Cheddar barrels were above $2/lb. through May 13; returned to $2 on May 18; fell below $2 again on July 1; but went above $2 again on July 14 and continued to increase to $2.07/lb. on July 18. Barrels averaged above $2 every month through April, and in the high $1.90s since then.
These prices have held despite May production of cheddar cheese 2.5% higher than a year ago, and total cheese production 2.2% higher. But domestic sales have been good and exports have been strong, 15% higher than a year ago in May, and 34% higher year-to-date. Stocks of American cheese were 8% lower than a year ago on May 31, and total cheese stocks 7% lower.
But, as with butter, cheese prices are now higher than world prices and interest in further exports has declined.
Nonfat dry milk prices have weakened. Nonfat dry milk averaged $1.9395/lb. in June and will average about $1.85/lb. in July. May exports were 8% higher than a year ago. While May production of nonfat dry milk was 8.7% higher than a year ago, May 31 stocks were still 4% lower. But, like butter and cheese, nonfat dry milk prices are now higher than world prices.
Dry whey prices have held near the June average of $0.6569/lb. In May, dry whey production was 5.6% higher than a year ago, and exports were 2% higher. May 31 stocks were slightly lower than a year ago, at -0.6%.
The Class III price peaked this year at $24.31/cwt, in April was $21.36/cwt, in June. The July Class III price will be about $21.50/cwt,.
The Class IV price was as high as $23.66/cwt, in March, was $23.13/cwt, for June and, with higher butter prices, it will be near $23.45/cwt, for July.
Milk prices no doubt will trend lower as we move through the year and into 2015. With feed prices lower than a year ago, margins to dairy producers will remain favorable for increasing milk production.
Cow numbers will continue to increase as producers add cows through reduced culling and bringing in more dairy replacements. Producers will feed for higher milk production per cow and forage quality should improve from what was available last winter. The result will be a higher relative increase in total milk production for the remainder of the year going into 2015.
World milk production is also increasing pushing world dairy product prices lower. Lower world prices will put downward pressure on U.S. prices in order to maintain dairy exports. Current Class III futures fall to $19.09/cwt, by December and stay well above $18 through first quarter of 2015. The Class IV price falls to $18.95/cwt, by December and remains well above $18/cwt, for first quarter of 2015.
If the increase in milk production picks up as anticipated, and world prices put some downward pressure on U.S. dairy product prices, these dairy futures prices may be a little optimistic. But, that said, no sharp decline in prices well below $18/cwt. is anticipated in the foreseeable future.
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Bob Cropp and Mark Stephenson provide their monthly outlook on the markets. Read More