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Hot weather raises temperatures, markets

Published on December 31, 1969 3:01AM

Last changed on September 9, 2013 7:08AM


For the Capital Press

The milk price roller coaster is alive and well and USDA's announcement this week of the June Federal order Class III milk price is a case in point.

After two months of gain, the benchmark Class III price dropped 50 cents, to $18.02 per hundredweight, but that's still $2.39 above June 2012, $2.11 above California's 4b price, and equates to about $1.55 per gallon.

Futures contracts portend another decline in July before rebounding in August and peaking in September. Late morning trading on July 5 had the July contract at $17.27; August, $18.05; September, $18.67; October, $18.53; November, $18.24; and December at $17.81. The 2013 Class III average now stands at $17.74, up from $15.90 at this time a year ago, $17.06 in 2011, and $13.58 in 2010.

The June Class IV milk price is $18.88, down a penny from May and $5.64 above a year ago. Its 2013 average hit $18.17, up from $14.90 a year ago, and compares to $19.23 in 2011, and $14.02 in 2010.

The AMS-surveyed cheese price average used in calculating the June Class III price was $1.7810 per pound, down 4.6 cents from May. Butter averaged $1.5422, down 10.6 cents, nonfat dry milk averaged $1.6878, up a nickel, and dry whey averaged 57.39 cents per pound, down fractionally from May.

California's June 4b cheese milk price is $15.91 per cwt., down $1.29 from May but $1.26 above June 2012. That put the 2013 4b average at $16.05, up from $13.83 at this time a year ago and compares to $15.67 in 2011. Compare these to the federal order averages and you'll understand why some California producers are seriously considering becoming part of the Federal order system.

California's June 4a butter-powder milk price is $18.39, up 15 cents from May but $5.22 above a year ago. The 4a average now stands at $17.94, up from $14.73 a year ago and compares to $18.94 in 2011.

The June 4a and 4b prices do not include the temporary price increases resulting from the May 20 public hearing because they only become effective on milk delivered on or after July 1, 2013 and continue through December 31, 2013.

Product prices increase

Soaring temperatures, particularly in the West, drove dairy product prices up the first week of July, national Ice Cream Month, but those temperatures had backed down some by week's end. The 40-pound Cheddar blocks closed that Friday at $1.6650 per pound, up 2 3/4-cents on the Fourth of July holiday-shortened week but a penny below that week a year ago.

The 500-pound barrels closed at $1.67, up 7 1/4-cents on the week and a half-cent below a year ago. Thirteen carloads of block traded hands on the week and 15 of barrel. The lagging behind AMS-surveyed U.S. average block price inched 0.4 cent lower, to $1.7466, while the barrels averaged $1.7830, down 1.3 cents.

Record cheese stocks were weighing on spot sales as buyers feel that the market must come down to instigate new sales, according to USDA's Dairy Market News (DMN). But, current U.S. prices are lower than international prices, export demand is good, and sales are being assisted by the CWT program.

CWT bid acceptances this week totaled 16 on 2.361 million pounds of cheese and 665,796 pounds of butter to customers in Asia, the Middle East and North Africa. The product will be delivered through December and raised CWT's 2013 cheese exports to 66.923 million pounds, plus 52.393 million pounds of butter, 44,092 pounds of anhydrous milkfat, and 218,258 pounds of whole milk powder to 32 countries.

Cheese production slows

The June 28 DMN reported that cheese production was slowing as peak milk volumes are past in many parts of the country and some plants have made the decision to slow manufacturing. Warmer weather across the country, but particularly the West, was expected to further hinder milk supplies. My thermometer hit 94 the last day of June and I'm 100 miles north of Seattle but the temps were considerably cooler by the Fourth.

Even cash butter took a turn for the good, reversing almost 12 cents in losses the previous three weeks, closing at $1.5250, up 9 3/4-cents on the week but three quarters below a year ago. Eighteen cars sold on the week as ice cream sales draw cream away from the churn. AMS butter averaged $1.5109, down 3.9 cents.

But the Grade AA butter market is weak, according to participants in the June 28 DMN. Stocks are growing steadily from month to month and that was evident in the last Cold Storage report showing stocks at 323.2 million pounds, the highest level of stored butter on record since January 1993, according to NASS data.

Butter sales into some retail accounts perked up with the recent drop in Grade AA prices. Various manufacturers report that while intermediate buyers are still hesitant to take positions, retailers recognize the current pricing offers opportunities to fill near term consumer needs.

Cash Grade A and Extra Grade nonfat dry milk closed a penny higher on the week, at $1.74 and $1.71 respectively. AMS-powder averaged $1.6977, also up a penny, and dry whey averaged 57.12 cents, down 1.1 cent.

