The Agriculture Department announced the April Federal order Class III benchmark milk price at $13.07 per hundredweight, down $3.18 from March, $2.89 below April 2019, and the lowest Class III price since May 2016.

The four-month Class III average stands at $15.84, up from $14.71 at this time a year ago and $14.02 in 2018, but that average will slip more as Monday’s Class III futures settlements portend a May price bottom at $11.50 (a level not seen in 11 years); June, $12.94; and July at $14.34, with a peak of $16.24 in October.

The Class IV price is $11.40, down $3.47 from March, $4.32 below a year ago, and the lowest Class IV price since September 2009. Its average for the year stands at $14.78, down from $15.69 a year ago and compares to $13.13 in 2018.

Uncle Sam shopping
Agriculture Secretary Sonny Perdue announced details Monday on $470 million in additional Section 32 food purchases for the third quarter, enabling USDA to obtain surplus food for distribution to communities nationwide; $120 million is earmarked to purchase of dairy products in July, August and September.

A USDA press release stated, “The purchases will provide additional support for producers and Americans in need, in response to changing market conditions caused by the COVID-19 national emergency.”

National Milk Producers Federation president and CEO Jim Mulhern praised the announcement, stating, “These Section 32 purchases will help both Americans who need high-quality nutritious food as well as U.S. dairy farmers who are experiencing unprecedented losses from the COVID-19 national emergency” and “will provide important and needed support to the dairy supply chain.”

Markets slowly recover
Most cash dairy prices strengthened going into May. The Cheddar blocks closed Friday, May 1, at $1.2050 per pound, up 13.5 cents on the week but 47 cents below a year ago. The barrels finished at $1.19, 14 cents higher, but 47.25 cents below a year ago.

The blocks gained 0.75 cents Monday, as traders anticipated Tuesday morning’s Global Dairy Trade auction. They jumped 4.5 cents Tuesday to $1.2575 as traders weighed the morning’s GDT and awaited the afternoon’s March Dairy Products report.

The barrels jumped 4 cents Monday and were up a penny Tuesday, hitting $1.24.

FC Stone dairy broker Dave Kurzawski called the strength a “refill rally,” stating that “foodservice suppliers and restaurants probably went into lockdown with plenty of product on-hand, which led to a collapse in foodservice orders coming through to dairy processors in late March and the first half of April.

“Now that those inventories have been worked down and foodservice sales are improving (and likely to improve further with states loosening their lockdowns), dairy processors are likely seeing a small surge in product heading into the foodservice pipeline.”

Midwest cheese producers continue to find milk at discounted prices, according to Dairy Market News, and cheese output has increased at some of the plants that recently cut back. While food service demand is more positive, sales are not where they were last year but are trending higher, according to multiple producers. Cheese storage remains a concern.

Western retail cheese demand remains stronger than normal and food service requests continue to revive but are still lower than usual as more takeout orders are helping restaurants keep cheese orders coming. Cheese output is active but inventories are ramping up as sales are still below output. Most manufacturers have enough storage but are concerned they may run out if the quarantine persists for a longer time.

Butter climbed to $1.1975 last Thursday but closed Friday at $1.1875, up 4.25 cents on the week, ending 7 weeks of loss, but $1.0850 below a year ago.

Monday’s butter was up 0.75 cents and stayed there Tuesday at $1.1950.

Butter plants are actively churning and cream remains widely available but a number of contacts do not expect that to continue. Cream prices are trending higher and plant managers say domestic retail business is busy as customers take advantage of the low prices.

Plentiful cream is keeping western butter output heavy. Retail demand has slowed from the panic buying a few weeks ago. Some contacts report a slight increase in restaurant purchases due to drive-thru and takeout meals but butter usage is typically very light for takeout items. Educational institutions and much of their food service is shut down though some schools are providing meals, but again, that butter usage is light and not close to normal volumes. Some parts are planning to reopen restaurants in the next month but it may take time for the food service segment to get back to normal levels, says DMN.

Grade A nonfat dry milk closed Friday at 79.25 cents per pound, 1.75 cents lower on the week and the lowest it has been at since July 20, 2018, and was 26 cents below a year ago.

