Cheese drops below $2; butter skyrockets, then slips

Columnist Lee Mielke wraps up the week's dairy news.


For the Capital Press

Published on July 1, 2014 12:02PM

Lee Mielke

Lee Mielke

Cash cheese prices strengthened the last week of June Dairy Month but gave back some of the gain on Friday.

The Cheddar blocks closed at $2.02 per pound, after hitting $2.04 on Thursday, but were still up 2 cents on the week and 38 1/4-cents above a year ago when they dropped 8 3/4-cents. But they dropped 2 cents on Monday and lost another 1 1/4-cents Tuesday, dipping to $1.9875, the first time below $2 since June 3.

The barrels, after eight consecutive sessions of gain took them to $2.05 on Thursday, backed down to $2.01 Friday, unchanged on the week, but 41 1/4-cents above a year ago when they plummeted 12 cents. The barrels were unchanged Monday but lost 2 3/4-cents on Tuesday, closing at $1.9825 per pound.

Cash butter soared to levels not seen in over a decade, closing Friday at $2.39 per pound, up 15 1/2-cents on the week and a whopping 96 1/4-cents above a year ago when it dropped 7 1/4-cents. Butter skyrocketed Monday, up 11 cents, but gave back a nickel on Tuesday, a likely reaction to the 13.6 percent plunge in Global Dairy Trade butter, and closed at $2.45 per pound. The U.S. all-time record high is $2.81 per pound posted in September 1998.

Global Dairy Trade average slips

Tuesday’s Global Dairy Trade auction saw the weighted average for all products reverse direction again and back down 4.9 percent after inching up 0.9 percent in the June 17 event. The price index had seen declines since reaching its high on Feb. 4.

The downturn was led by a 13.6 percent plunge in butter, which was up 1.8 percent in the last event. Anhydrous milkfat was next, down 7.4 percent, down 3.8 percent last time. GDT whole milk powder was down 5.4 percent, up 2.4 percent in the last event. Cheddar cheese was down 2.9 percent, after a 2.4 percent increase last time. Rennet casein was down 2.1 percent, following a 4.6 percent increase in the June 17 event. Skim milk powder was off 0.9 percent, after seeing a 0.2 percent decline last time.

The only product showing an increase was butter milk powder, up 4 percent, following a 17 percent boost in the last event.

FC Stone reports the average GDT butter price equated to about $1.4427 per pound U.S., down from $1.6780 per pound in the last event. ($1.4075 per pound on 80 percent butterfat, down from $1.6370 per pound). CME butter, at $2.45 per pound, was down a nickel today, likely in response to the GDT dip. The GDT Cheddar cheese average was $1.9170 per pound U.S., down from $1.9873. The U.S. block Cheddar CME price today was at $1.9875. GDT skim milk powder, at $1.7283 per pound U.S., is down from $1.7486, and the whole milk powder average at $1.5690 U.S., is down from $1.6594 in the last event. The CME Grade A nonfat dry milk price today stands at $1.77 per pound.

Milk production costs up slightly

The Agriculture Department’s National Milk Cost of Production report, issued Monday, shows May’s total costs were up slightly from April.

Total feed costs averaged $13.32/cwt., up 9 cents from revised April estimates and up 28 cents from March. May 2013 estimates were not available due to budget sequestration. Purchased feed costs, at $6.63/cwt., were down 22 cents from April and down 51 cents from March.

Total costs, including feed, bedding, marketing, fuel, repairs, hired labor and taxes, at $24.59/cwt., were up 12 cents from April and 24 cents above the March level. Feed costs made up 54.2 percent of total costs, compared to 54.1 percent the month before.

Read the complete report at:

April fluid milk sales drop 4.5 percent

April 2014 packaged fluid milk sales totaled 4.15 billion pounds, down 4.5 percent from April 2013, according to Dairy Market News. Sales were not adjusted for calendar considerations, as in previous monthly reports.

April sales of conventional products, at 3.94 billion pounds, were down 5 percent from a year ago; organic products, at 205 million pounds, were up 7.4 percent. Organic represented about 4.95 percent of total sales for the month.

January-April 2014 total packaged fluid milk sales, at 17.04 billion pounds, were down 2.2 percent from the same period a year earlier. Year-to-date sales of conventional products, at 16.21 billion pounds, were down 2.9 percent; organic products, at 828 million pounds, were up 13.4 percent. Organic represented about 4.86 percent of total sales.

California cheese milk price drops 27 cents

The California Department of Food and Agriculture announced its June 4b cheese milk price Tuesday at $19.07 per hundredweight, down another 27 cents from May after losing $2.39 last month, but is still $3.16 above June 2013. That puts the midyear average at $20.63, up from $16.05 at this time a year ago and $13.83 in 2012.

The June 4a butter-powder price is $23.19, up 62 cents from May and $4.80 above a year ago. The 4a average now stands at $22.94, up from $17.94 a year ago and $14.73 in 2012.

California Dairies’ hearing petition gets thumbs-down

The California Department of Food and Agriculture as turned down a June 17 request by California Dairies Inc. for a public hearing to consider changes to the state’s Class 4a pricing formula. CDI had charged that “the manufacturing cost allowances for butter and powder and the butter F.O.B. price adjuster were last changed Sept. 1, 2011. However, all of the manufacturing cost data collected and published by CDFA since then indicates that the trend is toward higher costs, and further adjustments to the butter and powder manufacturing cost allowances are both warranted and justified.”

A letter from CDFA to CDI stated that “the secretary does not want to impede the ongoing efforts of the California Dairy Future Task Force in developing potential alternative pricing scenarios that address the issues of our state’s antiquated pricing system.” Details are posted at CDFA’s website:

End of milk price enhancement means lower prices to farmers

California’s June Class 4a and 4b milk prices thaht the California Department of Food and Agriculture announced Tuesday will include the state-mandated price enhancement but that temporary boost ended Monday. All California milk from July 1 onward will be priced under previous formulas.

The Milk Producers Council’s Rob Vandenheuvel says the state’s dairy producers did not want to go through the hearing process again to renew that enhancement and view the creation of a federal milk market order to be the best way to proceed from here.

Addressing CDI’s request for a hearing to adjust California make allowances on butter and powder, Vandenheuvel wrote in his Friday newsletter that doing so would have decreased the state’s monthly Class 4a price by about 23 cents per hundredweight.

Regarding the end of California’s price enhancement on farm milk prices, Vandenheuvel stated that the changes to the formulas for all five classes of milk would result in the following:

• A $0.03/hundredweight temporary price increase will be eliminated on Class 1.

• A $0.05/hundredweight temporary price increase will be eliminated on Classes 2&3.

• A $0.15/hundredweight temporary price increase will be eliminated on Classes 4a&4b.

The total impact of this expiration will be about a $0.12/hundredweight drop in the Overbase price in July, compared to the formula used for the past year, according to Vandenheuvel.


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