June Dairy Month is a little happier for dairy farmers. The Agriculture Department announced the May Federal order Class III milk price at $18.57 per hundredweight (cwt.), up $1.09 from April and 2 cents above May 2024. That put the five month average at $19.04, up from $16.33 at this time a year ago, and compares to $17.99 in 2023.
Friday, June 6, futures settlements portend a June price at $18.77; July, $18.84; and August at $19.33, and a peak of $19.44 in September before heading back down.
The May Class IV price is $18.13, up 21 cents from April, but 2.37 below a year ago. Its five month average stands at $18.98, down from $19.99 a year ago, and compares to $18.66 in 2023.
Speaking of milk prices and June Dairy Month, Federal market order reform changes went into effect in June and, as StoneX put it, “For the first time in modern history the barrel cheese price will have no impact on the National Dairy Product Sales Report weekly/monthly pricing. With a flip of the calendar, the cheese futures contract is now a block cheese futures contract.”
The May 30 Daily Dairy Report says the changes also included increased make allowances for processors and a return to the “higher of” Class III or IV milk price for Class I values. “Bottlers will pay producers based on updated geographic premiums, known as ‘location differentials’ meant to adjust for regional imbalances in the supply and demand of fresh milk. The new Class III formula will also assume that processors recover 91% of the butterfat in milk through the cheese making process, up from 90% previously,” according to the DDR.
“Milk pricing formulas will change once again in December,” the DDR adds, “When standardized component levels rise to better reflect the massive increase in butterfat, protein, and milk solids levels in the U.S. milk.”
Dairy margins were flat to slightly stronger over the last half of May as movements in the milk and feed markets were largely offsetting, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC. “The milk market continues to recover as strong domestic and export demand counteracts rising milk production,” the MW stated.
It detailed the April Milk Production report, stating that April saw the largest year-over-year gain since August 2022. It was the fourth consecutive month of increasing production, relative to the prior year. The MW credited an expanding herd which was the largest reported since mid-2021, except for a single month in March 2023.
The MW also detailed the April Cold Storage report, pointing out that the butter inventory was below a year ago for the first time 15 months, which suggests strong demand. “Fat tests increased to 4.36% in March, up 0.09% from a year ago. U.S. butter commands a $1.26 per pound advantage to European butter after adjusting for fat levels which is helping to support exports.” “Cheese inventories saw the 14th consecutive monthly decline but the smallest year-over-year difference in over 12 months,” the MW concluded.
Another drop in the All Milk Price, a higher corn price, and a rise in alfalfa hay pulled the milk feed price lower again. The USDA’s latest Ag Prices report shows the April ratio at 2.27, down from 2.46 in February, and compares to 2.13 in April 2024.
The All Milk Price averaged $21 per cwt. in April, with a 4.32% butterfat test, down $1 from March which had a 4.36 test, and compares to $20.40 in April 2024, with a 4.24% test.
The national corn price averaged $4.62 per bushel, up a nickel from March, and 23 cents above a year ago. Soybeans averaged $10.20 per bushel, unchanged from March, but $1.60 below a year ago. Alfalfa hay averaged $180 per ton, up $13 from March, but $15 below a year ago.
The April average cull price for beef and dairy combined was at $142 per cwt., up $2 from March, $12 above April 2024, and $70.40 above the 2011 base average.
U.S. milk tanks are filling up and output surpassed year ago levels for the fourth month in a row in April. The Agriculture Department’s preliminary data in its latest Milk Production report shows output at 19.37 billion pounds, up 1.5% from April 2024, biggest increase since Aug. 2022. The 24 State production hit 18.6 billion, up 1.6%. The March totals were revised up 26 million pounds.
StoneX points out that fat and protein content in the milk were also up from last year and put component adjusted production up 3.0%.
April cow numbers totaled 9.425 million, up 5,000 head from March and 89,000 or 1.0% more than a year ago. The March count was revised up 16,000 head. The 24-State count, at 8.983 million, was up 7,000 from March, and 93,000 or 1.0% above a year ago. The March count was revised up by 12,000 head.
April output per cow in the 50 states averaged 2,055 pounds, up 11 pounds or 0.5% from a year ago, and up 12 pounds or 0.6% in the 24 State data.
California milk output was down 49 million pounds or 1.1% from a year ago and down for the seventh month in a row. Cow numbers were up 1,000 head but output per cow was down 30 pounds, as the nation’s biggest milk producer continues its recovery from bird flu.
Wisconsin inched up 0.1% on a 4 million pound increase. Cow numbers were down 7,000 head, but output per cow was up 15 pounds.
Idaho output was up 59 million pounds or 4.2%, thanks to 28,000 more cows. Output per cow was unchanged.
