Milk continues to go up

The “Mielke” Market Weekly

The June Federal Milk Marketing Order Class III benchmark milk price was announced at $19.87 per hundredweight, up $1.32 from May, $4.96 above June 2023, and the highest Class III price since December 2022. The six-month Class III average stands at $16.92, down from $17.48 a year ago, and compares to $22.95 in 2022.

Friday morning futures portended July at $19.65; August, $20.11; September, $20.49; October, $20.33; November, $19.97; and December, $19.40.

The Class IV price is $21.08, up 58 cents from May, $2.82 above a year ago, and the highest Class IV since October 2023. Its six-month average is at $20.17, up from $18.59 a year ago, and compares to $24.67 in 2022.

The U.S. Department of Agriculture issued its long awaited recommend decision on amendments to the FMMO pricing formulas. The decision stipulates milk composition factors be adjusted to 3.3% true protein, 6.0% other solids and 9.3% nonfat solids.

It would eliminate 500-pound barrel cheddar cheese prices from the Dairy Mandatory Market Reporting survey and use only the 40-pound block Cheddar price to determine the monthly average cheese price in the formulas. Make allowances would also be revised and the butterfat recovery factor would be updated to 91% from the current 90%.

The decision returns to the “higher of” the advanced Class III and IV skim milk pricing factors in the base Class I skim milk price and implements a rolling monthly Class I extended shelf life (ESL) adjustment to “ensure better price equity for ESL products.” Class I differential values would also be updated to reflect the increased cost of servicing the Class I market.

After the final decision is published in the Federal Register, the dairy industry has 60 days to submit comments. After that, USDA has 60 days to release the final decision for a vote by producers.

National Milk Producers Federation President and CEO Gregg Doud said, “Based on our initial reading, NMPF is heartened that much of what we proposed after more than two years of policy development, and another year of testimony and explanation, is reflected in USDA’s recommended Federal Milk Marketing Order modernization plan.”

Meanwhile, you’ll recall that May milk production was down 0.9% from a year ago but that didn’t have a lot of impact on the May dairy products report, according to StoneX broker Dave Kurzawski in the July 8 “Dairy Radio Now” broadcast.

May cheese production climbed to 1.213 billion pounds, up 2.1% from April’s count which was revised up 1 million pounds and was 0.7% above May 2023. Output for the first five months of 2024 totaled 5.97 billion, up 0.6% from 2023.

Wisconsin cheese totaled 305.6 million pounds, up 3.6% from April and up 3.2% from a year ago. California produced 214.5 million pounds, up 3.9% from April, but 0.5% below a year ago. Idaho contributed 81.6 million pounds, down 8.6% from April, but 8.9% above a year ago. New Mexico, with 81 million pounds, was up 3.9% from April, but down 13.5% from a year ago.

Italian cheese totaled 505.1 million pounds, up slightly from April and 4.4% above a year ago. Year to date output, at 2.5 billion pounds, is up 4.1% from a year ago

American output climbed to 488.1 million pounds, up 4.5% from April but 5.7% below a year ago. Year to date, at 2.4 billion pounds, was down 4.7% from a year ago.

Mozzarella cheese, at 405.1 million pounds, was up 7.1% from a year ago, with year-to-date output hitting 1.99 billion pounds, up 4.9%.

Cheddar output totaled 329 million pounds, up 11.8 million pounds or 3.7% from April’s level, which was revised down 5.1 million pounds, but was down 35.3 million pounds or 9.7%, from a year ago. Year to date Cheddar hit 1.6 billion pounds, down 7.6% from a year ago.

Kurzawski says Cheddar has been underwhelming all year but pointed to the increase in Mozzarella. He said, “Demand has been really hot.” He suspects that consumers using home delivery services like Door-Dash and Uber-Eats, are reverting to pizza rather than individual meals because they are cheaper, and that has increased the draw on Mozzarella cheese.

Butter production slipped to 204.3 million pounds, down 3.3 million pounds or 1.6% from April but was up 7.9 million pounds or 4% from a year ago. Year to date butter was at 1.04 billion pounds, up 4.7% from 2023. This was the first time ever to top 1 billion pounds before the month of June, according to HighGrounds Dairy.

