The U.S. Department of Agriculture announced the November federal order Class III benchmark milk price at $21.01 per hundredweight, down 80 cents from October but $2.98 above November 2021. That put the 11-month average at $22.09, up from $16.96 at this time a year ago and $18.39 in 2020.
Late Friday morning Class III futures had December at $20.20, which would result in a 2022 average of $21.93, up from $17.08 in 2021 and $18.16 in 2020.
Looking ahead, the January contract was at $19.91; February $19.86; and March was at $20, with a peak at $20.42 in September.
The November Class IV price is $23.30 per cwt, down $1.66 from October, $4.51 above a year ago and the lowest Class IV since January. Its average now stands at $24.68, up from $15.74 a year ago and $13.50 in 2020.
The CME cheddar blocks fell to $2.0650 per pound Wednesday but closed the first Friday in December at $2.10, down a nickel on the week but 24.25 cents above a year ago. They also ended November 10.50 cents higher than where they started the month at.
After dropping 24.50 cents the previous two weeks, the barrels slipped to $1.80 per pound Tuesday, lowest since Aug. 8, but rallied to finished Friday at $1.8975, up 8 cents on the week, 29.50 cents above a year ago and 20.25 cents below the blocks. They ended November 14.25 cents lower than their Nov. 1 perch.
Sales totaled seven cars of block for the week and eight for the month of November, down from 18 in October. Barrel sales totaled nine for the week and 28 for the month, down from 43 in October.
StoneX Nov. 30 Early Morning Update stated that cheese demand is “quiet right now. Buyers seem to, by and large, have what they need. On the ?ip side, we don’t get the sense that sellers are panicked either.”
Cheesemakers tell Dairy Market News that milk was plentiful after the Thanksgiving holiday. This week’s reported spot milk discounts were not as substantial mid-week as the previous week but most were below Class. Some cheesemakers said current demand slowdowns have kept them from seeking extra milk. Some said it’s the seasonal slowdown, as retailers have filled their holiday pipelines while others suggest market price declines are keeping customers on the sidelines. Cheese production is somewhat steady.
Cheese demand is steady in western retail markets while food service demand is slightly higher following Thanksgiving. Export demand is strong, though lower prices in other countries may soften this demand in the coming weeks, warns DMN. Asian purchasers continue to buy loads for second quarter 2023 and are reportedly paying a healthy premium to secure them. Barrel inventories are more ample than blocks currently. Cheesemakers said milk is available in the region, allowing them to run busy schedules, but they are hindered by labor shortages and delayed deliveries of production supplies.
CME butter fell to $2.88 per pound Thursday but closed Friday at $2.90, down 4.75 cents on the week but 89.75 cents above a year ago. There were six sales on the week and 63 for November, up from 58 in October.
Holiday-related cream access continues to keep Midwest butter churning active, said DMN, and plants were turning away cream offers because they were at capacity. Demand remains despite prices over $2.90 per pound and the late timeframe in regards to the holiday season. Market tones continue to maintain support and contacts view the markets as stable, if not slightly bullish, said DMN.
Western cream is becoming more available as milk production is improving in the region. Cream availability is outpacing strong demand and contributing to lower cream multiples. Some processors said tanker and labor shortages are making it difficult to obtain and process increased volumes of cream. Butter makers said they are actively churning, but labor shortages are preventing some from operating full schedules. Butter demand is strong in the West from both food service and retail. Inventories are available but some tightness persists. Contacts note they are booking loads of butter to ship into first and second quarter 2023.
Grade A nonfat dry milk fell to $1.3475 per pound Thursday, lowest since Sept. 16, 2021, but finished Friday at $1.36, 3.75 cents lower on the week and 20.25 cents below a year ago. Sales totaled 10 for the week and 41 for the month, up from 29 in October.
Dry whey saw its Friday finish at 45 cents per pound, up a penny on the week but 24.75 cents below a year ago. There were two sales on the week and 16 for the month of November, up from six in October.
The October Dairy Products report was issued Friday afternoon after the markets finished trading for the week. StoneX reminded us that a lot of milkfat went “missing” in August and September and, while it was produced at the farm level, it didn’t show up in the major dairy products.
“We are assuming some of that fat found its way back into the major dairy products in October, but may have continued to move directly into retail and foodservice,” StoneX said. I’ll have details from the Dairy Products report next week.
The Global Dairy Trade’s Pulse auction on Tuesday saw 2.2 million pounds of Fonterra whole milk powder sold, up from 2.1 million in the Nov. 22 Pulse, and at $3,280 per metric ton, down $25, or 0.8%, from the previous Pulse.
HighGround Dairy said, “After whole milk powder found support at the most recent main GDT auction two weeks ago Nov. 15, the two subsequent Pulse events have indicated slight price weakness. However, the two recent Pulse auction settlements remain higher versus the $3,250 per metric ton WMP value at the first November auction.”
Speaking in the Dec. 5 Dairy Radio Now broadcast, HGD’s Lucas Fuess said demand is pretty weak around the world regarding products from New Zealand despite continuous news that milk output there is weaker this season.
Don’t look for China to come to the rescue any time soon. China’s global dairy purchases will likely remain limited for the foreseeable future as protests mounted across the country due to frustration over the government’s continuing zero-COVID policy of massive lockdowns and quarantine centers.
There are reports the government may back off some. HGD reports the official newspaper of the Communist Party ran a daring opinion piece suggesting that “COVID controls change to be more targeted and effective.”
