If there’s a silver lining in declining U.S. dairy prices, it’s the closer relationship with global prices will make U.S. products more competitive on the export market.
Global Dairy Trade index inches upward
The Global Dairy Trade (GDT) overall dairy product price index rose another 1.7 percent during the latest auction, held Sept. 20.
Prices for all products except whole milk powder (WMP) rose, led by: anhydrous milk fat (+4.6 percent, to $4,998 per metric ton), butter (+3.6 percent, to $3,892 per MT); buttermilk powder (+7.0 percent, to $2,276 per MT); cheddar cheese (+2.2 percent, to $3,581 per MT); and skim milk powder (+3.0 percent, to $2,293 per MT). WMP declined 0.2 percent, to $2,782 per MT.
HighGround Dairy’s Curtis Bosma called the auction bearish for WMP and SMP, but bullish for all other products.
The next GDT auction is Oct. 4.
Class I base up again for October
The October federal milk marketing order (FMMO) Class I base price is $16.60 per hundredweight (cwt), up 4 cents from September, 76 cents more than October 2015 and the highest since December 2015.
Through the first 10 months of 2016, the Class I base average is $14.60 per cwt, down $1.69 from the same period a year earlier.
FMMO Class I base ($ per cwt)
October 2016 – $16.60
September 2016 – $16.56
October 2015 – $15.84
January-October 2016 – $14.60
January-October 2015 – $16.28
USDEC: Commodity price movements bode well for U.S. exports
Halfway through September, the U.S. butter price gap with the European Union (EU) has been virtually erased, according to the U.S. Dairy Export Council (USDEC). The cheese price gap has been cut nearly in half.
The disparity between U.S. and international butter prices has narrowed to its smallest gap since early 2015. The difference between U.S. and international cheese prices improved from recent levels as well. While still facing a pricing disadvantage, the shifts—and market trends that suggest further movement to close convergence—contain the promise of a much-needed competitive boost for U.S. dairy suppliers.
Since a brief moment of parity in early 2015, U.S. butter prices have averaged over $1,700 per ton more than EU butter and $1,900 per ton more than Oceania. This month, the U.S. butter price gap with the EU fell to just $33 per ton, while the price gap with Oceania fell nearly 60 percent to $766 per ton.
Read more on USDEC’s U.S. Dairy Exporter blog.
CWT 2016 export sales reach 655 million pounds milk equivalent
The year-to-date milk equivalent of dairy products exported through the Cooperatives Working Together (CWT) topped 655 million pounds as of the week ending Sept. 16. As of that date, cheese exports topped 35.8 million pounds; butter exports topped 7.4 million pounds; and whole milk powder topped 21 million pounds.
July fluid milk sales disappointing
After nearly matching year-ago monthly sales totals for several months, fluid milk sales slipped in July.
July 2016 packaged fluid milk sales totaled 3.76 billion pounds, down 4 percent from July 2015, according to USDA’s Dairy Market News. Sales of conventional products totaled 3.57 billion pounds, down 4.1 percent, while sales of organic products, at 196 million pounds, were down 2.8 percent. Organic represented nearly 5.2 percent of total sales for the month.
On the conventional side, whole and flavored whole milk sales continued to outpace last year’s sales. July sales of conventional whole milk were up 1.9 percent compared to the previous year, with flavored whole milk sales up 8.3 percent. Sales of organic whole milk were up 6.4 percent compared to a year earlier, but sales of all other varieties were down.
Conventional and organic low-fat and fat-free milk varieties again had the largest sales declines compared to a year earlier.
Year-to-date, total packaged fluid sales totaled 28.22 billion pounds, down 1 percent from a year earlier. Conventional fluid milk sales totaled 26.74 billion pounds, down 0.8 percent from a year earlier. January-July organic milk sales total 1.48 billion pounds, up 4.4 percent. Organic sales represented about 5.3 percent of total fluid sales for the period.
The figures represent consumption of fluid milk products in federal milk order marketing areas and California, which account for approximately 92 percent of total fluid milk sales in the U.S.
Dairy Margin Watch: September starts weaker
Dairy producer margins weakened slightly during the first half of September, with steady milk prices offset by a rise in feed prices, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging LLC.
Overall, margins remain near or above the 80th percentile of the past 10 years.
Milk prices managed to hold support at higher prices, despite large dairy product stocks. The gap between U.S. and global cheese prices has been narrowing, which could help stimulate exports and draw down stocks. In addition, the early September Global Dairy Trade auction was 7.7 percent higher than the prior event and the highest since March 2015.
USDA’s World Ag Supply & Demand Estimates (WASDE) report lowered the corn yield slightly, while raising that of soybeans. The corn changes were considered neutral to the market. The market appears to expect August represented a peak in corn yield estimates from USDA, supporting the market as corn prices have been increasing. In contrast, the WASDE soybean yield estimate was raised beyond market expectations. However, since much of the increased supply was absorbed by higher demand projections, soybean meal prices have held steady.
Visit the Margin Manager website.
Pennsylvania Milk Marketing Board boosts Class I over-order premium
The Pennsylvania Milk Marketing Board (PMMB) increased the state’s Class I over-order premium price for milk by 15 cents, to $1.75 per hundredweight (cwt) for the four-month period beginning Oct. 1, 2016.
PMMB also approved adjusting the premium back to $1.60 per cwt during February and March of 2017. The over-order premium and the fuel adjuster add-on mandated by PMMB are assessed on Class I (fluid) milk that is produced, processed and sold entirely within Pennsylvania.
The Pennsylvania Farm Bureau (PFB) had sought a 30-cent per cwt increase in the premium, while milk dealers asked the board to keep the premium unchanged.
During testimony before PMMB, Farm Bureau noted that the trend of declining milk prices has put a major strain on Pennsylvania dairy farmers, who are facing extremely difficult conditions on the farm. 
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Dave Natzke
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- Progressive Dairyman
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