The USDA announced the March Federal order Class III milk price Wednesday at $23.33 per hundredweight, down 2 cents from its record high last month but still $6.40 above March 2013. It is $1.17 above California’s comparable Class 4b milk price, and equates to about $2.01 per gallon.
That put the 2014 Class III average at $22.61 per cwt., up from $17.44 at this time a year ago, $16.28 in 2012, and $16.63 in 2011.
The March Class IV price is a record high $23.66 per cwt., up 20 cents from February and $5.91 above a year ago. The Class IV average now stands at $23.14, up from $17.71 a year ago, $15.94 in 2012, and $18.08 in 2011.
The National Dairy Products Sales Report-surveyed cheese price averaged $2.2689 per pound, down 1.75 cents from February. Butter averaged $1.8562, up 2.4 cents. Nonfat dry milk averaged $2.0897, up 1.1 cent, and dry whey, at 65.54 cents, was up 2.4 cents.
The California Department of Food and Agriculture announced its March Class 4b cheese milk price Tuesday at a record high $22.16 per cwt., up $1.02 from February and dwarfs last year’s $15.02 by $7.14. That pulls the 2014 4b average up to $21.20 per cwt., up from $15.42 at this time a year ago, $13.77 in 2012, and $15.37 in 2011. The March 4a butter-powder price is a record $23.37/cwt., up 29 cents from February and $5.50 above a year ago. The 4a average now stands at $22.86, up from $17.65 a year ago, $15.67 in 2012, and $17.81 in 2011.
Monthly average milk prices were up but so were feed prices, according to USDA’s latest Ag Prices report, yet dairy profit margins are at their highest level ever. The preliminary March 2014 milk-feed price ratio slipped from February. At 2.58, the index is down from 2.60 in February and compares to 1.48 in March 2013. The index is based on the current milk price in relationship to feed prices for a ration of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay.
The March 2014 U.S. average all-milk price was $25.40 per cwt., with a 3.77 percent fat test, up from $24.90 per cwt. in February, with a 3.81 percent test, and compares to $19.10 per cwt. in March 2013, with a test of 3.79 percent.
March corn averaged $4.54 per bushel, up 19 cents from February, but $2.59 less than March 2013. March soybeans, at $13.60 per bushel, were up 40 cents from February, but down $1.00 from March 2013. Alfalfa hay averaged $191 per ton, up $3 from February, but $28 less than March 2013.
Estimated U.S. March 2014 cull cow prices (beef and dairy combined) averaged $99.90 per cwt., according to the Ag Prices report. The average is up $4.50 per cwt. from February’s revised estimate, $16.10 more than March 2013, and likely the highest monthly average ever. By the way, for some perspective, the 2011 average was $71.60 per cwt.
Rail capacity shortage
But transportation issues have raised feed costs, according to the March 28 Daily Dairy Report. The hauling mark-up on all varieties of feed is higher than ever, according to the DDR. This additional cost is not reflected in the income-over-feed calculation, as it has little effect on the prices farmers receive for their corn or soybeans.
The booming oil industry is largely to blame for the rise in transportation costs. Rail cars in the U.S. and Canada are in short supply because they have been commandeered to transport oil from the heartland to refineries on the coasts. There are simply not enough pipelines. With fewer rail cars available, a greater share of the feed supply depends on the trucking industry.
However, the oil industry is also using more trucks to haul materials to the oilfields. These issues have slowed the flow of Canada’s record-large canola crop, which is only slowly trickling into the U.S., despite a pronounced shortage of oilseeds here.
Weather is also a factor. Winter has been harsh, and snow and ice have slowed the flow of trucks and barges throughout the country. When feed finally arrives at dairies around the country, it comes with a higher transportation mark-up, and it may not have arrived on time, which represents an indirect cost to dairy producers who depend on consistent feed rations, the DDR said.
Cheese prices decline for week
Cash cheese prices saw further declines the first week of April although there was a late “April Fools” on Thursday when the blocks reversed gears and jumped 3 3/4-cents only to plunge the next day. Many traders expected spot prices to crash once cheese started showing up at the CME but that didn’t happen. At any rate, the Cheddar blocks closed Friday at $2.35 per pound, down 3 1/2-cents on the week but still 58 3/4-cents above a year ago. The barrels closed at $2.2250, down 6 1/2-cents on the week, 53 1/4-cents above a year ago, but an unsustainable 12 1/2-cents below the blocks. Only one car of block was sold this week and three of barrel. The lagging NDPSR-surveyed U.S. average block price averaged $2.3450, up 8.1 cents. Barrel averaged $2.3216, up 4.1 cents.
Cheese production is building slowly as milk supplies increase towards the spring flush, according to USDA’s Dairy Market News. Current production levels are increasing slower than many manufacturers had hoped for. Advance export sales continue to draw inventory away from domestic sales. Domestic cheese demand is good despite high prices.
Cash butter took a turn downward this week, closing Friday at $1.97 per pound, down 3 cents on the week but still 26 cents above a year ago. Twelve cars traded hands on the week. NDPSR butter averaged $1.8989, up 4.9 cents.
