By Lee Mielke

 Farm milk prices continue to recover but more is needed. The October Federal order Class III benchmark was announced by the USDA at $17.83 per hundredweight, up $1.30 from September but $3.78 below October 2020.

Late Friday morning, Class III futures portended a November price at $17.76 and December at $17.63, which would result in a 2021 average of $17.00, down from $18.16 in 2020, and compares to $16.96 in 2019.

The October Class IV price is $17.04, up 68 cents from September, $3.57 above a year ago, and the highest Class IV since November 2014. The Class IV average is at $15.44, up from $13.52 a year ago but compares to $16.23 in 2019.

One of the measures of dairy farm profitability appears to have turned the corner. A small rise in the September All Milk Price and some relief in corn and soybean prices moved the September milk feed price ratio in a positive direction for the first time since November 2020. The USDA’s latest Ag Prices report has the ratio at 1.69, up from 1.50 in August, but down from 2.27 in September 2020.

The U.S. all milk price averaged $18.40 per cwt., up 70 cents from August and 70 cents above September 2020. The California all milk price, at $18.80, was up 70 cents from August and $1.50 above a year ago. Wisconsin’s, at $18.30, was up 90 cents from August and 40 cents above a year ago.

The national average corn price slipped to $5.45 per bushel, down 87 cents per bushel from August, but still $2.04 per bushel above September 2020. Soybeans averaged $12.20 per bushel, down $1.50 from August after falling 40 cents the previous month, but were still $2.96 per bushel above September 2020.

Alfalfa hay averaged $209 per ton, up $3 from August and $41 above a year ago.

The September cull price for beef and dairy combined averaged $72.90 per cwt., down $3.10 from August, $6.30 above September 2020, and $1.30 above the 2011 base average of $71.60 per cwt.

Quarterly milk cow replacements averaged $1,340 per head in October, down $40 from July and even with October 2020.

California cows averaged $1,300 per head, down $50 from July and down $50 from a year ago. Wisconsin’s average, at $1,450 per head, was down $30 from July but $30 above October 2020.

Chicago-based Commodity and Ingredient Hedging LLC.’s latest Margin Watch (MW) reports, “Dairy margins strengthened further over the second half of October as milk prices continued to advance in deferred periods which more than offset a similar rise in projected feed costs.

“A significant slowdown in the growth of milk production while demand has stayed strong has been attributed to some of the recent strength,” the MW stated. “The feed markets have been trending higher as strong ethanol demand for corn has helped to limit harvest pressure.”

The milk price recovery is too little too late for the large dairies that came up for sale in California and Texas, according to the Oct. 28 Dairy and Food Market Analyst. Editor Matt Gould talked about it in the Nov. 8 Dairy Radio Now broadcast. He said nearly 28,000 cows were sold in New Mexico since June, 6,800 cows in Texas and 6,150 in California. Of the auctions he tracks, Gould said some 51,000 head have been sold at dispersals over the last four months.

He blames low margins and said, “Dairies in Texas and New Mexico have experienced especially low milk prices so far in 2021. January thru August, prices averaged just $15.56 per cwt. in New Mexico, $2.39 below the national average. Texas was the fifth-lowest and averaged $17.31 per cwt, according to the DFMA.

“Add in elevated feed costs,” said Gould, up $3.16 per cwt. January thru August, and average farm-level margins fell to the lowest level in the United States since July 2013. Typically, when average revenue over feed costs are below $8 per cwt. for six months or more, it triggers a slowing of growth,” he concluded. “Margins have been below that level every month in 2021 and most recently totaled just $5.46 per cwt. Dairy processors face many of the same issues.”

Cheese vats were busy in September, according to USDA’s latest Dairy Products report. Cheese output totaled 1.14 billion pounds, down 0.5 percent from August level which was revised up 7 million pounds, but 3.3 percent above September 2020. Year to date (YTD) output sits at 10.2 billion pounds, up 3.5 percent from the same period in 2020.

Wisconsin produced 289.0 million pounds of the September total, down 1.9 percent from August but 1.9 percent above a year ago. California output, at 201.9 million pounds, was up 0.1 percent from August and 4.5 percent above a year ago. Idaho produced 83.3 million pounds, up 6.9 percent from August but 4.4 percent below a year ago.

Italian style cheese totaled 486.2 million pounds, up 0.2 percent from August and 3.5 percent above a year ago. YTD Italian hit 4.3 billion pounds, up 2.6 percent. American type cheese, at 454.2 million pounds, was down 0.9 percent from August but 5.1 percent above a year ago. YTD American was at 4.2 billion pounds, up 5.3 percent.

Mozzarella totaled 379.3 million pounds, up 2.1 percent from a year ago, with YTD at 3.4 billion pounds, up 1 percent from 2020. Cheddar, which is traded at the CME, totaled 313.0 million pounds, down 6.5 million pounds or 2 percent from August, but 9.7 million pounds or 3.2 percent above a year ago. YTD Cheddar was at 2.95 billion pounds, up 4 percent from 2020.

Increased cheese meant less fat for butter. Churns produced 143.4 million pounds, down 4.6 million pounds or 3.1 percent from August, and 7.3 million or 4.9 percent below a year ago. YTD butter stands at 1.6 billion pounds, down 2.3 percent from 2020.

Strength remained in the Nov. 2 Global Dairy Trade auction where the weighted average jumped 4.3 percent, following a 2.2 percent advance Oct. 19. Traders brought 66.0 million pounds of product to market, up from 61.4 million on Oct.5, and the most since Jan. 5.

Cheddar led the gains, soaring 14.1 percent, after a 2.9 percent gain on Oct. 19. Skim milk powder was up 6.6 percent, following a 2.5 percent gain. Whole milk powder was up 2.7 percent, which followed a 1.5 percent increase. Butter was up 4.7 percent, duplicating the gain last time, and anhydrous milkfat was up 4.2 percent, following a 2.5 percent gain. Lactose was up 1.6 percent after gaining 5.9 percent. Buttermilk powder was down 3.8 percent.

StoneX said the GDT 80 percent butterfat butter price equates to $2.3674 per pound U.S., up 10.6 cents, and compares to CME butter which closed Friday at $1.9350. GDT Cheddar, at $2.2941, up 28.7 cents, and compares to Friday’s CME block Cheddar at $1.5850. GDT skim milk powder averaged $1.6450 per pound, up from $1.5426. Whole milk powder averaged $1.7785 per pound, up from $1.7248. CME Grade A nonfat dry milk closed Friday at $1.57 per pound.