By by Lee Mielke
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Agriculture Department announced the June Federal Order Class III benchmark milk price this week at $21.36 per hundredweight, down $1.21 from May but $3.34 above June 2013, $2.29 above California's comparable 4b cheese milk price, and equates to about $1.84 per gallon. The half-year Class III average now stands at $22.68, up from $17.74 at this time a year ago and $15.90 in 2012. Class III futures settled Wednesday as follows: July, $21.25; August, $20.38; September, $20.23; October, $20.23; November, $19.79; and December $19.48.
The Class IV price is $23.13, up 48 cents from May and $4.25 above a year ago. Its 2014 average now stands at $23.09, up from $18.17 a year ago and $14.90 in 2012.
The four-week, NDPSR-surveyed cheese price used in calculating this month's prices was $2.0358 per pound, down 13.5 cents from May. Butter averaged $2.1874, up 14 cents. Nonfat dry milk averaged $1.8633, down 1.4 cents, and dry whey averaged 67.89 cents per pound, up fractionally from May.
The California Department of Food and Agriculture announced its June 4b cheese milk price at $19.07 per hundredweight, down another 27 cents from May after losing $2.39 last month, but is still $3.16 above June 2013. That put the midyear 4b average at $20.63, up from $16.05 at this time a year ago and $13.83 in 2012.
The 4a butter-powder price is $23.19, up 62 cents from May and $4.80 above a year ago. The 4a average now stands at $22.94, up from $17.94 a year ago and $14.73 in 2012.
These prices include the CDFA-mandated price enhancement but this will be the final month. As of July 1, all California prices will be under the old formulas. The Milk Producers Council's Rob Vandenheuvel says the state's dairy producers did not want to go through the hearing process again to renew that enhancement and view the creation of a Federal milk market order to be the best way to proceed from here.
Vandenheuvel stated that the changes to the formulas for all five classes of milk would eliminate the 3 cent per hundredweight increase on Class I, 5 cents on Classes 2 and 3, and 15 cents per hundredweight on Classes 4a and 4b. The total impact will be about a 12 cent per hundredweight drop in July's Overbase price, compared to the formula used for the past year.
Meanwhile, the California Department of Food and Agriculture (CDFA) turned down a June 17 request by California Dairies Inc. (CDI) for a public hearing to consider changes to the state's Class 4a pricing formula. CDI charged "The manufacturing cost allowances for butter and powder and the butter f.o.b. price adjuster were last changed Sept. 1, 2011. However, all of the manufacturing cost data collected and published by CDFA since then indicates the trend is toward higher costs, and further adjustments to the butter and powder manufacturing cost allowances are both warranted and justified."
A letter from CDFA to CDI stated, "The Secretary does not want to impede the ongoing efforts of the California Dairy Future Task Force in developing potential alternative pricing scenarios that address the issues of our state's antiquated pricing system."
MPC's Vandenheuvel said CDI's proposal would have decreased the state's monthly Class 4a price by about 23 cents per hundredweight.
Cheese prices are below $2 per pound again. The Cheddar blocks closed the 4th of July-holiday-shortened week at $1.9675 per pound, down 5¼ cents on the week but still 30¼ cents above a year ago. The barrels closed last Thursday at $1.9850, down 2½ cents on the week, 31½ cents above a year ago, and 1¾ cents above the blocks. Twenty six cars of block traded hands on the week and three of barrel. The NDPSR-surveyed U.S. average block price hit $2.0388, up .7 cent, and the barrels averaged $2.0165, up .3 cent.
Cheese production is steady across the nation as manufacturing milk is readily available in most regions. Cheese plants are operating at or near capacity to take advantage of the milk supplies but also to secure spot offerings at below Class pricing. Increased offerings of condensed skim are also available to boost vat yields.
Cash butter skyrocketed 11 cents last Monday, then shifted into reverse and gave it all back, closing last Thursday at $2.39 per pound, unchanged on the week but 86½ cents above a year ago. Nineteen cars were sold on the week. NDPSR butter averaged $2.2095, up 3.5 cents.
