Class III milk price drops by more than $ 1.60

Cheese prices are much lower in June than in early May, with lower dry whey prices and higher butter prices, says Bob Cropp, a dairy economist at the University of Wisconsin-Madison.

“At the start of May on the CME, barrels of cheddar were $ 1.81 per pound, 40 pound chunks of cheddar were $ 1.80, dry whey 66 cents, and butter $ 1.75 per pound. ”Says Cropp. “As of June 21, barrels were at $ 1.48, 40-pound blocks at $ 1.47, dry why 61 cents a pound and butter at $ 1.78.”

As a result, he predicts that the price of Class III, which was $ 18.96 in May, will be around $ 17.25 in June. The Class IV price will show some strength in June, with the price of butter edging up and the price of skimmed milk powder averaging around $ 1.27 per pound. The price of the Class IV, which was $ 16.16 in May, will be around $ 16.45 in June, Cropp says.

Too much milk

Milk production remains at a relatively high level, exerting downward pressure on milk prices.

“Milk production in the United States was estimated up 3.5% from a year ago in April and 4.6% up in May,” Cropp said. “A year ago, with the loss of the market due to COVID-19, dairy farmers were urged to cut back on milk production. As a result, May’s milk production was 0.5% lower than the previous year. “

Nonetheless, this year’s May production made a comeback. The number of dairy cows continues to increase, reaching 5,000 head in May. According to the USDA, there are 145,000 more dairy cows than a year ago, an increase of 1.6%. Milk production per cow is also up, 3% from a year ago.

Compared to a year ago, three states recorded double-digit increases in milk production in May: South Dakota, 14.6%; Indiana, 12.6%; and Texas, 10.8%. California and Wisconsin, the two largest milk producing states, saw increases of 5% and 5.6%, respectively. Other states with relatively strong increases were Kansas, 7.3%; Iowa, 6.2%; Minnesota and New Mexico, 60%; Colorado, 5.3%; Michigan, 5.1%; and New York, 4.2%.

Cropp believes high feed prices could reduce milk production by fall. “With widespread drought tightening feed supply, feed prices could be much higher by the fall, which could slow milk production by the fourth quarter,” he said. he declared.

Unless milk production slows, milk prices are expected to weaken from June to August, then rise from September, peaking in October or November, he says. “Milk production will decline seasonally during the summer months, while fluid milk sales will increase in late August and September with the opening of schools, and butter and cheese prices will strengthen at as stocks increase for strong seasonal sales from Thanksgiving to Christmas. “

If things are returning to normal with face-to-face learning at schools and colleges, more open restaurants, fans filling the stands at sporting events and returning conferences, Cropp believes foodservice sales will return to normal.

“All of this can boost milk prices starting this fall,” he says. “However, the strength of milk prices will depend heavily on how quickly things get back to normal.”

Strong exports of dairy products

Dairy product exports continue to be a positive, adding support to milk prices. April export volume on a milk solids equivalent increased by 25% compared to April 2020. Skim milk powder exports of skimmed milk powder increased by 15.5%, products made from whey 17.6%, cheeses 51.2% and fat 257%.

“Powdered skimmed milk powder, cheese and butter remain very price competitive in the international market,” says Cropp. “Global milk production is not growing by more than about 1% and global demand improves prospects for strong exports for the rest of the year.

But Cropp says the outlook for milk prices for the rest of the year remains uncertain.

“It all depends on the evolution of dairy production, domestic sales and exports,” he says. “Unless cheese prices recover, Class III will be in the $ 16 range by July and may not hit $ 17 until September, and not exceed the highest $ 17 in the fourth quarter. But we can’t rule out the possibility that Class III will hit $ 18 in the fourth quarter. “

Class III futures have weakened since the start of the year, but they could hit $ 18 for the rest of the year, Cropp believes.

The latest USDA price forecast isn’t as bullish on milk prices, with Class III averaging just $ 17.15 this year, up from $ 18.16 last year.

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