September 5, 2017 at 3:32 p.m.

July Class III benchmark milk price up 24 cents

By Lee Mielke- | Comments: 0 | Leave a comment

The Agriculture Department announced the July Federal order Class III benchmark milk price Wednesday at $21.60 per hundredweight, up 24 cents from June, $4.22 above July 2013, and equates to about $1.86 per gallon. While the uptick reversed two months of decline, Class III futures portend a turnaround in August. The August contract settled Thursday at $21.44; September, $21.36; October, $20.57; November, $19.73; and December at $19.35. That would portend a 2014 average of $21.68 per cwt., up from $17.99 in 2013 and $17.44 in 2012.
The July Class IV price is a record high $23.78 per cwt., up 65 cents from June and $4.88 above a year ago. The Class IV seven month average stands at $23.19, up from $18.27 at this time a year ago and $14.84 in 2012. The Class III average now stands at $22.52, up from $17.69 a year ago and $16.01 in 2012.
California's July Class 4b cheese milk price is $18.69 per cwt., down 38 cents from June, $3.04 above July 2013, $2.91 below the comparable Federal order Class III price, and is the lowest it has been since December 2013. The 4b average now sits at $20.35, up from $15.99 at this time a year ago, $14.02 in 2012, and $16.20 in 2011.
The 4a butter-powder milk price is a record high $23.58/cwt., up 39 cents from June, $4.97 above a year ago, and compares to the Federal order Class IV price of $23.78. The 4a, seven month average now stands at $23.03, up from $18.03 a year ago, $14.55 in 2012, and $19.10 in 2011. The state mandated milk price enhancements have ended and these prices reflect that termination.
Meanwhile, cash cheese is back to $2 while butter is in a meltdown. The Cheddar blocks closed Friday at $2.00 per pound, up 3 cents on the week and 22 1/2-cents above that week a year ago. The barrels, after plunging almost 12 cents the previous week, also closed at $2 Friday, up 4 1/4-cents on the week and 22 3/4-cents above a year ago. Ten cars of block traded hands on the week and six of barrel. The lagging NDPSR-surveyed U.S. average block price slipped to $2.0083 per pound, down 0.1 cent. Barrels averaged $2.0606, up 2 1/2 cents.
Midwest cheese buyers motivated by declining CME Group cheese prices during the second half of last week had mixed results finding cheese not already committed, reports Dairy Market News. Many cheese makers have already booked orders through August. Inventories are tight in many plants. Plants with committed buyers are sensitive to preserving inventory levels sufficient to meet already booked future commitments, factoring anticipated production capabilities. Some plants were able to find surplus milk to boost last week's cheese production. Others used condensed skim and nonfat dry milk to improve vat yields and production schedules. Seasonally declining milk production is limiting cheese manufacturing. Manufacturers of mozzarella are increasing production to fill building demand from school lunch buyers ordering pizza, college students returning to the pizza nutrition program, and football viewers adding to the mix. With barrels being at nearly the lowest closing prices of July during recent days, manufacturers who use process cheese have been active in seeking extra loads.
Western cheese production is steady to lower as milk receipts continue to move seasonally lower. Hot weather is affecting milk volumes. Some plants are running near capacity as milk is being moved to keep production up. Retail demand is good as wholesale prices continue to move up and down within a rather narrow range. Process cheese demand is picking up as summer grilling is ongoing. Some increased demand from foodservice accounts for fall orders is also noted. Export demand has slowed and manufacturers are busy filling contract and spot orders for domestic needs. Cheese stocks are in balance for current orders.
Cash butter, after gaining 11 cents last week and 10 3/4-cents the week before that, suffered a summer meltdown this week, plunging 19 cents, to $2.40, still 96 cents above a year ago. Twenty six loads traded hands on the week. NDPSR butter averaged $2.4109, up 2 1/2 cents.
The Central butter market tone remains firm, according to Dairy Market News. Several manufacturers noted the last few weeks of historical high prices have not affected demand enough to catch up on Fourth Quarter stock building. Churn operators note decreasing competition from ice cream manufacturers for cream and some were able to secure additional cream at lower levels, while a few took advantageous returns by selling cream after fulfilling butter commitments.
Production rates are mostly steady. 82% butter production is minimal as few new export orders come in. International prices are significantly lower than the U.S. A few buyers/resellers are beginning to look at import opportunities. Retail butter sales are mostly steady as some sellers suggest promotions are down seasonally and due to higher prices.
Western butter output is steady to lower as hot weather pulls milk volumes lower. While they typically decline at this time of year, the cumulative effect of the heat are evidenced in less bounceback when temperatures moderate.
Cash Grade A nonfat dry milk finished Friday at $1.65 per pound, down 2 1/2-cents on the week after holding steady for seven consecutive sessions and is at the lowest level since April 11, 2013. NDPSR powder averaged $1.8371, down 3.2 cents, and dry whey averaged 68.86 cents per pound, up 0.2 cent.
The Agriculture Department's National Milk Cost of Production report, issued July 25, shows June's total costs were up slightly from May. Total feed costs averaged $13.39 per cwt., down 9 cents from revised May estimates, but 16 cents above April. June 2013 estimates were not available due to budget sequestration. Purchased feed costs, at $6.82 per cwt., were up 3 cents from May but 3 cents lower than April.
Total costs, including feed, bedding, marketing, fuel, repairs, hired labor, taxes, etc., at $24.79 per cwt., were up 7 cents from May and 32 cents above the April level. Feed costs made up 54.0 percent of total costs, compared to 54.5 percent the month before.
