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Friday...Temperatures will range from a high of 29 to a low of 20 degrees with mostly cloudy skies. Winds will range between 7 and 11 miles per hour from the southwest. Less than 1 inch of snow is possible.
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Dairy commodity prices strong in spot market

Aug. 13, 2014 | 0 comments


Prices for dairy commodities continued to show strength in the spot market on the Chicago Mercantile Exchange through Wednesday of this week.

AA butter led the parade in the spot market on Wednesday with a 7-cent per pound jump to $2.50 as 11 carloads were sold, bringing the week's total to 33 carloads. An unfilled bid to buy two carloads added to the price, which was up by 10 cents per pound from a week earlier.

Cheddar cheese blocks and barrels joined the trend on Wednesday, tacking on 2 and 1-cent gains per pound respectively to close at $2.13 and $2.16 per pound in the spot market. The day's activity consisted of the sale of two carloads of blocks and one of barrels.

Grade A non-fat dry milk continued to defy the upward price trend. Its price fell by another 1 cent per pound on Wednesday, closing at $1.49 per pound after an uncovered offer to sell four carloads and an unfilled bid to buy one carload.

Futures markets

Despite the price strength in the cash market, the Class III milk futures recorded only minimal price movements for a few months in trading through Wednesday afternoon. Prices stood at new highs of $22.05 per hundred for August and $22.09 for September along with $20.93 for October before slipping to $19.76 for November and $19.11 for December and into the low $18s and high $17s per hundred for all months of 2015.

The strong prices continued to carry over in the dry whey futures market, which posted a new high of 69.15 cents per pound for August along with 58.4 cents for December futures. Prices for all months in 2015 were at 52.5 cents per pound or higher.

Dry whey futures are important to the Class III milk cash prices. They contribute about 6 cents per hundred to the Class III price for every 1 cent of the dry whey price per pound.

Producer price differential

The producer price differential (PPD) for the more than 2.937 billion pounds of milk pooled in the Upper Midwest Federal Milk Marketing Order 30 for July is 45 cents per hundred in the Chicago base zone and 25 cents at the most distant milk receiving plants. The pooled milk had component averages of 3.68 percent butterfat, 3.01 percent protein, and 5.75 percent other solids.

Of the pooled milk, 88.2 percent went to Class III use (cheese production) and 9.8 percent to Class I (bottled fluid milk). Classes II (soft dairy products) and IV (butter and milk powder) accounted for the remaining 2 percent of the pooled milk.

The PPD continues to be significantly higher in the neighboring marketing orders where the Class I usage percentage of the pooled milk is much greater. In the Central Order 32, which is based at Kansas City, MO, the July PPD is $1.42 per hundred thanks to a Class I usage of 29 percent. For Mideast Order 33, based at Cleveland, OH, the July PPD is $1.88 per hundred and the Class I usage is 35 percent. The total volume of pooled milk in those two orders is less than that in Order 30.

Dairy export update

On Tuesday of this week, Cooperatives Working Together (CWT) announced the receipt of a batch of five bids from Dairy Farmers of America, the Michigan Milk Producers Association, and Tillamook Creamery of Oregon for financial assistance on the export of 1.587 million pounds of whole milk powder and 277,782 pounds of Cheddar cheese to countries in Asia, the Middle East, North Africa, and South America. The deliveries are scheduled from August to December.

For the first half of 2014, the value of dairy product exports by the United States increased by 26 percent compared to 2013. The total value for the first six months of the year was $3.921 billion. June was the fourth consecutive month during which the value of the exports topped $600 million.

The June dairy product exports represented 17.3 percent of the nation's milk production, up slightly from the 16.5 percent during June of 2013. On the exports for 2014, CWT's program that is supported by a milk checkoff by members of participating dairy cooperatives was credited with about one half of the volume of cheese exports and one quarter of the butter exports.

The culling of dairy cows this year continues to run behind the 2013 pace. Including the 52,600 head culled during the week ending on July 26, the year's total of 1,607,720 was down by 184,700 from the same period in 2014.

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