Monthly Dairy Comments by Dr. Andrew P. Griffith                                                September 29, 2017


 

Milk Production: Milk production in the 23 major states during August totaled 17.0 billion pounds, up 2.1% from August 2016. Production per cow for August averaged 1,948 pounds. The number of milk cows was 8.73 million head, unchanged from July 2017. July production was revised up 0.2% to 17.2 billion pounds. For milk production in the top 5 producing states, California was down 0.7% from August a year ago; Wisconsin up 1.8%; Idaho down 0.2%; New York up 1.9%; and Texas up 9.2%. Other states with large production increases were Utah (10.2%), Colorado (5.9%), Kansas (5.4%), South Dakota (4.2%), Minnesota (4.0%), Arizona (3.8%), and New Mexico (3.5%). The states reporting a large decline in production compared to August 2016 were Oregon (-1.4%) and Washington (-0.2%).

 

Milk Price and Utilization: The Southeast Uniform milk price for August was $20.02, up $0.38 from July and $1.78 higher than August 2016. The Appalachian Uniform milk price was $19.53, up $0.18 from July and $1.91 higher than August 2016. August’s Class III price was $16.57, up $1.12 from July, and $0.34 lower than August a year ago. The Class IV price was up $0.01 from July to $16.61, and $1.95 higher than August 2016. The Class I Mover price for October is $16.44, down $0.27 from September. The milk/feed ratio for August was 2.49, 0.20 higher than July.

Southeast Class I utilization was 77.22%, up 9.71% from July, and 2.99% higher than August a year ago. The Uniform butterfat price was $3.0111, up 14.30 cents from last month and 45.03 cents higher than August 2016. The August Class I price was $20.52. September Class I price is $20.51. Appalachian Class I utilization was 71.62%, up 5.70% from July, and 2.61% lower than August a year ago. The Uniform butterfat price was $3.0120, up 13.85 cents from last month and 45.70 cents higher than August 2016. The August Class I price was $20.12.

 

Cheese Production and Stocks: Total cheese production in July was 1.03 billion pounds, up 1.0% from a year ago while butter production was up 1.6% to 137 million pounds. Nonfat dry milk (NDM) production was down 1.6% compared to a year ago with total production at 148 million pounds while skim milk powder (SMP) production was up 2.9% to 50.2 million pounds compared to a year ago. Total cheese stocks at the end of August were up 7% from August a year ago and down 3% from the previous month while butter stocks were down 9% from last month and down 12% from a year ago.

 

Springer Prices and Cow Slaughter: At Smiths Grove, Kentucky on September 26, supreme springers were not tested while US approved springers were not tested. Dairy cow slaughter in August was 265,600 head, up 39,800 head from July and 21,000 more than August 2016.

 

Southeast Federal Order Prices

Month

Uniform Price $/cwt.

Class I Price $/cwt.

Class III Price $/cwt.

Class IV Price $/cwt.

Class I

% Utilization

Butterfat Price $/lb.

Mar 17

19.15

20.70

15.81

14.32

65.23

2.4416

Apr 17

17.97

19.85

15.22

14.01

59.97

2.3992

May 17

17.83

19.00

15.57

14.49

62.92

2.4133

Jun 17

18.70

19.11

16.44

15.89

66.25

2.5760

Jul 17

19.64

20.39

15.45

16.60

67.51

2.8681

Aug 17

20.02

20.52

16.57

16.61

77.22

3.0111

  

Appalachian Federal Order Prices

Month

Uniform Price $/cwt.

Class I Price $/cwt.

Class III Price $/cwt.

Class IV Price $/cwt.

Class I

% Utilization

Butterfat Price $/lb.

Mar 17

19.06

20.30

15.81

14.32

69.75

2.4420

Apr 17

17.77

19.45

15.22

14.01

63.06

2.4008

May 17

17.65

18.60

15.57

14.49

67.37

2.4142

Jun 17

18.37

18.71

16.44

15.89

63.56

2.5883

Jul 17

19.35

19.99

15.45

16.60

65.92

2.8735

Aug 17

19.53

20.12

16.57

16.61

71.62

3.0120

 

What is the Market Offering for Milk to be Sold in December?

Ex: It is Sep. 28 and Dec. Class III milk futures are trading at $16.29. Local Dec. basis estimate is +$3.00.

If December futures

=

17.75

16.25

14.75

and actual blend price

=

20.75

19.25

17.75

Sample Strategies

 

 

Realized Prices for Dec. Milk

1) Sold Futures


@

16.29


19.29

19.29

19.29

2) Bought Put

15.25

@

0.13


20.62

19.12

18.12

3) Bought Put

15.75

@

0.25


20.50

19.00

18.50

4) Bought Put

16.25

@

0.43


20.32

18.82

18.82

5) Synthetic Put








     Sold Futures


@

1629





     Bought Call

17.25

@

0.16

 

19.63

19.13

19.13

 

What is the Market Offering for Milk to be Sold in January?

Ex: It is Sep. 28 and Jan. Class III milk futures are trading at $16.00. Local Jan. basis estimate is +$3.00.

If January futures

=

17.50

16.00

14.50

and actual blend price

=

20.50

19.00

17.50

Sample Strategies

 

 

Realized Prices for Jan. Milk

1) Sold Futures


@

16.00


19.00

19.00

19.00

2) Bought Put

15.00

@

0.15


20.35

18.85

17.85

3) Bought Put

15.50

@

0.28


20.22

18.72

18.22

4) Bought Put

16.00

@

0.50


20.00

18.50

18.50

5) Synthetic Put








     Sold Futures


@

16.00





     Bought Call

17.00

@

0.19

 

19.31

18.81

18.81