Yogurt production totaled 403.2 million pounds, up 5.5% from a year ago. Hard ice cream, at 65 million pounds, was up 2.3%.

Dry whey output fell to 76.6 million pounds, down 4.6 million pounds or 5.7% from April, and down 5.2 million pounds or 6.4% from a year ago. Year to date whey is at 387.7 million pounds, up 1.5%. Stocks fell to 64.5 million pounds, down 8.1 million or 11.2% from April, and down 13.6 million pounds or 17.5% from a year ago.

Nonfat dry milk output slipped to 171 million pounds, down 3.2 million pounds or 1.8% from April, and down 35.5 million pounds or 17.2% from a year ago. Year to date powder was at 814.6 million pounds, down 14.9%. Stocks continued to slowly grow, climbing to 283.6 million pounds, up 2 million pounds, or 0.7% from April, but were down 16.7 million pounds or 5.6% from 2023.

Skim milk powder production jumped to 41.9 million pounds, up 6.1 million pounds or 16.8% from April but was down 4.7 million pounds or 10.1% from a year ago. Year to date SMP was at 199.2 million pounds, down 18.5% from 2023.

Cash dairy prices start July strong. The Cheddar blocks closed the holiday shortened week at $1.90 per pound, down a penny but 50.75 cents above a year ago. The barrels finished at $1.9025, 2.25 cents higher on the week, and 52.25 cents above a year ago. Sales totaled five cars of block and 14 of barrel.

The holiday threw less of a wrench in Midwest cheesemakers’ plans than is typical, said Dairy Market News. Multiple plants were running a normal five-day workweek while milk availability holds up. Cheesemakers are trying to get ahead of a tightening milkshed in the region which faced hot temperatures and/or heavy rains. Even before the weather conditions, cheesemakers were noting lighter component levels. Cheese demand ranges from steady to strong, says DMN.

Cheese production is steady in the West. Milk demand from cheesemakers is stronger, however farm level milk output is generally declining in the region. Retail cheese demand is steady to stronger while food service is steady. Exports are steady to lighter as price competitiveness impacts the situation.

Almost defying gravity, Chicago Mercantile Exchange butter closed Friday at $3.1325 per pound, up 0.75 cents on the week and 65.25 cents above a year ago, with three sales on the week.

Butter churns ran lighter schedules this week. Cream availability was below typical holiday levels and some multiples inched higher, somewhat abnormal in a weekday holiday. Retail butter demand remains ahead of expectations. Some say prices around $3.10 per pound will keep orders in check but “seasonal butter demand is only expected to push higher moving forward,” said DMN.

Butter production ranges steady to lighter in the West as churn maintenance takes place. The mid-week holiday was expected to loosen cream availability, as availability has generally been tighter in the region. Domestic butter demand is steady to lighter for retail and lighter for food service.

Grade A nonfat dry milk finished the week a quarter-cent lower, at $1.18 per pound, 9.25 cents above a year ago, with six sales logged in for the short week.

Dry whey ended the week at 49.25 cents per pound, up a quarter-cent, highest since Feb. 26, and 26.50 cents above a year ago, with two CME sales on the week.

Dairy margins improved the last half of June as milk prices were mixed while feed costs plummeted with corn trading to three-year lows, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.

“USDA’s updated June Acreage Report and Quarterly Grain Stocks were both considered bearish for corn,” MW said. “USDA pegged corn acreage at 91.5 million, up 1.5 million from the March Prospective Plantings estimate and outside the range of pre-report estimates. June 1 corn stocks at 4.99 billion bushels were up 22% from last year and higher than the average pre-report estimate of 4.867 billion but within the range of estimates. On farm stocks were particularly burdensome, up 37% from a year ago and the highest in 25 years.”

Soybeans stocks were reported at 970 million bushels, up 22% from June 1, 2023. Soybean acreage was estimated at 86.1 million acres, up 3%. Planted acreage is up or unchanged in 24 of the 29 estimating states, said USDA.

