Milk price outlook brighter with strength in cheese

Milk prices most likely peaked for the year in March. The March Class III price was $19.40, up $2.40 from February and $5.92 from January. The March Class IV price was $19.41, up $1.01 from February. A drop in cheese prices beginning in mid-March means lower April milk prices. On the CME, barrel cheese fell from $1.98 per pound early March to a low of $1.51 on April 7th. Cheddar blocks fell from $2.02 per pound early March to $1.5775 by April 4th. The good news is prices have recovered some since then. However, the week of April 18th is showing some weakness again. As of April 19th barrels were $1.5825 per pound and blocks to $1.62. Nevertheless, the April Class III price will be down about $2.70 from March to near $16.70. The April Class IV price will increase over March to near $20.00 due to continued strong nonfat dry milk prices.

The outlook for milk prices appears a little brighter than a month ago with some strengthening of cheese prices. The following factors may be contributing to brighter cheese prices. While February American cheese production was 2.6% higher than a year ago cheddar production was actually down 0.6%. Italian cheese production was 6.6% higher giving a 4.1% increase in total cheese production. While February 28th cheese stocks were 4.0% higher than a year ago, American cheese stocks fell 2.5% from January to February and total cheese stocks fell 1.6%. Good domestic sales, especially Italian cheese as evident by its strong production, and exports were a key factors. February cheese exports were a record high on a daily-average basis, more than double prior-year levels. Year-to-date exports were 99% high than a year ago.

Both improved butter prices and nonfat dry milk prices contributed to a higher Class IV price. CME butter, which declined slightly from $2.00 per pound on March 31st to $1.97, has recovered back to $2.00. Western nonfat dry milk prices continue to trade in the range of $1.55 to $1.59 per pound. Despite butter stocks increasing 16.7% over January levels, stocks were still 31.7% lower than a year ago and the lowest for this date since 2005. Domestic butter sales have remained favorable and butterfat exports increased sharply in February being up 163% from a year ago. Nonfat dry milk/skim milk powder exports were also active in February being up 132% from a year ago.

Milk prices should reach its low in April and May and begin a seasonal increase peaking again in September or October. Class III prices could be above $17 by June and peaking near $18.00 by September. The Class IV price is likely to be in the range of high $19's to $20 until fall. While this is a much brighter price outlook that what appeared back in March caution is to be noted. Dairy product prices and in turn milk prices are highly sensitive to new market information. Beverage milk sales, which accounts for about 28% of total milk use, is not helping to support milk prices. February sales of conventional beverage milk product sales was 2.6% lower than a year ago with total organic beverage milk products 23.0% higher (organic products were 3.7% of total beverage sales) netting a 1.9% decline in total beverage milk sales. Thus,   

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