Back home, USDA announced the fluid milk portion of the solicitation of the Special Supplemental Nutrition program for Women, Infants and Children. You’ll recall close to $1 billion will be spent to purchase food for emergency food providers like food banks. Because the spending is administered through the Emergency Food Assistance program, cheese and fluid milk are the only dairy products qualified for purchase.
The solicitation seeks 20.9 million gallons or nearly 180 million pounds of milk for distribution in the seven-month period from March through September. Initial calculations show this volume equates to less than 1% of estimated fluid milk sales during the period, according to HGD.
Like the cheese solicitation in mid-November, HGD said, “It is of a disappointing volume and likely have minimal market impact. The small volume, coupled with a several month delivery period, will not pull substantial enough product from estimated supply to be bullish, though it may create plenty of noise and volatility throughout 2023.” Fuess added, however, that USDA did state it would entertain bids on products other than what USDA is requesting.
Congress passed legislation this week to avert a national railroad strike. The president, as expected, signed the measure. Fuess said it was thought this strike was averted a few weeks ago when the unions and railroad workers reached a tentative agreement but that was ultimately rejected.
National Milk President and CEO Jim Mulhern said, “A rail strike would bring chaos to agricultural supply chains, as its ripple effects on trucking and other industries would complicate transport of goods everywhere from grocery stores to export markets, all the while adding another cold blast of inflation to consumer expenses this winter as products inevitably become scarce.”
Back on the farm, the October milk feed price ratio climbed higher for the second month in a row, thanks to a higher all-milk price and lower corn and soybean prices. The USDA’s latest Ag Prices report shows the ratio at 1.92, highest since June, up from 1.74 in September and compares to 1.84 in October 2021.
The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk would only purchase 1.92 pounds of dairy feed of that blend.
The all-milk price average advanced to $25.90 per hundredweight, up $1.50 from September, and $6.30 above October 2021.
California’s price climbed to $26.60 per cwt, also up $1.50 from September and $7.30 above a year ago. Wisconsin’s, at $24.40, was up $2.30 from September and $4.70 above a year ago.
The October national average corn price was $6.50 per bushel, down 59 cents from September, after falling 15 cents the previous month, but is still a budget busting $1.48 per bushel above October 2021.
Soybeans fell to $13.50 a bushel, down 60 cents from September, after dropping $1.20 the previous month, but are still $1.60 per bushel above October 2021.
Alfalfa hay jumped $4 per ton, after gaining $2 the previous month, and averaged $281 per ton in October, another record high, and $62 per ton above a year ago.
Looking at the cow side of the ledger, the October cull price for beef and dairy combined averaged $84.10 per cwt, down $7.10 from September, $13.50 above October 2021 and $12.50 above the 2011 base average.
Quarterly milk cow replacements averaged $1,730 per head in October, up $20 from July and $390 above October 2021. Cows averaged $1,850 per head in California, up $100 from July and $550 above a year ago. Wisconsin’s average, at $1,840 per head, was down $30 from July and $390 above October 2021.
Dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Missouri, said, “October’s gain in the income over feed calculation moved to the highest level since June. Income over feed costs in October were above the $8 per cwt level needed for steady to increasing milk production for the 13th month.”
Meanwhile, dairy margins weakened over the second half of November as milk prices slumped while feed costs were steady to higher since the middle of the month according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.
“U.S. milk production grew again in October, marking the fourth consecutive month that milk production increased from the prior year,” the MW reported. “USDA reported October milk production at 18.85 billion pounds, up 1.2% from last year with a larger dairy herd and higher yields driving the increase. USDA revised the September dairy herd up by 6,000 head from the initial assessment of a 2,000 head decline to a 4,000 head increase. October’s dairy herd also increased 1,000 head from September to 9.418 million head. This would be 31,000 head higher than last October when producers were aggressively culling cows with margins under pressure. Yields increased in the Midwest last month due to mild weather while they contracted along the West Coast due to unseasonably hot weather and soaring input costs. Milk production in Texas increased 7% in October due to both a larger dairy herd and increased milk yield, eclipsing Idaho to become the third largest milk producing state in the U.S.”
The MW also detailed the October Cold Storage report, pointing out that butter stocks saw the smallest year-over-year shortfall in the past 12 months, and the draw between September and October was well below the five-year average.
The National Milk Producers Federation reported this week that total domestic consumption of milk in all products returned to positive annual growth during third quarter for the first time since early this year.
“Strengthened use of all cheese was a key driver while U.S. dairy export volumes backed off a bit in third quarter from their record pace in the prior quarter but kept the industry on an almost certain path to set yet another calendar year record,” NMPF said. “Year-to-date performance through the third quarter was 18% of total U.S. milk solids production, up from the current 17.3% calendar year record set in 2021.
“The U.S. has clearly resumed increasing milk production after many months of below year-ago levels. Despite this greater supply, dairy product prices, which had been falling in recent months, found a floor and rebounded in some cases during October. Retail price inflation for all items, the categories of food and beverages, dairy products and for most individual dairy products moderated in October from a month earlier.
“The Dairy Margin Coverage program generated a second payment for 2022, of 88 cents per cwt for tier 1 coverage at the $9.50 per cwt level in September. CME dairy futures and USDA’s dairy outlook currently indicate that milk prices will be about $2.50 to $3 per cwt lower in 2023 than this year.”