Things remain tough on the farm. Lower average milk prices, combined with higher alfalfa hay prices, more than offset steady soybean prices and slightly lower corn prices, sending the May 2012 milk-feed price ratio to the lowest level in two decades, according to the May Ag Prices report.

The May 2012 milk-feed price ratio, at 1.38, is down from a revised 1.42 in April and 1.73 in May 2011 and is the 14th consecutive month it has been below 2, reports Dairy Profit Weekly (DPW).

At $16.40 per cwt., the U.S. average milk price is the lowest since July 2010. Average hay prices rose $8, to $215 per ton; soybean prices were steady, at $13.70 per bushel; and corn prices dropped 12 cents, to $6.34 per bushel. The April MILC payment to producers will be $1.2110 per cwt.

On the bright side; the cash dairy markets saw more strength the final week of the month with 40-pound block cheese closing Friday June 1 at $1.65 per pound, up 8 cents on the week, but 40 cents below a year ago when they jumped 24 cents, to $2.05. The 500-pound barrels closed at $1.5325, up 6.25 cents on the week and 42.75 cents below a year ago. Only two cars of block traded hands on the week and four of barrel. AMS-surveyed block cheese averaged $1.5210, across the U.S., down 0.6 cent. The barrels averaged $1.4932, up a half-cent. Cheese production nationally remains heavy, according to USDA. Increased milk supplies have been moving to manufacturing facilities with cheese plants taking much of the increase. This has increased stocks in cold storage, but manufacturers are reported to be comfortable with current inventories. 

The May Federal order benchmark Class III milk price was announced at $15.23 per cwt., down 49 cents from April, $1.29 below May 2011, and equates to about $1.31 per gallon. That put the 2012 Class III average at $15.96, down from $16.65 at this time a year ago, and compares to $13.57 in 2010 and $10.23 in 2009.

Looking ahead, Class III futures were trading late Friday morning as follows: June, $15.57; July, $16.07; August, $15.89; September, $15.96; October, $16.11; November, $16; and December, $16.

The May Class IV price is $13.55, down $1.25 from April and a whopping $6.74 below a year ago. Its 2012 average now stands at $15.24, down from $18.86 at this time a year ago.

The AMS surveyed cheese price averaged $1.5215 per pound, down 1.5 cents from April. Butter averaged $1.3657, down 9.8 cents. Nonfat dry milk averaged $1.1551, down 9.6 cents, and dry whey averaged 53.89 cents, down 5.3 cents.

Looking “back to the futures;” after factoring in the announced Class III milk prices and the remaining futures, the average Class III milk price for the first six months of 2012 stood at $15.65 on March 2, $15.70 on May 10, and $15.94 on May 25. The last half of 2012 was averaging $15.95 on April 20, $15.61 on April 27, $15.08 on May 4, $15.44 on May 11, $15.69 on May 18, $16.13 on May 25, and was trading around $16.00 late morning June 1.

Export sales are being assisted by the Cooperatives Working Together (CWT) program. American cheese stocks are above year ago and last month’s levels. “Other” natural cheese stocks were below year ago levels, but increasing from last month. A recent earthquake in Italy is reported to have damaged over 300,000 wheels of aged cheese worth hundreds of millions of dollars.

CWT accepted 14 requests for export assistance the last week of May to sell a total of 875,235 pounds of cheese and 1.664 million pounds of butter to customers in Asia, North Africa, Central America and the Middle East. The product will be delivered through November and raised 2012 CWT cheese exports to 54.7 million pounds plus 44.7 million pounds of butter and anhydrous milk fat to 27 countries. Totals of both were adjusted due to cancellations. 

Cash butter saw a third week of gain, closing Friday at $1.40, up 1.25 cents on the week but 74.25 cents below a year ago. Six cars traded hands. AMS butter averaged $1.3450, up a penny from the previous week.

Butter demand has been fair for the current time of year, according to USDA’s Dairy Market News. 

Butter feature activity has been light to moderate, but expected to increase as more co-featuring is occurring with sweet corn and the unofficial start of barbeque season during the Memorial Day holiday weekend. Lower retail butter prices are also helping sales, says USDA.

Cream demand increased, surprising many ahead of the holiday weekend. Cream supplies are declining due to less standardized cream available as school milk needs decline, lower milk output in some areas, and declining milkfat levels in milk. Butter production remains moderate to heavy at seasonal levels.

Cash Grade A nonfat dry milk closed Friday at $1.1850, up 3 cents on the week on 11 cars traded, while Extra Grade remained at $1.09. AMS powder averaged $1.1317, down 1.3 cents, and dry whey averaged 52.4 cents, down 1.8 cents.

USDA reports that Northeast milk production likely plateaued in early May. Nevertheless, production remained heavy and drying at some plants remained at full capacity. Milk production in the Southeast is declining overall except in the mid-Atlantic. This has kept manufacturing capacity in the Southeast at about 60-70 percent of capacity. 

Milk intakes and component levels are gradually receding from seasonal highs in the Central region. Various marketing representatives and cooperative managers indicate the competition for farm milk is increasing steadily in some areas of the Central region where cheese and butter/powder plants are numerous. 

California milk output is mostly steady and remains at or near the seasonal peak. Weather has been warm during the daytime, but cooler at night. Arizona milk production is trending lower on a week-to-week basis. Hotter temperatures are a main cause, along with time in milk and feeding changes made because of high feed costs, according to USDA. Milk production in the Pacific Northwest has slowed from the heavy levels a few weeks ago but remains heavy.

USDA’s preliminary 2011 milk cost of production (COP) estimates are giving dairy policy leaders and others new numbers to digest. Production costs across the 23 states are analyzed are in a wide range, reports Dairy Profit Weekly (DPW), with regional similarities often difficult to find. The bottom line, DPW says, is that; although the 23-state gross income rose an average of $3.94 per cwt. in 2011 compared to 2010, that was more than offset by a $4.69 per cwt. increase in total feed costs. 

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Lee Mielke may write to him in care of this publication.