Strong dairy product prices resulting in record milk prices continue into 2014.
The February Class III price was a record $23.35/cwt. and will be near that for March. The February Class IV price was a record $23.46/cwt. and will be near $23.60/cwt. for March. The February average U.S. all milk price was a record $24.70/cwt. and will average near $25/cwt. for March.
Compared to March a year ago the Class III price will be about $6.40 higher, the Class IV price $5.85 higher and the average U.S. all milk price $5.90 higher.
On the CME, cheddar barrels were a record $2.32/lb. back on Feb. 5. But by mid-February the price fell by more than 25¢ to $2.0625/lb., only to resume price increases. Cheddar barrels reached $2.16/lb. the beginning of March and as of March 19 barrels were close to the earlier record at $2.305/lb.
The situation is similar for 40-pound cheddar blocks. Cheddar blocks were a record $2.36/lb. on Feb. 4, fell by more than 25¢ to $2.105/lb. with the price rebounding beginning in March at $2.2275/lb., setting a new record on March 14 at $2.3625/lb. and, as of March 19 the price was $2.42/lb.
CME butter averaged $1.80/lb. in February and as of March 19 it was $1.905/lb.. Dry whey averaged 62¢/lb. in February and will average about 64¢ in March. Nonfat dry milk has been about $2.07/lb. February and March.
Good domestic demand for cheese and strong exports of cheese, butter and nonfat dry milk is a major factor for these record prices. Exports of dairy products set a record last year totaling 15.5% of U.S. milk production on a total solids basis. Exports above a year ago continued into January. Compared to January a year ago exports of nonfat dry milk/skim milk powder were 22% higher, total cheese had a new record at 46% higher, butterfat 136% higher, and lactose 3% higher. On a total solids basis exports were equivalent to 14.5% of milk production compared to 12.3% a year ago.
Domestic sales and exports have tightened stocks of dairy products. The latest stock report is for Jan. 31 stocks. Compared to a year ago butter stocks were 33% lower, American cheese stocks and total cheese stocks were both 2% lower. Nonfat dry milk stocks were 25% lower and dry whey stocks 8% lower.
Milk production is also a key factor for record prices. With corn prices around $4.50 per bushel compared to near $7/bushel a year ago, and alfalfa hay averaging lower for most parts of the country –except for some states like California and Texas – margins (returns over feed costs) are very favorable for milk production. But, milk production was flat the last two month of 2013, with milk production for the year up just 0.7% (adjusted for leap year).