The Agriculture Department announced the July Federal order Class III benchmark milk price at $14.10 per hundredweight (cwt.), down $1.11 from June, $1.35 below July 2017, and the lowest Class III since February 2018. It equates to $1.21 per gallon, down from $1.31 a month ago and $1.33 a year ago.
    The seven month Class III average is at $14.37, down from $16.02 at this time a year ago and compares to $13.73 in 2016.
    Late Friday morning Class III futures portended an August price at $14.82; September, $15.63; October, $16.19; November, $16.28; and December $16.12.   
    The July Class IV price is $14.14, down 77 cents from June, $2.46 below a year ago, and the lowest Class IV since April 2018. Its seven month average is at $13.73, down from $15.30 a year ago and compares to $13.42 in 2016.
    California’s July Class 4b cheese milk price is $14.09, down 34 cents from June, $1.20 below a year ago, a penny below the FO Class III price (smallest differential since February’s 2-cents) and the lowest 4b price since March 2018. Its seven month average is at $14.06, down from $15.14 a year ago and compares $13.02 in 2016.
    The July Class 4a butter-powder milk price is $13.72, down 50 cents from June and $2.69 below a year ago. Its seven month average is at $13.42, down from $15.07 a year ago and compares to $13.11 in 2016
    You’ll recall that preliminary USDA data reported June 50-State milk production at 18.3 billion pounds, up 1.2 percent from June 2017. USDA’s latest Dairy Products report shows where that milk went.
    Cheese output totaled 1.06 billion pounds, down 1.9 percent from May but 1.8 percent above June 2017. Year-to-date output stands at 6.4 billion pounds, up 2.2 percent from a year ago. June was the 63rd consecutive month that output exceeded that of a year ago.
    Wisconsin remains the Number 1 cheese producer, hitting 276.5 million pounds in June, down 3.1 percent from May and 0.7 percent below a year ago. Number two, California produced a tad under 205 million pounds, down 5.5 percent from May and 1.1 percent below a year ago.
    Idaho provided 83.7 million pounds, up 8.1 percent from May and 1.1 percent above a year ago. Minnesota, at 62 million, was down 2.6 percent from May but 2.6 percent above a year ago. New Mexico output totaled 73.9 million pounds, down 2.0 percent from May but a whopping 16.2 percent above a year ago.
    Italian cheese totaled 449.7 million pounds, down 1.8 percent from May and 0.1 percent below a year ago. Year to date (YTD) Italian is at 2.7 billion pounds, up 2.4 percent from a year ago. Mozzarella, at 354.4 million pounds, was up 1.4 percent, with YTD at 2.1 billion pounds, up 2.7 percent.
    American type cheese production totaled 430.5 million pounds, down 2.9 percent from May but 2.7 percent above a year ago, with YTD at 2.6 billion pounds, up 1.6 percent. Cheddar output, the cheese which is traded daily at the CME, totaled 314.1 million pounds, down 1.8 percent from May but 4.0 percent above a year ago, with YTD Cheddar at 1.9 billion pounds, down 0.9 percent.
    Churns produced 143.5 million pounds of butter, down 14.7 percent from May but 3.1 percent above a year ago. YTD output is at 1.02 billion, up 4.1 percent.
    California butter totaled 44.5 million pounds, down 12.3 percent from May but a hefty 9.5 percent above a year ago. Pennsylvania output fell to 6.6 million pounds, down 23.1 percent from May and 10.7 percent below a year ago.
    Yogurt output amounted to 369.3 million pounds, down 1.9 percent from a year ago, with YTD output hitting 2.2 billion pounds, down 3.0 percent.
    Dry whey for human consumption totaled 85.9 million pounds, up 2.9 percent from May but down 0.8 percent from a year ago. Stocks totaled 71.3 million pounds, up 7.4 percent from May but 13.1 percent below those a year ago.
