Penn State’s measure of income over feed costs rose by 0.4% in December. The Pennsylvania all-milk price hit its high for the year in December and the outlook for the next several months is also good. With lower corn prices and booming dairy exports, the outlook for income over feed costs for 2014 looks attractive.
The CME block cheese price rose by 9.5% in the last month, ending 18¢/lb. higher at $2.05/lb. Cheese prices have risen steadily since mid-November. This increase is driven by export demand, especially from China. CME butter prices fell by 2.4%, or 4¢/lb. in the past month. The butter price showed weakness in the middle of December, but has regained much of these losses. The latest butter production report had sizeable decreases in November, supporting what is generally a weaker market. Skim milk powder continues to rise, increasing another 4.3% since last month. The increased export demand is supporting the powder price, so that prices are strong, despite increased inventories. Dry whey prices rose 2% to $0.5625/lb. Like skim milk powder, the increased production has been matched by demand, so for now the market is absorbing these production increases without lower prices.
Table 1 lists some past and estimated future milk prices. The December Pennsylvania all-milk price was $0.20 higher than the revised November value at $23.20/cwt. The sizeable revision of the November all-milk price put the PA all-milk price above $23.00 for the first time since November 2012, and with December, the first time the all-milk price has been above $23 in consecutive months since September 2011. Those past prices were accompanied by higher feed prices, so the present price is better once costs are considered. The December Class III price was $0.12 higher than in November at $18.95/cwt. The Class III futures price for January is $20.06. Average Class III futures prices for 2014 are up $0.32 above the average 2013 prices at $18.31. Like last month, a small increase in the latest milk production report along with strong cheese futures prices make the higher cheese prices sustainable, especially for early 2014. The December Class IV price was up $1.02/cwt. from November at $21.54/cwt. The prices of Class IV futures average $19.95/cwt. for 2014, up significantly from the 2014 futures prices of last month. The first few months are especially strong, with weaker Class IV futures as 2014 progresses. The PA all-milk prices for 2013 and the forecast prices for 2014 based on the futures prices are also shown in Table 1. The forecast all-milk prices for 2014 average $0.70/cwt. above the average for 2013, which given the lower feed prices is positive for dairy farmers.