The powder gained 1.25 cents Monday and stayed put Tuesday, at 80.50 cents per pound.

Whey saw a Friday finish at 39.50 cents per pound, up a penny on the week and 4.75 cents above a year ago.

Traders inched the whey a quarter-cent higher both Monday and Tuesday, hitting 40 cents per pound, a CME price not seen since Aug. 21, 2019.

GDT slips 0.8%
Butter and cheese pulled this week’s Global Dairy Trade auction slightly lower as the weighted average slipped 0.8%, following a hefty 4.2% drop April 21.

The losses were led by buttermilk powder, down 10.3%. GDT Cheddar was down 6.8%, following a 1.9% uptick on April 21, and butter was down 5.8% after a 3.6% decline. Rennet casein was down 5.1%, and anhydrous milkfat was off 2.4%, after leading the losses last time by 7.0%.

Lactose topped the gains, up 7.9%, and skim milk and whole milk powder were both up 0.1%, following declines of 4.9% and 3.9%, respectively.

FC Stone equated the GDT 80 percent butterfat butter price to $1.7112 per pound U.S., down 11.1 cents from the last event. CME butter closed Tuesday at $1.1950. GDT Cheddar cheese equated to $1.8665 per pound, down 16.5 cents, and compares to Tuesday’s CME block Cheddar at $1.2575. GDT skim milk powder averaged $1.0763 per pound and whole milk powder averaged $1.2452. CME Grade A nonfat dry milk closed Tuesday at 80.50 cents per pound.

Milk ratio down again
A lower All Milk price could not be offset by lower feed costs so the March milk-feed price ratio fell for the fourth month in a row and the lowest since July 2019. The USDA’s latest Ag Prices report put the ratio at 2.23, down from 2.34 in February but compares to 2.14 in March 2019.

The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. Simply put, 1 pound of milk purchased 2.23 pounds of dairy feed containing that blend in March.

The U.S. All-Milk price averaged $18.00 per hundredweight, down 90 cents from February but is 40 cents above March 2019. California’s All Milk price slipped to $17.60, down $1 from February but 30 cents above a year ago. Wisconsin’s, at $18.10, was also down $1 from February but is 80 cents above a year ago.

The national average corn price averaged $3.68 per bushel, down a dime per bushel from February but 7 cents per bushel above March 2019. Soybeans averaged $8.46 per bushel, down 13 cents from February and 6 cents per bushel above a year ago. Alfalfa hay averaged $175 per ton, up $4 per ton from February but $11 per ton below a year ago.

The March cull price for beef and dairy combined averaged $67.50 per cwt., up $1.70 from February, $4.70 above March 2019, but is $4.10 below the 2011 base average of $71.60 per cwt.

USDA said no
Last week I reported on a letter from 23 U.S. dairy cooperatives requesting the USDA call an emergency hearing to amend Federal Milk Market Orders and establish a minimum Class I milk price mover of $15.68 per cwt. for June, July and August.

Two days later, the answer was no. The USDA stated it “would not be able to complete a rulemaking proceeding that allows all industry stakeholders the opportunity to adequately participate and implement the proposal timely.”

The proposal drew comment from many in the industry, many of which opposed the plan. The Minnesota Milk Producers Association argued, “While we all want higher milk prices, arbitrarily bumping prices to a made-up number could cause more harm than good.” The association warned: “While raising the Class I price would help those in Class I (fluid milk) areas, those farms without most of their milk in Class I would be left behind. While a mandated change in Class I milk price could affect government-related risk management programs, it could also limit hedging on the CME, which would adversely affect market liquidity.”

Bob Gray, editor of the Northeast Dairy Farmers Cooperatives newsletter, countered: “A disservice was done to dairy farmers by rejecting this hearing out of hand. You hold the hearing, weigh the facts and make a decision based on the arguments presented. That is the proper way to proceed under the circumstances we find ourselves in today.”

Local cheese maker Rowan Cooke was devastated when he heard King Island Dairy would be shutting down.

You may be interested in

Related
notes

Most Read

Featured

Join to

Follow us

SUBSCRIBE TO OUR NEWSLETTER