Dairy market undergoing

all-around price downturn

A national all-milk average price of $19.20 per hundred has been announced for milk shipped in January.

This is down by 60 cents per hundred from the December price and, based on current milk futures and dairy commodity prices, might represent the start of a long period of all-milk prices of under $20 after they averaged $20.14 per hundred in 2011.

Accompanying the predicted January all-milk price was a calculation of a milk to feed price ratio at a very low 1.77 compared to the 3.0, which is considered to be a profitable level for dairy farmers who buy a large portion of their feed.

In addition to the $19.20 per hundred all-milk price, numbers used for the January ratio were costs of $5.90 per bushel of shelled corn, $11.70 per bushel of soybean, and $192 per ton of dry alfalfa hay.

The Class I fluid milk national base price for February is $17.03 per hundred, not including regional price differentials. For January, the Class I base price was $18.80 per hundred.

Recent attention-getting activities in the spot market were the sale of 20 carloads of Cheddar barrels on Friday, Jan. 27, and a 4.5-cent per pound fall in the price for AA butter on Monday of this week.

On the other market days during the past week, no more than two carloads of product were traded and price changes were minimal.

On Wednesday of this week, however, there were price downturns on all four of the major commodities traded in the spot market on the Chicago Mercantile Exchange (CME). In what is one of the tightest price ranges ever, the day's closing prices after respective per pound declines of 1.75, .50, and 1 cent were $1.4925 for Cheddar block cheese, $1.49 for Cheddar barrels, and $1.4950 for AA butter.

There also happened to be spot market sales of three carloads each of block and barrel cheese and AA butter on the CME on Wednesday. In addition, there were uncovered offers to sell one carload each of Cheddar blocks and AA butter.

As a result of uncovered offers to sell one carload each of Grade A and Grade Extra non-fat dry milk on the CME, the price for both dropped by 1 cent per pound. This left the prices at $1.37 per pound for Grade A and $1.35 for Grade Extra.

Price weakness again appeared in the futures market for dry whey. After starting at 69.75 cents per pound for February, the prices drop off to below 50 cents by July of this year and then dip to 40 cents and below at the start of 2013.

In line with those commodity prices, red ink predominated in the Class III milk futures market on Wednesday for all months from February through December 2012 with March and April registering the highest declines of 32 and 28 cents per hundred respectively.

With only one more trading day remaining before the official Class III cash price is announced on Friday (Feb. 3), the January futures price stood unchanged at $17.09 per hundred.

The futures prices then drop to the lower half of the $16s for February through May, rebound to the high $16s and low $17s for June through January of 2013, and settle back to the low $16s and high $15s per hundred for the remaining months of 2013.

Cooperatives Working Together has accepted a group of 17 bids from Bongard's Creamery, Land O'Lakes, Darigold, United Dairymen of Arizona, Dairy Farmers of America, and O-at-Ka (Niagara, N.Y.)

The bids were for export assistance on shipping 10.955 million pounds of butter and 2.84 million pounds of Cheddar, Monterey Jack, and Gouda cheeses to countries in Asia, Europe, the Middle East, and North Africa by June of this year.