Kansas grabbed our attention with an 11.4% jump, thanks to 16,000 more cows milked and a 40 pound gain per cow. Michigan was up 2.0% on 6,000 more cows and a 15 pound gain per cow. Minnesota was up 0.9%, despite a loss of 4,000 cows. Output per cow was up 35 pounds.
New Mexico was up 2.4% on 5,000 additional cows and a 5 pound gain per cow. New York was up 1.4% on a 30 pound increase per cow. Cow numbers were unchanged. Oregon was down 1.9% on 2,000 fewer cows and a 5 pound drop per cow. Pennsylvania was up 0.1%, on a 5 pound gain per cow offsetting a loss of 1,000 cows. South Dakota was up 9.2%, thanks to 16,000 more cows, and a 30 pound gain per cow.
Texas output jumped a whopping 145 million pounds or 10.6%, thanks to an eye catching 50,000 more cows and a 55 pound gain per cow.
Washington State was down 4.5%, on a drop of 11,000 cows, as a large dairy on the east side called it quits. Output per cow was down 10 pounds.
That’s not encouraging news to processor Darigold which started production June 2 in its pricey new $900 million plus plant in Pasco. The plant can handle up to 8 million pounds of milk per day, with dryer capacity estimated at up to 280 million pounds annually and 175 million pounds of butter. Dairy producers in the state are paying dearly for the new facility that hopefully yields a good return on investment.
Meanwhile, StoneX broker Dave Kurzawski said in the May 26 Dairy Radio Now broadcast “Tis the time of year for milk output to increase. It’s the spring flush and we’re probably at the peak right now.”
When asked if this size of an increase, considering the new cheese capacity that has come on line, wasn’t a concern for the market, he answered, “I think we over estimated how quickly those cheese plants would be up and running. That slower start makes sense because it takes time to put a cheese plant together.”
He said we now have the opportunity to make milk. When you get into the summer months you don’t know what the weather is going to do and how that will impact production but he suspects that milk is “in balance.” “We’re not awash in milk anywhere and we’re not dumping milk. We’re more or less in balance even with a 1.5% increase.” Added to that are strong U.S. exports which he believes will continue “until prices narrow between the U.S. and the rest of the world.”
Checking Chicago, dairy prices started June Dairy month mixed. The Cheddar blocks made it up to $1.9550 per pound Monday, June 2, highest since Oct. 3, 2024, but closed Friday, June 6, at $1.8575, down 9 cents on the week and 1.25 cents above a year ago.
The barrels finished at $1.86, a penny lower, 9.50 cents below a year ago, and an inverted quarter-cent above the blocks. Sales for the week amounted to 34 cars of block and seven of barrel. May sales of block totaled 136 loads, up from 132 in April. Barrel sales totaled 53 in May, down from 66 in April.
Central cheesemakers say demand is strong from retail purchasers, but retail sales are somewhat muted. Export demand is steady. Milk was available but not as excessive last week as previous weeks. Vats are running busy schedules.
Class III milk is tighter in the West but cheese manufacturers say it’s adequate, especially with bottling demand lightening. Cheese output is steady and or in balance with demand, while others say it’s outweighing demand. Demand varies from steady to stronger with respect to domestic and international buyers. European price upticks are keeping domestic prices competitive.
Butter hit $2.56 per pound Wednesday, June 4, highest since Jan. 15, but closed Friday, June 6, at $2.5550, up 8 cents on the week, fourth week of gain, but 53.75 cents below a year ago, on 102 sales. May sales totaled 123 loads, up from 116 in April.
Cream remains readily available in the Central region, but was more excessive following Memorial Day weekend. Contacts anticipate cream will decline in the coming weeks as temperatures rise. Domestic demand is meeting expectations and exports are strong, thanks to competitive U.S. prices.
Cream is seasonally decreasing in the West but remains sufficient for both butter producers and ice cream manufacturers. New butter manufacturing capacity in the region is set to begin. Schedules vary from steady to strong.
Grade A nonfat dry milk closed Friday, June 6, at $1.2625 per pound, a quarter-cent lower but 6.75 cents above a year ago, with 13 sales put on the board. Powder sales totaled 102 in May, up from 50 in April.
The Daily Dairy Report’s Sarina Sharp reported in the May 30 Milk Producers Council Newsletter, “Some cheesemakers are fortifying their vats with nonfat dry milk to maintain protein and fat ratios. And Mexican buyers are stepping up purchases, allowing U.S. prices to rise even as international values falter.”
Dry whey saw its close Friday, June 6, at 58 cents per pound, up 7.50 cents, highest since Feb. 10, and 11 cents above a year ago, on 12 CME sales for the week. There were 29 total in May, down from 33 in April.
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