Milk prices are better than expected early this year, but higher prices are certainly welcomed. The June Class III milk price of $19.87 was the highest since December 2022 and the highest since June 2022. The same was true for Class IV milk with a June price of $21.08 the highest since December 2022 and the highest June since 2022.
The income over feed price continues to improve with the May price at $10.52 and is the best income over feed price since November 2022. Grain prices are under significant pressure which could improve income over feed significantly as we move through the next few months. Eventually, this will provide a great opportunity to lock in profitable feed prices for the upcoming year.
The May Dairy Products report showed American cheese production 5.7% below May 2023 totaling 488.188 million pounds and nearly the same level as May 2022. American cheese production has been below the previous year since January. It is uncertain as to the reason cheese production has been running lower.
The easy explanation would be that milk production has been below a year ago this year. However, U.S. milk production has been running below the previous year since July 2023, yet American cheese output exceeded the prior year throughout the last half of 2023. There seems to be a shift to other varieties of cheese. Italian-type cheese production has surpassed the previous year and is substantially higher than in 2023.
Total cheese production has been mixed with some months higher and some lower. This has kept American cheese inventory below last year setting the stage for potentially higher prices if demand increases and runs similar to a year ago. So far, demand has not increased sufficiently to cause concern for cheese buyers. They have not been aggressive on the daily spot market with cheese prices holding in a choppy pattern.
A positive development in the market is the strong exports of cheese. Cheese reached the highest-ever exports during March, April, and May. This is positive as higher cheese prices have not turned international buyers away. Higher prices may have an impact as the year unfolds but overall cheese exports are expected to remain strong.
International butter demand is improving and may see a rebound in exports through much of the rest of the year. If butter shows continued strength in exports, the price may increase over the next few months. The butter price may not set another record this year, but further strength is likely.
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