The latest crop production report showed 11% of the U.S. corn crop was silking, as of the week ending June 30, up from 4% the previous week, 4% ahead of a year ago, and 5% ahead of the five-year average. Sixty-seven percent was rated good to excellent, down 2% from the previous week, but up from 51% a year ago.

The beans are 95% emerged, 2% behind a year ago but 2% ahead of the average. Sixty-seven percent were rated good to excellent, unchanged from the previous week, but up from 50% a year ago.

Meanwhile, a higher all-milk price offset higher corn, soybean and hay prices to lift the May milk feed price ratio. The USDA’s latest ag prices report shows the ratio at 2.24, up from 2.14 in April, and compared to 1.40 in May 2023.

The all-milk price averaged $22 per hundredweight, with a 4.17% butterfat test, up $1.50 from April, and $2.90 above May 2023, which had a 4.06% test.

The national corn price averaged $4.51 per bushel, up 12 cents from April, but $2.03 below a year ago. Soybeans averaged $11.90 per bushel, up a dime from April, but $2.50 per bushel below a year ago. Alfalfa hay averaged $202 per ton, up $7 from April but $77 below a year ago.

The May average cull price for beef and dairy combined climbed to $132 per cwt, up $2 from April, $29 above May 2023, and $60.40 above the 2011 base.

Milk production margins moved to the highest level since June 2022 at $12.17 per cwt and were $1.24 per cwt above April, according to dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Missouri. Brooks said May income over feed costs were above the $8 per cwt level needed for steady to higher milk production for the ninth month in a row. Input prices were higher in May with all three input commodities remaining in the top nine for May all time.

“Milk income over feed costs for 2024 (using June 28 CME settling futures prices for Class III milk, corn, and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $13.02 per cwt, a loss of 28 cents per cwt versus last month’s estimate. Income over feed cost in 2024 would be above the level needed to maintain or grow milk production, and up $5.01 per cwt from 2023’s level.”

May U.S. milk equivalent dairy exports were down 4.1% from last year. The good news was that low cheese prices in February and March spurred strong sailings in May, up 46.6% from May 2023, with Cheddar exports up 54.9%. HGD says cheese exports were at a second all-time high, with shipments to Mexico, a record 40.4 million pounds, 38% of the total market share.

Unfortunately, nonfat and skim milk powder exports, at 133.6 million pounds, were down 24.2%,the lowest May total since 2017, according to HGD, and down 11.7% year to date. Sales to Mexico dropped 12%.

Dry whey exports were down 1.6%, after a small gain in April. Demand from China picked up in May, reports HGD, but exports to Southeast Asia were down 30%. Butter exports were also down, dropping 19.4% from a year ago.  

StoneX’s Kurzawski said we’ve been exporting around 100 million pounds of cheese per month versus about 70 million a year ago, and that’s part of the reason CME prices are at $1.90. He warned, however, that those exports will likely fall in the next couple months as U.S. prices become uncompetitive.

The Global Dairy Trade auction saw its weighted average plunge 6.9% July 2, following a 0.5% slip June 18, and the steepest drop since Aug. 15, 2023. Volume mushroomed to 53.2 million pounds, up from 37 million pounds June 18, and the largest offering since Feb. 20. The average metric ton price fell to $3,782 U.S., down from $3,893.

Anhydrous milkfat led the declines, dropping 10.7%, after slipping 1.2% June 18. Butter was down 10.2% after gaining 6.2% June 18. GDT Cheddar was down 6.9%, after dropping 1%. Skim milk powder was down 6.1%, after inching up 0.7%, and whole milk powder was down 4.3%, following a 2.5% decline. Buttermilk powder was down 5.1%. Lactose showed the only positive move, up 0.6%, which followed a 1.9% gain June 18.

StoneX said the GDT 80% butterfat butter price equates to $2.8970 per pound U.S., down 35.6 cents from June 18 and compares to CME butter which closed Friday at $3.1325. GDT Cheddar, at $1.8053, was down 10.2 cents, and compares to Friday’s CME block Cheddar at $1.90. GDT skim milk powder averaged $1.1731 per pound, down from $1.2544, and whole milk powder averaged $1.4598 per pound, down from $1.5397. CME Grade A nonfat dry milk closed Friday at $1.18 per pound.