Milk Prices
The dairy market is experiencing a significant transition as economic factors from 2022 carry over into 2023, impacting milk production levels. Phil Plourd, head of market intelligence at Ever.Ag, recently discussed these developments with Chip Flory, host of AgriTalk.
In September, consumer spending outpaced expectations, totaling $714.4 billion.
Class III followed cheese prices higher, with the nearby contract settling at $22.55 per hundredweight.
Though spot butter prices held steady, the market was busy with trades, with 46 lots changing hands.
There had been earlier concerns that milk supply would tighten with supply limited to bottling and manufacturing. Lower cow numbers and tight heifer supplies would further reduce milk availability. Much of that concern has dissipated.
CME cheese prices began the week in the red with barrels slipping to $1.8450 per pound
The USDA lowered its milk production forecast for 2024 based on a slight decrease in growth for milk production per cow.
USDA’s World Agricultural Supply and Demand Estimates report leaned bearish for both corn and soybeans, with yield, production and ending stock estimates ahead of pre-report expectations.
Inflation in September was higher than expected, up 0.3% from August and +2.4% versus September 2023, compared to calls for +0.2% month-over-month and +2.3% year-over-year.
Demand for MPCs takes milk from dryers, lowering milk powder output.
Calm in the spot markets translated to a lack of fireworks in futures.
August was yet another strong month for cheese exports with 94 million pounds shipped out, explaining part of why spot cheese prices went on a run higher in September.
Class III contracts for the rest of 2024 fell, with November settling at $21.00 per hundredweight, down 39 cents, and December closing at $20.44 per hundredweight, 42 cents lower.
With much of the Upper Midwest processing capacity maxed out in terms of milk production, finding a new home for milk is not an easy task. This is causing dairy farms to dump milk due to the oversupply.
The dairy industry stands as a backbone of American agriculture, and few have championed its cause as persistently and effectively as Vilsack. Earlier today, he spoke to attendees at World Dairy Expo in Madison, Wis.
Spot butter prices tumbled, giving up seven cents to reach $2.6800 per pound, the lowest level since January.
Class III futures through the rest of 2024 continued to decline, with the November contract down 27 cents to $22.61 per hundredweight.
Barrels continued to decline, landing at $2.1475 per pound and giving up 15 cents, the largest single-day drop since November 2020.
Butter and cheese prices have fallen substantially since the highs were established. The supply outlook has changed with reports indicating there should be sufficient supply through the end of the year.
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CME barrels continued to plunge, falling to $2.2975 per pound, shedding $0.1025 on the day and -$0.2925 from the Friday before.
Butter settled at $2.7900 per pound, giving up seven cents to reach the lowest price since March.
CME barrels plunged even further off recent all-time highs, ending today at $2.4275 per pound, $0.1175 lower.
Taking a look at the current national dairy supplies, one USDA economist says supplies remain relatively tight amid strong demand. Plus, how a community is coming together after a massive fire over the weekend at one of Ohio’s largest dairy farms.
Futures followed spot prices lower today, with Q4 Class III prices settling at $22.45 per hundredweight, 45 cents lower.
Friday’s Milk Production report, which showed there was more milk in August than expected, had a bearish effect on spot blocks and butter.
August milk production was down less-than expected, slipping 0.1% year-over-year.
Barrels continued to rise, reaching $2.6225 per pound and tacking on 5.75 cents to set yet another record-high price.
Supply concerns and rising global prices continued to drive CME barrels higher.
Seasonal demand is providing support to the market. This support may continue for a time as supply has tightened and demand is improving.
Harvest is underway across much of the Midwest, with 9% of the U.S. corn crop now in the bin, ahead of the five-year average of 6%.