    Nonfat dry milk production totaled 148.2 million pounds, down 7.3 percent from May and 9.0 percent below a year ago. YTD output stands at 968.8 million pounds, up 0.8 percent. Stocks climbed to 301.9 million pounds, up 31.2 million pounds or 11.5 percent from May and are 4.1 million pounds or 1.4 percent above those a year ago.
    Skim milk powder production totaled 58.9 million pounds, up 16.9 percent from May and 49.1 percent above a year ago. YTD skim is at 284.2 million pounds, down 2.1 percent from a year ago.
    FC Stone’s Dave Kurzawski says “The startling number out of this report was the powder stocks number over 300 million pounds.” He points out that “Stocks came in at 301.9 million up 11.5 percent month over month on relatively soft production of 148.2 million pounds. We assumed demand slowed in June, but not by this much. Using our estimates today’s report suggests domestic disappearance for June was down 42 percent from last year. Something doesn’t quite add up there, either there will likely be a revision for the June number or we’ll see sharply higher July demand.”
    The report was less dramatic for cheese, he said, with “a strong shift out of other American style cheeses into Cheddar,” and “Butter continued its grind higher as hot weather in the US and Europe was keeping bids beneath the market.” He says the market may be more focused on heat and tighter cream supplies than the Dairy Products report.”
    July was the real hot month, especially in the West, he argues, “We really need to see those numbers later this month. What we can tell you is that we expect the heat to have a material impact on the fat content of milk. While you may say ‘this is normal,’ what’s not normal is the material decline in fat in European milk.”
    A slightly higher U.S. All Milk price average and lower feed prices pushed the June milk feed price ratio up for the first time in six months. The Agriculture Department’s latest Ag Prices report shows the June ratio at 1.98, up from 1.90 in May but down from 2.31 in June 2017.
    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 1.98 pounds of dairy feed containing that blend.
    The U.S. All-Milk price averaged $16.30 per cwt), up a dime from May but a dollar below June 2017. Michigan was on the bottom, with $14.80, unchanged from May; California was at $15.63, down 3 cents from May; and Wisconsin was at $16.50, down 20 cents from May.
    June corn averaged $3.58 per bushel, down 9 cents from May but is 15 cents per bushel above June 2017. Soybeans averaged $9.55 per bushel, down 29 cents from May but 45 cents per bushel above a year ago. Alfalfa hay averaged $181 per ton, down $8 from May but $27 per ton above a year ago.
    Looking at the cow side of the ledger; the June cull price for beef and dairy combined averaged $66.30 per cwt., up a dime from May, $10.20 below June 2017 and $5.30 below the 2011 base average of $71.60 per cwt.
    The Daily Dairy Report’s Sarina Sharp adds that “The price being paid across the country for quality Holstein springers has averaged $1,200 per head over the past month, putting the cost of replacement heifers at lows not seen in decades.”
    Block Cheddar closed August 3 at $1.5875 per pound, up 6 3/4-cents on the week and the highest since June 18, but 11 cents below a year ago. The barrels finished at $1.4750, down 4 1/2-cents, 5 1/2-cents below a year ago, and 11 1/4-cents below the blocks, with 3 cars of block sold on the week and 52 of barrel.
    FC Stone’s Kurzawski wrote in his August 2 Early Morning Update; “The relationship between blocks and barrels has been exacerbated by trade wars as less cheese exports means more surplus milk will move into barrel production that will have to find a home domestically. Although there are some headlines that the US is making progress on trade deals with Mexico on autos. If there’s a deal made with Mexico that could significantly change the perception of the cheese markets as we will have more certainty on the US export prospects.”
    He talked about the reasons for the block/barrel relationship in the August 6 Dairy Radio Now broadcast but especially on other export destinations for U.S. dairy products that might help offset losses to Mexico and China.
    His first point was that the U.S. will not likely lose 100 percent of its trade with either country. If we lose, say 20 percent of our sales with Mexico, for example, if other countries increased their purchases by 6 percent, we would offset that loss.