Additional butter operators sold cream supplies, leaving churn rates reduced. The current tight cream situation has created more demand for bulk butter, which is exceeding spot offerings. Production rates are steady to lower. Export orders are reduced as international prices remain lower than U.S. prices. Retail sales are mixed amongst the regions with some affected by current high prices.
Cash Grade A nonfat dry milk closed last Thursday at $1.7725, down 3½ cents on the week. Four cars were sold. NDPSR powder averaged $1.8796, up .6 cent, and dry whey averaged 68.31 cents per pound, up .4 cent.
The preliminary June milk feed price ratio was unchanged from the revised May level, according to USDA's Ag Prices report. The June milk-feed price ratio is at 2.24, unchanged from May, and compares to 1.52 in June 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 pound of milk today can purchase 2.28 pounds of dairy feed of that blend.
The June U.S. average all-milk price was $23.30 per hundredweight, down from $24.20 in May, and compares to $19.50 in June 2013. June corn, at $4.37 per bushel, was down 34 cents from May and $2.60 less than June 2013. Soybeans averaged $14.10 per bushel, down 30 cents from May, and $1 per bushel below a year ago, and alfalfa hay averaged $222 per ton, down $2 from May, but $2 per ton more than June 2013.
The report shows the preliminary June cull price for beef and dairy combined averaged $105 per hundredweight, up $1 from May, and $23.40 per hundredweight above June 2013.
April 2014 packaged fluid milk sales totaled 4.15 billion pounds, down 4.5 percent from April 2013, according to USDA's Dairy Market News. (Sales were not adjusted for calendar considerations as in previous monthly reports). April sales of conventional products, at 3.94 billion pounds, were down 5 percent from a year ago; organic products, at 205 million pounds, were up 7.4 percent. Organic represented about 4.95 percent of total sales for the month.
January-April 2014 total packaged fluid milk sales, at 17.04 billion pounds, were down 2.2 percent from the same period a year earlier. Year-to-date sales of conventional products, at 16.21 billion pounds, were down 2.9 percent. Organic products, at 828 million pounds, were up 13.4 percent. Organic represented about 4.86 percent of total sales.
Last Tuesday's Global Dairy Trade auction saw the weighted average for all products reverse direction again and back down 4.9 percent after inching up .9 percent in the June 17 event. The price index had seen declines since reaching its high on Feb. 4.
The downturn was led by a 13.6 percent plunge in butter, which was up 1.8 percent in the last event. Anhydrous milkfat was next, down 7.4 percent, down 3.8 percent last time. GDT whole milk powder was down 5.4 percent, up 2.4 percent in the last event. Cheddar cheese was down 2.9 percent, after a 2.4 percent increase last time. Rennet casein was down 2.1 percent, following a 4.6 percent increase in the June 17 event. Skim milk powder was off .9 percent, after seeing a .2 percent decline last time.
The only product showing an increase was butter milk powder, up 4 percent, following a 17 percent boost in the last event.
FC Stone reports the average GDT butter price equated to about $1.4427 per pound U.S., down from $1.6780 per pound in the last event ($1.4075 per pound on 80 percent butterfat, down from $1.6370 per pound). CME butter closed last Thursday at $2.39 per pound. The GDT Cheddar cheese average was $1.9170 per pound U.S., down from $1.9873. The U.S. block Cheddar CME price last Thursday was at $1.9675. GDT skim milk powder, at $1.7283 per pound U.S., is down from $1.7486, and the whole milk powder average at $1.5690 U.S., is down from $1.6594 in the last event. The CME Grade A nonfat dry milk price last Thursday stood at $1.7725 per pound.
Cooperatives Working Together accepted 20 requests for export assistance this week to sell 7.839 million pounds of Cheddar cheese, 110,231 pounds of butter (82 percent butterfat) and 972,239 pounds of whole milk powder to customers in Asia, the Middle East, North Africa, South America and Oceania. The product will be delivered through December 2014 and raises CWT's 2014 cheese exports to 58.762 million pounds, plus 47.521 million pounds of butter and 14.568 million pounds of whole milk powder to 41 countries.
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