s borders, and we have to work together to fight for a larger share of those markets.”

NMPF’s annual Town Hall featured presentations from staff on the latest policy issues affecting the industry, including efforts in Congress to address immigration reform, the fight against misbranded dairy imitators, and NMPF’s work this year to achieve a positive outcome in the ongoing NAFTA negotiations. Later in the day, NMPF President and CEO Jim Mulhern discussed the organization’s work this year to improve the dairy safety net in the coming farm bill.

The October 31 Daily Dairy Report says the U.S. Food and Drug Administration may be pulling the health claims of soy products. Speaking in the November 6 Dairy Radio Now interview, Jerry Dryer, editor and analyst of the Dairy and Food Market Analyst newsletter, said that could have far reaching implications, because those claims have been somewhat damaging to the dairy industry.

We also discussed the issue of nondairy beverages calling themselves “milk.” Dryer said “It’s important that people understand they’re not drinking milk when the drink soy juice or canola oil juice or whatever they put in those nondairy bottles and call it milk.”

He reported some encouraging news from the recent International Dairy Federation meeting in Belfast, Ireland, which stated that world-wide dairy consumption is increasing faster than production. Part of that assessment, he said, is based on “self-sufficiency,” can a country support its own citizens with its milk supply.

He cited Asia, a big dairy customer of the U.S., as an example. Asia used to be 93 percent self-sufficient and only had to import 7 percent of its dairy needs. That has slipped to 91 percent the past seven years, according to Dryer, so 9 percent now has to be imported. Similar trends are occurring in Africa which is 84 percent self-sufficient and Central America which is only 78 percent self-sufficient. That all bows well for U.S. dairy exports, according to Dryer.