Butter prices are steady to higher on strong seasonal demand and very good export orders. The market tone is firm as butter manufacturers finish Easter Passover retail orders. Production rates are mixed amongst the regions as cream supplies tighten and cream prices increase.
Cash Grade A nonfat dry milk ended the week at $1.9975, down 3 1/4-cents on the week. One car was sold. NDPSR powder averaged $2.0734, down 1.3 cents, and dry whey averaged 66.72 cents, up 1.3 cents and the highest since December 2012. The highest dry whey price occurred in April 2007 at 79.33 cents a pound.
This week’s Global Dairy Trade auction saw the weighted average for all products drop 8.9 percent, following a 5.2 percent drop in the March 18 event, and a 4 percent drop in the March 4 event. The price index has seen declines since reaching its recent high February 4. The downfall was led by a 15 percent plunge in buttermilk powder, an 11.3 percent drop in anhydrous milkfat, and an 11 percent fall in butter. Whole milk powder was down 8.4 percent and Cheddar cheese was down 3.5 percent.
FC Stone reports the average butter price equated to about $1.8325 per pound, down from $2.0567/lb. in the March 18 event ($1.7878/lb. on 80 percent butterfat, down from $2.0065/lb.). Friday’s CME butter price closed at $1.97 per pound. The GDT Cheddar cheese average was $2.0130 per pound, down from $2.1052. The CME block price closed Friday at $2.35 per pound. GDT skim milk powder, at $1.8715 per pound, is down from $2.0792, and the whole milk powder average was $1.8293, down from $2.0136 in the last event. The CME Grade A nonfat dry milk price Friday stood at $1.9975 per pound.
Export assistance approved
Cooperatives Working Together accepted 47 requests for export assistance this week to sell 7.04 million pounds of cheese, 13.93 million pounds of 82 percent butter and 485,017 pounds of whole milk powder to customers in Asia, Central America, Europe, the Middle East, North Africa and the South Pacific. The product will be delivered through September and raises CWT’s 2014 cheese export sales to 36.34 million pounds plus 29.42 million pounds of butter and 3.37 million pounds of whole milk powder to 27 countries on five continents. CWT’s Jim Tillison says he’s not sure 47 requests is a record but what’s most impressive is the number of new players involved in the export market.
February milk production was up 1.4 percent compared to a year ago, according to USDA’s preliminary estimate, and this week’s Dairy Products report shows where it went. Butter production totaled 166 million pounds, down 9.1 percent from January and 4.6 percent below February 2013. Nonfat dry milk output, at 141 million pounds, was up 1.5 percent from January and 2.3 percent above a year ago.
American type cheese totaled 341 million pounds, down 10.3 percent from January and 1.5 percent below a year ago. Italian type cheese, at 374 million pounds, was down 11 percent from January but 3.7 percent above a year ago. Total cheese output amounted to 851 million pounds, down 10.7 percent from January and 0.6 percent below a year ago.
Drought pushes hay prices up
The drought situation in California is “Pretty Scary,” according to Utah State Ag Economist Dillon Feuz. He’s heard that irrigation companies are telling forage and other row crop growers that they may not have water. That makes it hard to say where hay prices are heading. “$300 per ton is not out of line,” he said. “If California stays this dry, that could be the impact.”
California is a big enough player that most of the hay that leaves Utah and Nevada is probably going into California, either directly to exports or into the dairy industry to supplant hay that’s leaving the Golden State. Most of Arizona’s hay is under irrigation from the Colorado River.
“I don’t think they’re going to be as short as California, so their production should still be up,” he said. “But again, California is a big player in the hay market and if you drastically reduce one of the major players then you are going to have a shock that’s going to be felt across the Western states.”
While hay producers may be fine with it, it could have an impact on many dairy producers in the West. “Your benefit is sometimes your neighbors’ loss,” Feuz said. “Certainly they recognize if hay prices get too high and force dairies out of business, then they’ve just lost a major local buyer of their product.”
Feed regulation rewrite
The National Milk Producers Federation has asked the Food and Drug Administration to rewrite a draft livestock feed regulation, saying the agency went beyond the intent of Congress by seeking to impose requirements that will not make animal feed safer.
In comments sent to the agency Monday, NMPF asked FDA to substantially revise the regulation and requested the agency establish a new round of comments from industry and the public. “FDA has the authority to re-propose the regulation and still comply with (a) court-ordered deadline to publish a final rule by Aug. 30, 2015,” NMPF said. NMPF made the request in two sets of comments, one focused on dairy plant safety and the other addressing animal feed.
In separate comments submitted jointly with the International Dairy Foods Association, NMPF also identified unnecessary and duplicative requirements for dairy processing plants which may divert some food production materials such as cheese trim and liquid whey to animal feed. These plants are already subject to Food Safety Modernization Act requirements for human food production.
NMPF stated the proposed standards “do not reflect the inherent differences between foods for human and animal consumption” for diverted food production materials and requested regulatory relief for these dairy processing plants.
With the substantial changes requested, NMPF asked FDA to conform the regulations with the intent of the FSMA and issue a new draft. Visit www.nmpf.org for more information.