Quiet period settles in for dairy spot markets

In the wake of the Christmas holiday, the spot market for manufactured dairy products turned relatively quiet on the Chicago Mercantile Exchange during the first part of this week.

No spot market sales of Cheddar cheese or AA butter were made on Tuesday or Wednesday of this week. This is in contrast to the last pre-holiday session on Friday of last week when eight carloads of Cheddar blocks and six of Cheddar barrels were sold and a bid to buy three carloads of barrels was not filled.

With an unfilled bid to buy one carload of barrels being the only activity on the spot market on Wednesday, the prices held at $1.56 per pound for barrels and $1.5625 for blocks. The average prices for the month are likely to be the second lowest for any month of 2011, being higher only than the average of $1.5140 for January.

During 2011, monthly average record high prices for Cheddar cheese blocks were set in June, July and August to break the records previously set in 2007 and 2008. March fell just over 1 cent short and February lagged by 10 cents for topping the price records set for those months in 2008.

The rising prices for dry whey and the high cheese prices combined to set a probable record average all-milk price of around $20.10 per hundred for 2011. Final numbers will be tabulated once the December price is announced within the coming week.

On the down side, however, the Economic Research Service of the U.S. Department of Agriculture has reported very high feed and operating costs for milk production. In October, for instance, those average costs were calculated to be $14.41 per hundred of milk production for feed costs alone, and $17.06 per hundred for total operating costs.

For 2011 as a whole, the estimates are that feed costs will average above $13 per hundred of milk production, compared to $11.17 in 2010. In the spot market for AA butter, an unfilled bid to buy two carloads was the only activity on Wednesday of this week as the price stood at $1.5950 per pound, which is where it has been since Dec. 20.

Prices remain at $1.48 per pound for Grade Extra and $1.45 for Grade A in the non-fat dry milk spot market, which has seldom had any activity in recent months.

Class III milk futures posted modest gains for nearby months on Wednesday of this week despite no movement in the commodity cash markets. The December futures price of $18.66 per hundred remained as the highest one on the board, while all months of 2012 closed on Wednesday in the very narrow range of $17 to $17.37 per hundred. The 2013 prices remained in the lower half of the $16s per hundred before dropping into the high $15s for the final quarter of the year.

The dry whey futures market continues to provide underlying strength for the cash milk price with its prices of 60 to 69 cents per pound for the first half of 2012 and in the 50s for the second half of the year. Every one cent of the dry whey price converts to about six cents per hundred on the milk price.