Class III milk, not Class I, likely will be the price leader in June milk checks.

That’s a rare occurrence as Class I beverage milk is typically the market leader.

A big pendulum swing
In late April, many people would have thought this milk price situation in June was unfathomable. Back at that time U.S. cheese was selling for $1 per pound, while Cheddar was fetching $2 per pound in New Zealand. Of course, the Kiwis are the world’s largest dairy product exporter. Those market conditions were detailed in the Hoard’s Dairyman Intel, “Why a $1 spread in cheese prices?

Less than two months later, the pendulum has swung in the opposite direction.

Cheese in New Zealand is selling for roughly $1.70 per pound, while spot blocks of Cheddar on the CME fetched well over $2.50 per pound in late June, with blocks in the low $2.40-per-pound range.

Cheese trumps fluids
“June’s Class III price (driven by cheese price gains) is expected to jump over $7 per cwt. (hundredweight), exceeding $19 per cwt.,” stated Cary Hunter, interim market administrator for the California federal marketing order.

Of course, that is a major pricing factor in California . . . a state that produces the second-largest volume of cheese in the United States. The Golden State’s total is only surpassed by Wisconsin.

“The Class I price (announced the first two weeks of May) will not reflect the price spike that will be captured in the June class and component prices (Class II, III, and IV),” continued Hunter. “Class I, therefore, will likely end up as the lowest class price for the month.”

That market anomaly leads to negative producer price differentials (PPDs).

To learn more about that topic, read “Up to $4 deducts could be in June milk checks.”

As for the final component values for this June’s milk checks . . . those will be finalized on July 1.

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(c) Hoard's Dairyman Intel 2020
June 29, 2020
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