Dairy markets continue upward
Cash dairy prices moved higher last week as hot summer weather and back-to school demand influenced the market.
The Cheddar blocks ended up at $1.6575 per pound, up 7 cents on the week but still 8 1/2-cents below a year ago. The barrels closed Friday at $1.62, up 14 1/2-cents on the week and 6 1/2-cents above a year ago.
The blocks inched up a quarter-cent Monday to $1.66, highest price since May 10, 2018, but gave back a half-cent Tuesday. The barrels were up 2 3/4-cents Monday and another 2 1/4-cents Tuesday, hitting $1.67, highest since Nov. 22, 2017, and 1 1/2-cents above the blocks, an inversion not seen since Dec. 19, 2017.
Overall Midwest cheese production is steady, according to Dairy Market News. Preseason football drives Italian and pizza cheese sales. Some manufacturers have cut production by a day or so a week. Some are seeing lower milk supplies as Class I demand gears up for school openings. Spot milk ranged 50 cents under to $1.00 over class.
Western cheese output remains active as milk yield is mostly at normal levels and sufficient to meet cheese processing requirements. Cheese inventories are plenteous but “overall, the market undertone seems to be firming,” according to DMN, however, trade war rhetoric with China heated up again last week as the game of chicken continues.
Cash butter closed Friday at $2.34 per pound, up 2 cents but 34 1/4-cents below a year ago.
The butter gained 2 3/4-cents Monday and added 2 cents Tuesday, hitting $2.3875, highest since June 11, 2018.
DMN says butter output is near its lowest point of the year. Sales remain steady to a bit slower but contacts are confident in the market direction, which has been steady to slightly bullish all year. School demand is increasingly a market factor helping sales.
Western butter is trending lower. Higher temperatures across the West have boosted ice cream sales, giving a lift to cream multiples.
Grade A nonfat dry milk closed Friday at 83 cents per pound, up a quarter-cent on the week but 2 cents shy of a year ago.
Monday’s powder was unchanged and it dropped a penny Tuesday, to 82 cents per pound.
Dry whey closed Friday at 44 1/4-cents per pound, up three-quarter cents on the week.
The whey was steady Monday but bid a quarter-cent higher Tuesday to a record high 44 1/2-cents per pound for the new CME market.
The Agriculture Department left its 2018 milk production estimate unchanged in Friday’s World Agricultural Supply and Demand Estimates report but raised its 2019 estimate on slightly higher cow numbers and increased milk per cow.
2018 production and marketings were projected at 217.9 billion and 216.9 billion pounds, respectively, unchanged from last month’s estimates. If realized, 2018 production would be up 2.4 billion pounds or 1.1 percent from 2017.
2019 production and marketings were estimated at 220.9 billion and 219.9 billion pounds, respectively, up 300 million pounds on both. If realized, 2019 production would be up 3.0 billion pounds or 1.4 percent from 2018.
Cheese, butter, NDM and whey price forecasts were raised for 2018. Prices for cheese, NDM and whey were also raised for 2019 as demand strength is expected to carry into next year. The 2019 butter price forecast was unchanged.
The 2018 Class III and Class IV price forecasts were raised from last month to reflect the higher dairy product price forecasts. The 2019 Class III price forecast was raised on higher forecast cheese and whey prices.
Look for a 2018 average of $14.50-$14.70 per hundredweight, up from the $14.30-$14.60 predicted a month ago and compares to the 2017 average of $16.17 and $14.87 in 2016. The 2019 average is now expected at $14.95-$15.95, up from the $14.70-$15.70 projected in last month’s report.
The Class IV price forecast was raised on the stronger forecast NDM price. It’s projected to average $13.95-$14.25, up from the $13.65-$14.05 expected a month ago and compares to $15.16 in 2017 and $13.77 in 2016. The 2019 average is now projected at $13.75-$14.85, up a dime from last month’s estimate.
U.S. corn production was forecast at 14.6 billion bushels, down less than 1 percent from last year. Based on conditions as of Aug. 1, yields are expected to average a record high 178.4 bushels per acre, up 4.4 bushels from last month’s estimate and is 1.8 bushels above 2017. If realized, this will be the highest yield on record for the U.S.
Soybean production is forecast at a record 4.59 billion bushels, up 4 percent from last year. Based on conditions as of August 1, yields are expected to average 51.6 bushels per acre, up 2.5 bushels from last year.
California Class I up
The California September Class I milk price is $16.87 per hundredweight for the north and $17.14 for the south. Both are up 73 cents from August but $1.78 below September 2017.
That put the nine-month average at $16.21 for the north, down from $17.93 a year ago and compares to $15.78 in 2016. The southern average, at $16.48, is down from $18.20 a year ago and compares to $16.05 in 2016.
New safety net
The USDA’s Risk Management Agency announced a new insurance plan for dairy producers that insures against unexpected declines in quarterly milk sales. Sign-up for the new product begins Tuesday, Oct. 9, with the first available coverage starting the first quarter of 2019.
Those interested in purchasing Dairy Revenue Protection must do so through an agent selling on behalf of an approved insurance provider. A list of crop insurance agents is available at all USDA Service Centers and online at the RMA Agent Locator.