Looking in the rear view mirror, this week's Dairy Products report shows May butter production at 167 million pounds, down 0.2 percent from April but 1.5 percent above May 2012. Nonfat dry milk output, at 167 million pounds, was up 4.6 percent from April but 13.4 percent below a year ago.

The Daily Dairy Report (DDR) said that manufacturers are responding to export demands and increased production of skim milk powder (SMP) in May to a record-large 54.6 million pounds. Combined nonfat dry milk (NDM) and SMP production totaled 222.1 million pounds, up 6.7 percent from a year ago and 7.5 percent higher than in April on a daily average basis. The DDR says manufacturers may have shifted some NDM capacity into SMP.

USDA also revised its estimate of manufacturers stocks of NDM at the end of April from 193.1 million pounds to 207.6 million. This, coupled with strong production, put May ending stocks at 226.7 million pounds, 5.2 percent higher than year-ago levels despite record large NDM exports, the DDR said.

American type cheese totaled 389 million pounds, up 3.3 percent from April and 5.9 percent above a year ago. Italian type, at 402 million pounds, was up 1.1 percent from April and 2.7 percent above a year ago. Total cheese out of the vat in May amounted to 954 million pounds, up 2.6 percent from April and up 3.9 percent from May 2012.

NE production strong

Milk production remains heavy in the Northeast with some balancing plants operating at near capacity levels, according to DMN's weekly production update. Other areas were seeing production declines to varying degrees, due to weather stress.

Component levels are also declining, at variable rates, across the nation. Florida, Arizona and California were experiencing the most significant declines in milk production due to the heat. Cream markets are improving as ice cream manufacturers take additional loads. Churn operators, in most regions, were developing alternative cream usage plans for the Fourth of July holiday week.

USDA's latest Crop Acreage and Grain Stocks reports shows that a cool, wet spring may have slowed the planting pace, but didn't hamper the planted area, according to DairyBusiness Update (DBU). Corn and soybean acreage estimates were up slightly from March "Prospective Plantings" estimates. Corn planted area for all purposes in 2013 is estimated at 97.4 million acres, up slightly from last year, and the largest planted acreage in the U.S. since 1936. Growers expect to harvest 89.1 million acres for grain, up 2 percent from last year.

Soybean planted area was estimated at a record high 77.7 million acres, up 1 percent from last year. Planted area increased in 18 out of 31 soybean-producing states. Area for harvest, at 76.9 million acres, is up 1 percent from 2012 and will be a record high, if realized.

The numbers aren't so favorable when it comes to grain stocks, according to the DBU. June 1 corn stocks in all positions totaled 2.76 billion bushels, down 12 percent from a year earlier. The March-May 2013 indicated disappearance is 2.64 billion bushels, compared with 2.88 billion during the same period last year.

Soybeans stored in all positions on June 1 totaled 435 million bushels, down 35 percent from a year earlier. Indicated disappearance for the March-May quarter totaled 564 million bushels, down 20 percent from a year ago, according to DBU.

The total hay acreage is slightly higher than the March USDA "Prospective Plantings" report suggested. U.S. hay producers intend to harvest 56.6 million acres of all hay in 2013, up slightly from 2012. Expected harvested area of alfalfa and alfalfa mixtures, at 17.7 million acres, is up 2 percent from 2012.

Harvested area of alfalfa and alfalfa mixtures is expected to decline throughout much of the Great Plains and Rocky Mountains due to unfavorably hot, dry conditions throughout much of the spring and into summer. There was a significant reduction in expected acreage in Colorado.

Expected area for all other types of hay totals 39.0 million acres, down fractionally from 2012. Acreage is expected to increase in states situated from the northern Rocky Mountains to the Great Lakes, as timely spring rainfall boosted hay field and pasture growth. Additionally, several states had a large amount of acreage come out of CRP.

Global prices increase

Prices continued to move incrementally higher at this week's Global Dairy Trade (GDT) auction, according to the Daily Dairy Report. The trade-weighted index increased 0.7 percent. All product prices moved higher except butter and Cheddar cheese, which fell by 5.7 and 3.7 percent, respectively, but still remain at historically high price levels, the DDR said. Skim milk powder (SMP) posted a 3.1 percent increase in the weighted index price, while whole milk powder (WMP) settled just 0.1 percent higher.

U.S.- produced unsalted, sweet cream butter was offered by California-based Dairy America for the first time but only in the August contract period. The contract settled at $1.65 per pound, according to the DDR.

Wanted: House farm bill

In dairy politics, DBU reports that more than 30 dairy organizations joined about 500 other agricultural groups in sending a letter to House Speaker John Boehner, R-Ohio, urging him to bring a farm bill back to the House floor as soon as possible.

Noting that the current extension of the 2008 farm Bill expires on Sept. 30, the organizations also urged Boehner not to split farm and nutrition programs into separate bills.


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