MILK CHECK OUTLOOKS DIMMED over the past 90 days. During the April to June time span, the bundle of June-to-August Class III futures dropped precipitously from $18.85 to $14.94 per hundredweight (cwt.). Class IV CME contracts held more firm with a $18.56 to $18.25 range.
THESE LOW PRICES CAUSED the May’s Dairy Margin Coverage (DMC) margin to drop by $1.01 per cwt. to reach $4.83. That’s not only a new bottom, it’s also the lowest point during the duration of the DMC program and its predecessor, the Margin Protection Program (MPP).
IN MAY, FEED PRICES MODERATED A BIT. However, the drop was not enough to offset falling milk prices that yielded a $19.30 All-Milk price.
PREMIUM ALFALFA ROSE $2 to reach $317 per ton. Meanwhile, corn fell 16 cents a bushel in May to net $6.54, while soybean meal dropped $33.67 per ton to sell for $432.58 based on national averages.
AT TIER I $9.50 LEVEL COVERAGE, dairy farmers will receive $4.67 per cwt. as a DMC payment for May milk. Current projections indicate the DMC milk margins may not rebound above $9.50 until early 2024.
THIS FALL, CLASS III COULD RECOVER and Class IV could slide a bit. September-to-December Class III futures netted $16.75 per cwt. and the same group of Class IV contracts netted $17.65 on July 6 CME trading.
“CURRENT WEAK PRICES and the margin situation isn’t attributable to one single factor; rather, it’s an accumulation of many small weaknesses in many areas, with some further deterioration in just the last couple of months,” explained Peter Vitaliano, NMPF economist.
“THE FUTURES MARKETS’ PROJECTED improvement during the second half of the year will need to be driven by consumers returning to bolder spending behavior as inflation ebbs and for the low prices to perform their proverbial supply-side function of curing themselves,” said Vitaliano.
USDA ANNOUNCED AWARD DETAILS FOR CHEESE solicitation, with plans to buy 38 million pounds between October 2023 and June 2024. If purchased evenly, that’s about 4.3 million pounds a month. While the purchases will be supportive, it’s not likely to move markets.
TANKER LOADS OF MILK WERE DUMPED into the Milwaukee Metropolitan Sewerage District in late June, reported the Milwaukee Journal Sentinel. While a number of causes were identified, one major issue was omitted — labor shortages. In the pre-COVID-19 era, cheesemakers were more than willing to take low-priced spot milk and add overtime shifts. Now, extra workers are hard to find.
THE BEEF AND PORK PRICE DIVIDE has become wide. U.S. beef production has seen the largest decline since 1979 and there seems to be no near-term change on the horizon for beef, reported USDA. The federal agency has projected that beef production will fall 4.2% this year and decline another 8.4% as the beef cow herd continues to shrink.
AS A RESULT, CATTLE FUTURES are topping highs previously set in 2014 as August 2023 live cattle futures closed at $1.75 per pound. That’s up over 30% from one year ago. Large Holstein cows have fetched $2,000.
THE PORK INDUSTRY IS HEMORRHAGING MONEY as hog farmers are losing $30 to $80 per head. On July 5, August lean hogs traded at 97 cents per pound and December contracts were a paltry 75 cents.
A NUMBER OF DAIRY CO-OPS HAVE SEVERED TIES with the International Dairy Foods Association over the organization’s petition to modify federal orders. DFA and Land O’Lakes, two of the nations largest co-ops, left according to public reports. Others also have suspended memberships.
