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Class III milk price up in November, but down from a year ago
Mielke Market Weekly
By Lee Mielke
 Financial relief is coming slowly to U.S. dairy farms. The Agriculture Department announced the November Federal order Class III milk price at $17.15 per hundredweight, up just 31 cents from October but is $3.86 below November 2022. That put the year’s average at $17.11, down from $22.09 in 2022, but compares to $16.96 in 2021.
Unfortunately, late Friday morning Class III futures portend a December price at $16.11, which would be down $1.04 from November. January was trading at $16.26; February, $16.69; and March at $17.39, with a peak of $18.61 in October.
The November Class IV price is $20.87, down 62 cents from October, and $2.43 below a year ago. The year’s average is at $19.11, down from $24.68 a year ago, but compares to $15.74 in 2021.
Class III milk prices in 2024 will be better than those we saw this summer, says HighGround Dairy’s Market Intelligence Manager, Cara Murphy, in the December 4 “Dairy Radio Now” broadcast, but not to the levels we saw in 2022. Feed prices have come down, she said, and are more supportive of on farm margins.
Demand is one of the big factors in milk prices and “China is always on our mind,” she said. China has backed off in its dairy purchases and there’s a lot of uncertainty as to when they will come back but she believes the export market still holds potential for the U.S. European cheese prices have been low for most of 2023 but have since been on the rise on low inventories in Europe. That is opening opportunities for the U.S., she said, due to our low prices.
The other side of the coin is supply and that means milk. HighGround sees limited growth in the U.S. in 2024, according to Murphy. She pointed to the large reduction in California particularly, though some of that has been countered by increases in the Midwest. The slaughter rate is telling, she concluded. Rates popped in the summer months when the Class III plunged to $13.77 in July. Culling has since pulled back but is up 2.6 percent from a year ago. The October herd was down 42,000 from a year ago and she believes that will play out in 2024.
Falling feed prices for the sixth month in a row and another boost in the All-Milk Price nudged the milk feed price ratio higher for the fourth consecutive month. The USDA’s latest Ag Prices report put the October ratio at 2.03, up from 1.89 in September and 1.90 in October 2022, and the highest since March 2022.
The index is based on the current milk price in relationship to feed prices for a ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. One pound of milk would purchase 2.03 pounds of dairy feed of that blend.
The All-Milk Price average increased for the third month in a row, hitting $21.60 per hundredweight, up 60 cents from September, but $4 below October 2022.
The national corn price averaged $4.93 per bushel, down 28 cents from September, after falling 52 cents the previous month, and is $1.56 per below October 2022. Soybeans averaged $12.70 per bushel, down 50 cents, after dropping 90 cents the previous month, and were 80 cents per bushel below a year ago.
“Milk production margins were the highest of 2023 by $1.07 over September, according to dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Mo. Brooks says, “Income over feed costs were above the $8 per cwt. level needed for steady to higher milk production for the second time since January. Input prices were lower, but all three commodities were in the top five for October all time. Feed costs were the fifth highest ever for the month of October and the 61st highest of all time. The ratio was below the 5-year average for the 17th month running, as the average ratio for October is 2.18.
Brooks adds, “2023 milk income over feed costs (using Nov. 30 CME settling futures prices for Class III milk, corn and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $7.79 per cwt., a loss of 11 cents per cwt. versus last month’s estimate. 2023 income over feed would be below the level needed to maintain or grow milk production, and down $4.12 per cwt. from 2022’s level,” according to Brooks.
Milk income over feed costs for 2024 is expected to be $11.86 per cwt., a gain of $4.07 versus the 2023 estimate. Income over feed is 57 cents per cwt. lower than last month and would be above the level needed to maintain or grow milk production, Brooks concludes.
Cash dairy prices started December varied. The Cheddar blocks crept up 2 cents Monday but headed lower from there, closing Friday Dec. 1 at $1.52 per pound, down 7 cents on the week, lowest since July 17, down 16.50 cents from its Nov. 1 print, and 58 cents below a year ago.
The barrels also finished Friday at $1.52, up 8 cents on the week, 15.25 cents lower on the month, and 37.75 cents below a year ago. There were 14 sales of block on the week and 51 for November, down from 69 in October. Barrels totaled 16 for the week and 58 for the month, down from 66 in October.
Milk availability defied expectations the week following Thanksgiving, says Dairy Market News. Spot milk prices reached $2.50-under Class III over the weekend, but bounced back to $1-over with no sub-Class prices being reported at midweek. Last year, below-Class prices during the holiday week continued into the following week. Cheese demand is holding a steady pattern, says DMN, and any extra Cheddar loads are generally spoken for among regional contacts.
In politics, the U.S.-Canada-Mexico Agreement (USMCA) negotiated by the Trump Administration will not be as beneficial as expected for the U.S dairy industry. A Nov. 24 ruling by a USMCA dispute panel allows Canada to continue to restrict dairy access that the U.S. negotiated for in the pact and “weakens the agreement’s value to the U.S. dairy industry,” according to the National Milk Producers Federation and the U.S. Dairy Export Council.
An earlier panel ruled in January 2022 that Canada had improperly restricted access to its market for U.S. dairy products. In response, Canada made insufficient changes to its dairy tariff rate quota (TRQ) system, resulting in an outcome that still fell far short of the market access the U.S. expected to receive under USMCA. To address that shortcoming, the U.S. brought a second case to challenge the changes that Canada instituted. The panel announced that Canada was not obligated to make further changes.
“It is profoundly disappointing that the dispute settlement panel has ruled in favor of obstruction of trade rather than trade facilitation,” said Jim Mulhern, president and CEO of NMPF. “Despite this independent panel’s adverse ruling,” NMPF urged Ambassador Tai and Ag Secretary Vilsack to “look at all available options to ensure that Canada stops playing games and respects what was negotiated.”
The International Dairy Foods Association called the ruling “a glaring failure to safeguard the most fundamental rights outlined in the USMCA.”