    “I think we can certainly do that out of Southeast Asia, Indonesia, Vietnam, even Japan potentially, maybe the Middle East” Kurzawski concluded. “It’s not an insurmountable number. It is a number that remains to be seen. We don’t know if that’s going to be the case, to fully offset it. I think it will be responsive to price, so if the U.S. can maintain a little bit of discount to the world prices going forward, I think we have a seat at the table to move product globally in a bigger way.”
    Dairy Market News reports that some Midwest specialty cheese producers plan to cut production by a day per week during their slower period while pizza cheesemakers are gearing up for heavier sales as schools and colleges prepare to open their doors, and football season draws near. Cheese producers are “slightly anxious, but hopeful regarding some steadiness moving forward in the cheese markets.” A majority of spot milk purchases moved closer to flat market, while some discounts and premiums were reported. The range was $3 under to $1 over Class III but producers who took on discounted spot milk do not expect the same deals the following week, according to DMN.
    Western cheese output is steady, and manufacturers have plenty of milk. Even with summer heat suppressing milk volumes and components, cheese output has been active. Inventories were at record levels in June. Cheddar stocks are in “relatively good balance, while mozzarella and hard Italian cheeses are long.” Cheese purveyors describe demand as not good enough but are hopeful that as schools start up and football seasons begin, institutional food service sales may improve and pizza sales may start to draw down mozzarella stocks.
    CME butter finished Friday at $2.32 per pound, up 5 3/4-cents and the 4th consecutive week of gain, but is 41 cents below a year ago. 25 carloads found new homes on the week.
    Butter makers continue to sell cream to the spot market instead of churning. Butter producers maintain that retail and food service sales are meeting summer expectations. Fall outlooks are mixed but most lean bullishly, with suggestions that the lack of churning currently will lead to “a balanced, if not favorable, supply/demand ratio.”
    Tighter cream stocks are restricting Western butter manufacturing as ice cream and butter makers compete for available cream. Issues with truck obtainability combined with higher temperatures are making it tougher to move cream in some areas. Some processors are selling part of their cream to take advantage of the higher premiums and to save on storage. As a result, butter stocks, although still abundant, are not building. Butter demand is mixed, according to DMN.
    Cash Grade A nonfat dry milk closed a penny higher on the week, at 82 3/4-cents per pound, 3 1/2-cents below a year ago, with 21 cars selling on the week.
    Spot dry whey closed Friday at a fresh high for the brand new market at 43 1/2-cents per pound, also up a penny on the week, with no sales reported.
    Cooperatives Working Together (CWT) member cooperatives accepted offers of export assistance from CWT that helped them capture contracts to sell 908,305 pounds of Cheddar cheese and 14.495 million pounds of whole milk powder to customers in Asia and Oceania. The product has been contracted for delivery through December.
    CWT’s 2018 exports now total 45.446 million pounds of American-type cheeses, 12.085 million pounds of butter (82 percent milkfat) and 27.106 million pounds of whole milk powder to 29 countries on five continents. These sales are the equivalent of 889.245 million pounds of milk on a milkfat basis. The totals were adjusted due to cancellations, according to the CWT.
    In politics the Senate, in an 84 to 14 vote, defeated a proposed amendment to an appropriations bill that would have prohibited the Food and Drug Administration from enforcing dairy standards of identity on product labels. At issue is the practice of plant-based beverages calling themselves “milk.”
    The National Milk Producers Federation praised the action, stating; “We are very pleased with the Senate’s overwhelming rejection of Senator Mike Lee’s (R-UT) blatant attempt to interfere with the ability of the Food and Drug Administration to enforce standards of identity for dairy products and other foods. We fought this amendment because it would have undermined the decades-long policy, established by Congress, that the FDA should regulate food names in order to promote honesty and fair dealing in the interest of consumers.”