Consumer dairy product prices will rise 3-4 percent in 2014, according to forecasts by USDA's Economic Research Service. That's slightly above the anticipated increase for all foods consumed at or away from home. The projections were unchanged from last month's report. The Consumer Price Index for food measures the average change over time in the prices paid by urban consumers for a representative market basket of consumer goods and services.
June 2014 retail dairy product prices declined 0.6 percent from May, but were up 3.9 percent from June 2013. The report predicts that 2015 retail dairy product prices will rise 2.5-3.5 percent, compared to an expected all-food price increase of 2-3 percent. Dairy product prices rose just 0.1 percent in 2013, compared to a 2.1 percent rise in 2012.
The ERS Producer Price Index (PPI) shows June 2014 farm-level milk prices declined 5.6 percent from May, but were up 19.5 percent from June 2013. June wholesale dairy prices declined 1.6 percent from May, but were up 10.7 percent from a year ago.
The full-year 2014 PPI projection of farm-level milk prices looks for a 5-6 percent rise, following an 8.1 percent increase in 2013. Wholesale dairy prices are projected to increase 4-5 percent in 2014, after increasing 3.6 percent in 2013. The 2015 PPI projection indicates farm-level prices will rise 0.0-1.0 percent, while wholesale PPI prices will increase 1-2 percent.
Meanwhile; the preliminary July milk feed price ratio was up from the revised June level, according to the Agriculture Department's latest Ag Prices report issued Thursday. The July milk-feed price ratio is at 2.44, up from 2.20 in June, and compares to 1.53 in July 2013.
The index is based on the current milk price in relationship to feed prices for a ration of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay, in other words, 1 pounds of milk today can purchase 2.44 pounds of dairy feed containing that blend.
The July U.S. average all-milk price was $23.40 per cwt., up from $23.20 per cwt. in June, and compares to $19.10 per cwt. in July 2013. July corn, at $3.80 per bushel, was down 69 cents from June and $2.99 less than July 2013. Soybeans averaged $12.70 per bushel, down $1.70 from June, and $2.60 per bushel below July 2013, and alfalfa hay averaged $216 per ton, down $6 from June, but $7 per ton more than July 2013.
Looking at the cow side; the report shows the preliminary July cull price for beef and dairy combined averaged $113.00 per cwt., up $7 from June, and $30.30 above July 2013. Prices received for milk cows averaged $1970 per head, up $160.00 from April. The 2013 average was not available due to Sequestration.
Cooperatives Working Together (CWT) accepted eight requests for export assistance this week to sell 1.645 million pounds of Cheddar cheese, and 2.222 million pounds of whole milk powder to customers in North Africa, Central and South America. The product will be delivered through January 2015 and raises CWT's 2014 cheese exports to 78.313 million pounds plus 47.995 million pounds of butter and 18.290 million pounds of whole milk powder to 42 countries on six continents. These sales are the equivalent of 1.936 billion pounds of milk on a milkfat basis. The year-to-date sums have been adjusted for cancellations.
In other trade news, the U.S. dairy industry told the Senate Finance Committee's trade subcommittee this week that the 2010 U.S.-Korea Free Trade Agreement has further strengthened U.S. dairy exports to the Korean market, even though it is not yet fully implemented.
At the same time, Shawna Morris, vice president for trade for the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC), said a new and growing type of trade barrier involving common food names has emerged that is restricting access to the Korean market for key U.S. cheeses.
"(Korea's restrictions on the use of several common cheese names) are the direct result of a separate free trade agreement with the European Union," Morris testified. "In a nutshell, the EU has been leaning on countries around the world to block imports of products by confiscating common food names and reserving them exclusively for cheese producers in their member countries."
The U.S.-Korea free trade agreement eliminated nearly all Korean tariffs on America's dairy exports. Morris said even though the agreement has only been in place since 2012, and its full impact is still years away, U.S. dairy exports to Korea in 2013 more than doubled the average of the three previous years.
Morris said the Korea FTA's dairy provisions could be a good model for the Pacific trade liberalization agreement now being negotiated with Japan, Canada and eight other countries. "We hope that Trans-Pacific Partnership will result in an agreement that we can support as robustly as we have supported the Korea-U.S. Free Trade Agreement," she testified.
Despite the positives under the U.S.-Korea FTA, Morris said, a separate 2011 Korea-European Union free trade agreement is abusing geographical indications regulations to inappropriately restrict U.S. access to the Korean market for gorgonzola, feta, asiago and fontina cheese.
"Since approval of the EU-Korea FTA, the EU has expanded around the world the model it first developed in that agreement," Morris said. "EU pressure has resulted in similar restrictions in Central America, Peru, Colombia and most recently in South Africa. Canada has also agreed to restrict cheese names. And we understand the EU is pursuing similar objectives in Singapore, Japan, the Philippines, Malaysia and Vietnam, as well as China."
Moreover, Morris said, it is clear the Europeans want to impose cheese name restrictions on the United States through the planned Trans-Atlantic trade agreement, which is also currently being negotiated. That is "entirely unacceptable," she said, adding that the U.S. dairy industry, together with other food industries and many members of Congress, want already-imposed GI restrictions rolled back instead.
"Our negotiators should only come to an agreement on Geographical Indications with the EU if it simultaneously rejects restrictions in the U.S. market on common names, addresses the trade barriers erected against U.S. exports to third-country markets, and restores access to the EU for key U.S. exports such as parmesan and feta," Morris said.

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