Farm milk prices slipped for the fifth month in a row, but have likely bottomed out for 2013. The USDA announced the March Federal order Class III price at $16.93 per cwt., down 32 cents from February, but $1.21 above March 2012, $1.91 above California’s 4b cheese milk price (even with the state’s temporary price increase), and equates to $1.46 per gallon. The March Class IV price is $17.75, unchanged from February and $2.40 above a year ago.

The April Class III futures contract was trading late Friday (April 5) morning at $17.56. May was at $18.35; June, $19.33; and peaked at $19.35 in July. The 2013 Class III average now stands at $17.44, up from $16.28 a year ago, and compares to $16.63 in 2011 and $13.85 in 2010. The Class IV average is now at $17.71, up from $15.94 a year ago, and compares to $18.08 in 2011 and $13.22 in 2010.

The March AMS-surveyed cheese price averaged $1.6467 per pound, down 1.6 cents from February. Butter averaged $1.6146, up 7.1 cents. Nonfat dry milk averaged $1.5208, down 3.5 cents, and dry whey averaged 60.48 cents, down 3.2 cents from February.

California’s 4b cheese milk price was announced by the California Department of Food and Agriculture at $15.02 per cwt., down 39 cents from February, but $1.35 above a year ago. The 4b average for 2013 now stands at $15.42, up from $13.77 a year ago and $15.39 in 2011.

The 4a butter-powder price is $17.87, down 14 cents from February but $2.54 above a year ago. Its 2013 average is now at $17.65, up from $15.67 a year ago and $17.81 in 2011. The prices for the months February to May include the temporary price increases resulting from the Dec. 21, 2012 public hearing.

Cash block cheese closed the first Friday of April at $1.7625 per pound, up 7 cents on the week and 27.5 cents above a year ago. Barrels finished at $1.6925, up 9.5 cents, 23.25 cents above a year ago, but 7 cents below the blocks. Five cars of block traded hands on the week and seven of barrel. The AMS-surveyed U.S. average block price inched up 1.1 cent, to $1.6217, while the barrels averaged $1.6499, up 3.2 cents.

USDA’s Dairy Market News (DMN) reports that cheese production across the country continues at an accelerated pace compared to last year. Midwest cheese manufacturers are noting abundant milk supplies are available and the East and West are above year ago levels as well. 

FC Stone market analyst Ryan Cox wrote in his April 5 eDairy Insider Opening Bell that “milk production is strong and we can expect product inventories to build as we go through the flush.”

Sales have been sufficient to keep inventories from building excessively, says USDA, and export demand has been good, assisted by the CWT program. “Good export sales are important in keeping inventories at manageable levels,” says DMN, but “buyers are hesitant to purchase above immediate needs.”

The CWT accepted 28 requests for export assistance this week to sell 5.9 million pounds of cheese and 1.6 million pounds of butter to customers in Asia, Europe, the Middle East, North Africa and Oceania. 

Speaking of the world market; milk powder prices moved sharply higher in Tuesday’s Global Dairy Trade (GDT) auction and the trade-weighted average for all products increased 14.2 percent. The April 3 Daily Dairy Report (DDR) says that the sharp increase follows previous biweekly gains of 14.8 and 10.4 percent.

Second half 2012 GDT prices moved modestly higher, but the recent gains are in response to lower-than-anticipated milk production in drought-stricken New Zealand. The DDR points out that New Zealand, the world’s largest exporter of whole milk powder (WMP), exported 98 percent of its 2012 WMP production, “Therefore, it comes as no surprise that WMP prices have posted significant price gains during recent auctions. WMP prices rose 7 percent on April 2, to an average $2.31 per pound, the highest price recorded since July 2008.”

Tightness in the WMP market has spilled into other markets, according to the DDR. Skim milk powder posted the largest price gain from the last auction largely due to limited offerings by Fonterra in the June through October contract periods. The DDR adds that the U.S. is the only top-five dairy exporting country to post higher milk production in 2013. More important, the 1 percent increase in U.S. milk production during Fourth Quarter 2012 contributed to strong dairy product production and stock building. “With ample stocks and lower domestic prices versus global markets, the United States is well positioned to capture market share over the next several months,” the DDR concludes.

Butter closed April 8 at $1.71, up 8 cents on the week and 28 cents above a year ago. Three cars sold. The AMS butter price averaged $1.6586, up 2.9 cents.

Cash Grade A nonfat dry milk closed Friday at $1.6825, up a whopping 12.25 cents on the week. Three cars were sold. Extra Grade closed at $1.59, up 3 cents, on bids. AMS powder averaged $1.5066, down 0.3 cent, and dry whey averaged 58.16 cents, down a penny.

February dairy product production was down a little from a year ago on some products, according to USDA’s latest Dairy Products report, but February had one less day of production this year so the comparisons are skewed due to last year being a leap year.

Butter output, at 171 million pounds, was down 8.9 percent from January, but 1.1 percent above a year ago. Nonfat dry milk production, at 138 million pounds, was down 3.7 percent from January and 20 percent below a year ago.

FC Stone dairy economist Bill Brooks said “the Dairy Products report showed reduced nonfat production and higher skim milk powder (SMP) output. I think that will continue given the international market conditions. With more milk going into SMP and moving offshore, it will help firm up nonfat prices.”

American type cheese, at 347 million pounds, was down 7.8 percent from January, but 1.3 percent above a year ago. Italian type cheese output, at 361 million pounds, was down 9.7 percent from January and 2.6 percent below a year ago. Total cheese output hit 857 million pounds, down 8.4 percent from January and slightly below that of a year ago.

Dairy product commercial disappearance from November 2012 through January 2013 totaled 49.2 billion pounds, up 0.6 percent from a year ago. Butter was down 14.8 percent; American cheese, up 1.7 percent; other cheese, up 1.2 percent; NDM, down 33.6 percent; and fluid milk products were off 2.1 percent.

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.