The latest GDT index improved. May Class I base prices dipped just a little, but March and April producer income margins tightened. This and other U.S. dairy economic news can be found here.
GDT index firms
Overall dairy prices improved slightly at the second straight Global Dairy Trade (GDT) auction, April 19. The GDT index rose 3.8 percent, following a 2.1 percent gain earlier this month.
Whole milk powder prices drove the latest increase, jumping 7.5 percent. Skim milk powder increased 0.3 percent. Cheddar cheese, butter and anhydrous milkfat also posted gains.
Class I base holds in May
The May federal milk marketing order (FMMO) Class I base price is $13.70 per hundredweight, down just 4 cents from April and $2.13 less than May 2015.
Through the first five months of 2016, the Class I base average is $14.18 per hundredweight, down $2.16 from the same period a year earlier.
Dairy Margin Watch: April started weaker
Dairy margins were generally weaker over the first half of April, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging LLC. Milk prices held relatively steady during the period, but feed costs rose.
From a historical perspective, margins remain negative through year-end and into 2017.
Recent strength in both corn and soybean meal prices are attributed to South American weather and crop concerns. USDA’s April World Ag Supply & Demand Estimates report was considered neutral, with only small changes noted to the domestic corn and soybean balance sheet.
Milk prices have largely remained under pressure as production continues to run heavy during the spring flush period. While domestic demand has been strong to help support prices, U.S. values are still elevated at a premium to world prices. Butter prices have been a bright spot lately, with a sharp rally noted during early April helping to support milk prices on a component basis.
Visit the Margin Manager website.
2016 outlook remains cloudy
Dairy products stocks and the domestic-global price gap continue to cast a cloud on dairy price recovery, according to USDA’s monthly Livestock, Dairy and Poultry Outlook report.
Price differences between U.S. domestic wholesale prices and foreign export prices have contributed to the increase in imports of products with high milk-fat content.
The 2016 Class III milk price forecast is $13.65-$14.15 per hundredweight, unchanged at the midpoint from last month’s forecast. The Class IV milk price forecast is lowered to $12.90-$13.50 per hundredweight. The all-milk price forecast for 2016 is $15.00-$15.50 per hundredweight, unchanged at the midpoint from last month’s forecast.
Read the full USDA outlook report.
Dunn: April dairy outlook
Pennsylvania dairy farmers saw milk income over feeds costs (IOFC) fall in March, with milk prices falling more than the feed costs to produce it, according to the latest Dairy Outlook report from Jim Dunn, Penn State University dairy economist.
Dunn’s calculations reflect daily gross milk income less feed costs for an average cow producing 65 pounds of milk per day.
March 2015 daily feed costs were down 26 cents from February’s revised estimate to $4.31 per cow per day. The March Pennsylvania all-milk price was estimated at $16.60 per hundredweight, down 50 cents from February, generating $10.79 per cow per day.
That left the preliminary March IOFC at $6.48 per cow per day, down 17 cents (2.9 percent) from February, and the lowest since July 2015.
Measured another way, preliminary feed costs per hundredweight of milk produced averaged $6.62 per hundredweight, down 41 cents from February. The milk margin over feed costs was $9.98 per hundredweight.
Dunn’s forecast of the average 2016 Pennsylvania all-milk price is $17.75 per hundredweight, which would be down 72 cents (-3.9 percent) from 2015.
March 2016 dairy Consumer Price Index lower
March 2016 retail dairy product prices were mostly lower compared to the previous month and year, according to unadjusted monthly Consumer Price Index (CPI) data released by the Bureau of Labor Statistics.
The March 2016 average fresh fluid milk price at retail was down 6.9 percent from March 2015, helping push overall retail dairy product prices down 2.8 percent. That compares to a 0.7 percent decline for retail prices for all food eaten at home.
March 2016’s average cheese price was down 2.6 percent from a year earlier, but butter was up 6.7 percent. Whole fluid milk prices were down 6.9 percent, with “other” fluid milk down 5.5 percent.
Compared to February 2016, retail dairy product prices were down 0.7 percent, led by declines in fluid milk, cheese and ice cream prices.
Next ‘Protecting Your Profits’ conference call is April 27
Pennsylvania's Center for Dairy Excellence will host the next “Protecting Your Profits” conference call on Wednesday, April 27, 12-12:15 p.m. (Eastern). Alan Zepp, risk management program manager, will provide an overview of current dairy markets and margins, including opportunities through Livestock Gross Margin for Dairy (LGM-Dairy).
Current futures markets anticipate that Class IV prices will remain at or below $15 per hundredweight until June 2017, while Class III prices rebound to above $15 in October 2016. With changes proposed for MPP-Dairy, the call will also include a discussion on how those changes will affect dairy producers.
Anyone can participate in the free monthly conference call series, but pre-registration is required. To register, call the center at 717-346-0849 with name, phone number, and e-mail address. Once registered, participants will receive the call-in number and information.
In addition to participating live, calls are hosted in a webinar format and recorded. They are available for viewing later.
Access past Protecting Your Profits calls. PD
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Dave Natzke
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