Milk prices have been well above a year ago through July. The Class III price set a record high in July at $21.39, $7.65 higher than a year ago. For the first seven months Class III averaged $17.68, $4.08 higher than a year ago. The July Class IV price was $20.33, $4.58 higher than a year ago. For the first seven months Class IV averaged $19.38, $5.11 higher than a year ago. The July U.S. All Milk Price was $22.10, also a record and $6.20 higher than a year ago. For the first seven months the U.S. All Milk price averaged $19.81, $4.44 higher than a year ago. But, while milk prices have been well above a year ago so have feed prices. Compared to a year ago the price of corn is about 85% high, soybeans 37% higher and U.S. average alfalfa hay 62% higher with hay prices more than double in Idaho and almost double in California. So higher milk prices have been needed for dairy producers to experience favorable returns over feed costs.
The July prices will be the peak for the year with August prices some what lower. The August Class III price may be near $21.00, the Class IV price near $19.90 and the U.S. All Milk price near $22.00. Butter, cheese and nonfat dry milk prices are all showing some weakness. CME cheddar barrel cheese prices had been above $2 a pound since June 6th. But, in the last three trading sessions barrel cheese lost 23 cents down to $1.865 per pound as of August 18th. CME cheddar blocks also had been above $2.00 per pound since June 6th, but lost 13.25 cents in the last two trading session down to $1.9075 per pound as of August 18th. Butter prices have held above $2.00 per pound. West nonfat dry milk prices, which have been near $1.65 per pound, are now trading in the $1.45 to $1.57 range. However, dry whey prices have been firm trading in the $0.57 to $0.60 range adding support to the Class III price.
Butter prices could hold near $2.00 per pound until later this fall. Butter production is much higher than a year ago, up 20.1% for June. But, while stocks have increased since May they remain tight for this time of the year with June 30th stocks still 24% lower than the 5-year average. Cheese prices will most likely experience further declines to perhaps $1.80 to $1.70 per pound by year's end. But, on the positive side for cheddar cheese prices is lower production. Compared to a year ago cheddar cheese production during the month of June was down 5.4% from a year ago. Total cheese production was just 1.3% higher. American cheese stocks are now also slightly lower than a year ago with June 30th stocks 1.3% lower. During August and September milk available for cheese making will be tighter. Milk production and milk composition is declining seasonally and schools will be opening channeling additional milk into fluid use.