The milk price roller coaster is alive and well and USDA’s announcement of the June Federal order Class III milk price is a case in point. After two months of gain, the benchmark Class III price dropped 50 cents, to $18.02 per cwt., but that’s still $2.39 above June 2012, $2.11 above California’s 4b price, and equates to about $1.55 per gallon.

Futures contracts portend another decline in July before rebounding in August and peaking in September. Late morning trading on July 5 had the July contract at $17.27; August, $18.05; September, $18.67; October, $18.53; November, $18.24; and December at $17.81. The 2013 Class III average stands at $17.74, up from $15.90 at this time a year ago, $17.06 in 2011, and $13.58 in 2010.

The June Class IV milk price is $18.88, down a penny from May and $5.64 above a year ago. Its 2013 average hit $18.17, up from $14.90 a year ago, and compares to $19.23 in 2011 and $14.02 in 2010. The AMS-surveyed cheese price average used in calculating the June Class III price was $1.7810 per pound, down 4.6 cents from May. Butter averaged $1.5422, down 10.6 cents, nonfat dry milk averaged $1.6878, up a nickel, and dry whey averaged 57.39 cents per pound, down fractionally from May.

California’s June 4b cheese milk price is $15.91 per cwt., down $1.29 from May but $1.26 above June 2012. That put the 2013 4b average at $16.05, up from $13.83 at this time a year ago and compares to $15.67 in 2011. Some California producers are seriously considering becoming part of the federal order system.

California’s June 4a butter-powder milk price is $18.39, up 15 cents from May but $5.22 above a year ago. The 4a average now stands at $17.94, up from $14.73 a year ago and compares to $18.94 in 2011.

The June 4a and 4b prices do not include the temporary price increases resulting from the May 20 public hearing because they only become effective on milk delivered on or after July 1, 2013 and continue through Dec. 31.

Soaring temperatures, particularly in the West, drove dairy product prices up the first week of July, national Ice Cream Month, however those temperatures had backed down some by week’s end. The 40-pound Cheddar blocks closed that Friday at $1.6650 per pound, up 2.75 cents on the 4th of July holiday-shortened week but a penny below that week a year ago.

The 500-pound barrels closed at $1.67, up 7.25 cents on the week and a half-cent below a year ago. Thirteen carloads of block traded hands on the week and 15 of barrel. The lagging behind AMS-surveyed U.S. average block price inched 0.4 cent lower, to $1.7466, while the barrels averaged $1.7830, down 1.3 cents.

Record cheese stocks are/were weighing on spot sales as buyers feel that the market must come down to instigate new sales, according to USDA’s Dairy Market News (DMN). But, current U.S. prices are lower than international prices, export demand is good, and sales are being assisted by the CWT program.

CWT bid acceptances last week totaled 16 on 2.361 million pounds of cheese and 665,796 pounds of butter to customers in Asia, the Middle East and North Africa. The product will be delivered through December and raised CWT’s 2013 cheese exports to 66.923 million pounds, plus 52.393 million pounds of butter, 44,092 pounds of anhydrous milkfat, and 218,258 pounds of whole milk powder to 32 countries.

The June 28 DMN reported that cheese production was slowing as peak milk volumes are past in many parts of the country and some plants have made the decision to slow manufacturing. Warmer weather across the country, but particularly the West, was expected to further hinder milk supplies.

Even cash butter took a turn for the good, reversing almost 12 cents in losses the previous three weeks, closing at $1.5250, up 9.75 cents on the week but three quarters below a year ago. Eighteen cars sold on the week as ice cream sales draw cream away from the churn. AMS butter averaged $1.5109, down 3.9 cents.

But, the Grade AA butter market is weak, according to participants in the June 28 DMN. Stocks are growing steadily from month to month and that was evident in the last Cold Storage report showing stocks at 323.2 million pounds, the highest level of stored butter on record since January 1993, according to NASS data.

Butter sales into some retail accounts perked up with the recent drop in Grade AA prices. Various manufacturers report that while intermediate buyers are still hesitant to take positions, retailers recognize the current pricing offers opportunities to fill near term consumer needs.

Cash Grade A and Extra Grade nonfat dry milk closed a penny higher on the week, at $1.74 and $1.71 respectively. AMS-powder averaged $1.6977, also up a penny, and dry whey averaged 57.12 cents, down 1.1 cent.

Last week’s Dairy Products report shows May butter production at 167 million pounds, down 0.2 percent from April but 1.5 percent above May 2012. Nonfat dry milk output, at 167 million pounds, was up 4.6 percent from April but 13.4 percent below a year ago.

The Daily Dairy Report (DDR) said that manufacturers are responding to export demands and increased production of skim milk powder (SMP) in May to a record-large 54.6 million pounds. Combined nonfat dry milk (NDM) and SMP production totaled 222.1 million pounds, up 6.7 percent from a year ago and 7.5 percent higher than in April on a daily average basis. The DDR said manufacturers may have shifted some NDM capacity into SMP.

USDA also revised its estimate of manufacturers stocks of NDM at the end of April from 193.1 million pounds to 207.6 million. This, coupled with strong production, put May ending stocks at 226.7 million pounds, 5.2 percent higher than year-ago levels despite record large NDM exports, the DDR said.

American type cheese totaled 389 million pounds, up 3.3 percent from April and 5.9 percent above a year ago. Italian type, at 402 million pounds, was up 1.1 percent from April and 2.7 percent above a year ago. Total cheese out of the vat in May amounted to 954 million pounds, up 2.6 percent from April and up 3.9 percent from May 2012.

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.