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Dairy Month starts with lower Class III milk price
By Lee Mielke

Happy June Dairy Month! Unfortunately, it starts with the announcement of a May Federal order Class III milk price of $10.83 per hundredweight (cwt.), down 10 cents from April, $2.94 below May 2005, and $9.75 below May 2004, but this should be the bottom. The Class IV price is $10.33, down 3 cents from April and $1.87 below a year ago. The 2006 Class III average now stands at $11.69, down from $14.26 a year ago and $15.65 in 2004.

Class III futures were trading late Friday morning as follows: June $11.42, July $11.92, August $12.22, September $12.47, October $12.55, November $12.44, and December $12.22. That portends a 2006 average of $11.98, down from $14.05 in 2005 and $15.39 in 2004.

The NASS cheese price averaged $1.1694, virtually unchanged from April. Butter averaged $1.1635, down 2 cents. Dry whey averaged 28.05 cents, down 2.5 cents, and nonfat dry milk averaged 82.88 cents, down 1.4 cents from April.

Memorial Day is behind us and summer is on its way. Downes-O’Neill dairy economist, Bill Brooks, predicted in Tuesday’s DairyLine that the cash dairy markets will likely move sideways for a while, similar to the beginning of May.

He reported that a lot of milk moved to manufacturing over the Memorial Day holiday and more will come with schools closing for summer. On the bright side, demand is good, according to Brooks. He looks for block cheese to remain close to $1.20 for awhile until we get a better handle on the impact of the heat that some parts of the country are currently seeing. Brooks is headquartered in Kansas City and said they are experiencing July type temperatures already.

Butter stocks are growing dramatically as more milk is shifted from the cheese vat to butter powder. Butter prices are “holding in there at a fairly decent level, relative to our stocks growth,” he said, and had been trading sideways, between $1.17-$1.18 in May “so there’s good support in there but these stocks are keeping a lid on price movements.” The heat should rev up ice cream demand, he concluded, and that should “Move butter prices higher, as we get through the flush and school closings and move into June.”

Cash block cheese closed the first Friday of June Dairy Month at $1.20 per pound, down 2.5 cents on the week, and 31 cents below a year ago. Barrel also closed at $1.20, up a penny on the week, but 27 cents below a year ago. Four cars of block traded hands and three of barrel. The NASS U.S. average block price hit $1.1729, up 1.7 cents. Barrel averaged $1.1761, up 2.5 cents. Butter closed at $1.1750, down a quarter-cent on the week, and 27.5 cents below a year ago. Six cars were sold. NASS butter averaged $1.1576, down 0.7 cent.

Price support purchases totaled 1.2 million pounds of nonfat dry milk. That put the cumulative total at 48.8 million, compared to 31.8 million a year ago.

With the 2006 planting season wrapping up, our eyes turn to growing conditions and feed prices. Dairy Profit Weekly editor, Dave Natzke, said Friday that USDA’s weekly crop progress report shows corn and soybean planting slightly behind last year, but progress on both crops is well ahead of normal for this date thanks to warmer, drier conditions in many corn and soybean growing areas.

He reported that 97 percent of U.S. corn acreage was planted as of this week, with about 87 percent of corn seedlings emerged. More than two-thirds of producers surveyed rated the crop as good to excellent. Soybean planting was estimated at about 80 percent complete, with emergence at about 42 percent. The early positive crop progress report is good news for dairy producers who must buy feed, according to Natzke.

However, USDA’s latest milk-feed ratio shows that lower milk prices and higher feed costs are turning what was a healthy margin situation just five to six months ago into a cash flow challenge, Natzke said. The May index, at 2.33, is the sixth straight month the ratio dropped from the previous month (from a peak of 3.46 in November 2005) and is at its lowest point since June 2003.

May all-milk prices were lower compared to April among all major dairy states except New Mexico and Texas. The preliminary national average price in May decreased 10 cents per cwt. from April, to $12.00 per cwt. The May 2006 average all-milk price is $2.70 per cwt. lower than May 2005, Natzke said.

May U.S. average soybean prices increased 10 cents per bushel. Corn prices rose 6 cents per bushel from April and baled hay prices were up another $8 per ton. Corn prices seem to be attracting the most attention, Natzke reported, as the fast-growing ethanol industry fuels competition and higher prices.

National Milk’s latest Import Watch reports that dairy product imports in first quarter 2006 were down from a year ago and, for some commodities, the level of imports track with U.S. prices at the Chicago Mercantile. NMPF’s Chris Galen said in Thursday’s DairyLine that, in the case of butter where prices have dropped significantly in the past six months, in the first three months of 2006, butter, butter oil, and butter substitutes were down significantly from a year ago.

Cheese imports are about the same, he said, down a little but a reflection of the soft cheese market here in the U.S. The exception is milk protein concentrate.

MPC imports in first quarter 2006 were down 1 percent, Galen said, that’s the good news the bad news is that they’re up from 2004 by about 60 percent and the largest volume that has entered the U.S. in the past five to six years. So, while butter and cheese imports for the most part have tailed off so far in 2006 that is not the case for MPC, according to Galen.

MPC imports do not seem to be tied very closely to domestic dairy product prices, according to the Import Watch. Galen said, “To the extent that there is an impact, it is more noticeable for products like butter and cheese.”

CWT bid acceptances this week included 220,000 pounds of butter to Egypt via California Dairies of Artesia, 880,000 pounds to Morocco through Seattle-based WestFarm Foods, and 660,000 pounds to Egypt via United Dairymen of Arizona. 220,000 pounds of anhydrous milkfat will go to Mexico from Dairy Farmers of America, and 95,700 pounds will go to Mexico from Select Milk Producers of Artesia, New Mexico. CWT butter exports now total 10.58 million pounds. Cheese exports total 4.97 million, whole milk powder 3.53 million, and anhydrous milkfat 2.34 million pounds.

This farm news was published in the June 7, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.