Benchmark at 5-year high

The October Federal order Class III benchmark milk price hit a five-year high at $18.72 per hundredweight, up 41 cents from September, $3.19 above October 2018, and the highest Class III since November 2014.

It is $3.29 above what California’s October 2018 4b cheese milk price was. The nation’s largest milk producing state marked the one year anniversary of entering the Federal order Milk Marketing Order system on November 1.

Monday’s Class III futures settlements portended a November price at $20.19 before heading lower in December to $19.70. The 2020 peak was at $18.12 in January, with the lowest 2020 price at $16.95 in March.

The 2019 Class III average is at $16.37, up from $14.72 a year ago and $16.18 in 2017.

The October Class IV milk price is $16.39, up 4 cents from September and $1.38 above a year ago. The 2019 average stands at $16.23, up from $14.06 a year ago and $15.44 in 2017.

Barrels keep climbing

Most cash dairy prices ended October strong. Block Cheddar climbed to $2.1750 per pound the day after Halloween but closed Friday at $2.1550, up 3.25 cents on the week, after gaining 15.5 cents the previous week, and is 69.75 cents above a year ago.

The barrels closed Nov. 1 at $2.3250, up 7.5 cents on the week on unfilled bids, after pole vaulting 25 cents the previous week, and were 98.5 cents above a year ago.

24 cars of block traded hands last week at the CME and 69 on the month, up from 63 in September. No barrel was sold last week but 66 cars were sold on the month, down from 80 in September.

The blocks inched a half-cent higher Monday but gave back a quarter-cent Tuesday, slipping to $2.1575, as traders absorbed the morning’s Global Dairy Trade auction and anticipated the afternoon’s September Dairy Products report, which I will detail next week.

The barrels were up a penny and a half Monday and they gained another 3.5 cents Tuesday, shooting to $2.3750, highest since September 25, 2014. They’re also at an inverted 21.75 cents above the blocks.

Central cheesemakers continue to report steady, somewhat tight milk supplies, according to Dairy Market News. Cheese production is still slightly slower than this time in recent years while cheese demand is good for short term needs. Barrel makers continue to report mostly bullish demand and some process cheese manufacturers say they are oversold week to week.

The barrel pricing topping the blocks was a surprise to many, according to DMN, and contacts credit a tightness of barrels. Increased governmental cheese purchases seem to be helping that trend. Demands for the holiday are surfacing “bit by bit,” says DMN, but domestic sales out west were close to the previous week's levels. Export sales have improved slightly.

Inventory is sufficient and cheese output is active, prompted by a stable to increasing milk supply.

CME butter closed Nov. 1 at $2.08 per pound, up 2 cents on the week but 22 cents below a year ago. Twenty-nine cars traded hands on the week, 115 on the month, up from 102 in September.

The butter lost 1.75 cents Monday and stayed there Tuesday at $2.0625.

DMN says there was concern that cream availability for churning could dwindle as Class II and Class III producers took more cream for holiday-related items but butter makers say that was not the case last week. Bulk butter supplies are generally available and market tones are “maintaining a steadiness that market participants are accustomed to.” Some analysts expect to see a sub-$2 price point prior to seeing $2.25 again. Others expect continued steadiness, explaining that with Thanksgiving falling later this year, Nov. 28, it will assist the market later into the season.

Western retail butter sales are seasonally strong but bulk demand is mixed. Cream is adequate for most processing and butter production is steady. Butter stocks are getting pulled lower but the latest cold storage report did not match the typical expectation of a large decrease for the month.

Grade A nonfat dry milk saw a Nov. 1 finish at $1.1825 per pound, 3 cents higher on the week and 28.25 cents above a year ago. 16 cars sold on the week, with 60 for the month, up from 49 in September.

Monday’s powder was up 0.75 cents and it tacked on 0.25 cents Tuesday, hitting $1.1925, highest since February 18, 2015.

CME dry whey fell to 26.75 cents per pound last Tuesday, lowest since March 13, 2018. It closed Nov. 1 at 28.25 cents, unchanged on the week but 16.25 cents below a year ago. Product continues to make its way to Chicago, with 48 loads traded last week and 305 on the month, up from just 50 in September.

The whey eased back a quarter-cent, both Monday and Tuesday, slipping to 27.75 cents per pound.

GDT up 3.7%

The international dairy market got a boost Tuesday as the weighted average of products offered in this week’s Global Dairy Trade auction (GDT) jumped 3.7%. That followed a 0.5% gain on Oct. 15, 0.2% Oct. 1, and 2.0% on Sept. 17.

Skim milk powder led the charge this time, up 6.7%, following a 2.4% gain last time.

Buttermilk powder was up 5.4% and rennet casein was up 5.1%. Whole milk powder was up 3.6%, after holding steady last time, and anhydrous milkfat was up 2.6%, after inching up 0.8%. Even butter inched higher, up 0.2%, after slipping 0.4%.

Lactose was down 1.9%. It was not traded last time and GDT Cheddar was off 0.6%, after a 2.2% descent last time.

FC Stone equated the GDT 80 percent butterfat butter price to $1.8221 per pound U.S. CME butter closed Tuesday at $2.0625. GDT Cheddar cheese equated to $1.6371 per pound, down 1.2 cents and compares to Tuesday’s CME block Cheddar at $2.1575. GDT skim milk powder averaged $1.3262 per pound and compares to $1.2441 last time. Whole milk powder averaged $1.4762, up from $1.4212. CME Grade A nonfat dry milk closed Tuesday at $1.1925 per pound.

Milk feed ratio up

A higher All Milk price pulled the September milk feed price ratio higher for the third month in a row. The USDA’s latest Ag Prices report put the ratio at 2.33, up from 2.26 in August and compares to 2.13 in September 2018.

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 2.33 pounds of dairy feed containing that blend.

The U.S. All-Milk price averaged $19.30 per hundredweight, up 40 cents from August, $2.40 above September 2018, and the highest in almost five years.

The national average corn price averaged $3.80 per bushel, down 13 cents from August, after falling 23 cents from July, but is 40 cents per bushel higher than September 2018.

Soybeans averaged $8.35 per bushel, up 13 cents from August, after dropping 16 cents from July, and are 43 cents per bushel below a year ago. Alfalfa hay averaged $181 per ton, up $2 from August and $2 per ton above a year ago.

The September cull price for beef and dairy combined averaged $65.60 per hundredweight, down $2.70 from August, $4.80 above September 2018, but $6 below the 2011 base average of $71.60 per hundredweight.

Milk cow replacements averaged $1,310 per head for the quarter in October, up $70.00 per head from July, and $80 per head above 2018. They averaged $1,400 per head in California, up $100 from July and $200 above a year ago. Wisconsin cows averaged $1270 per head, up $60 from April and $90 above October 2018.

From: Capital Press