Monthly Dairy Comments by Dr. Andrew P. Griffith                                                January 31, 2018


 

Milk Production: Milk production in the 23 major states during December totaled 17.0 billion pounds, up 1.2% from December 2016. Production per cow for December averaged 1,943 pounds. The number of milk cows was 8.74 million head, up 3,000 head from November 2017. November production was revised down 0.1% to 16.2 billion pounds. For milk production in the top 5 producing states, California was down 0.3% from December a year ago; Wisconsin up 1.0%; Idaho down 0.2%; New York down 2.2%; and Texas up 8.1%. Other states with large production increases were Colorado (9.2%), Utah (6.2%), Iowa (3.8%), Illinois (3.1%), Kansas (3.1%), and New Mexico (3.1%). The states reporting a large decline in production compared to December 2016 were Florida (-4.6%) and Washington (-1.1%).

 

Milk Price and Utilization: The Southeast Uniform milk price for December was $19.04, down $0.03 from November and $0.74 lower than December 2016. The Appalachian Uniform milk price was $18.37, down $0.26 from November and $0.97 lower than December 2016. December’s Class III price was $15.44, down $1.44 from November, and $1.96 lower than December a year ago. The Class IV price was down $0.48 from November to $13.51, and $1.46 lower than December 2016. The Class I Mover price for February is $14.25, down $1.19 from January. The milk/feed ratio for December was 2.38, 0.16 lower than November.

Southeast Class I utilization was 70.29%, down 4.60% from November, and 1.35% lower than December a year ago. The Uniform butterfat price was $2.5269, down 9.77 cents from last month and 26.78 cents higher than December 2016. The December Class I price was $20.68. January Class I price is $19.24. Appalachian Class I utilization was 65.59%, down 8.36% from November, and 5.94% lower than December a year ago. The Uniform butterfat price was $2.5245, down 9.82 cents from last month and 26.06 cents higher than December 2016. The December Class I price was $20.28.

 

Cheese Production and Stocks: Total cheese production in November was 1.05 billion pounds, up 2.8% from a year ago while butter production was up 1.8% to 146 million pounds. Nonfat dry milk (NDM) production was up 9.7% compared to a year ago with total production at 140 million pounds while skim milk powder (SMP) production was down 11.9% to 41.8 million pounds compared to a year ago. Total cheese stocks at the end of December were up 7% from December a year ago and up 2% from the previous month while butter stocks were up 6% from last month and up 2% from a year ago.

 

Springer Prices and Cow Slaughter: At Smiths Grove, Kentucky on January 23, supreme springers were not tested while US approved springers were $1,275 to $1,300, down $13. Dairy cow slaughter in December was 247,300 head, up 3,600 head from November and 5,700 fewer than December 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.

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

Sep 17

19.61

20.51

16.36

15.86

76.55

2.9466

Oct 17

19.12

20.24

16.69

14.85

74.40

2.7619

Nov 17

19.07

20.21

16.88

13.99

74.89

2.6246

Dec 17

19.04

20.68

15.44

13.51

70.29

2.5269

 

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.

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

Sep 17

19.06

20.11

16.36

15.86

72.07

2.9404

Oct 17

18.59

19.84

16.69

14.85

71.23

2.7563

Nov 17

18.63

19.81

16.88

13.99

73.95

2.6227

Dec 17

18.37

20.28

15.44

13.51

65.59

2.5245

 


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

Ex: It is Jan. 30 and Apr. Class III milk futures are trading at $13.59. Local Apr. basis estimate is +$3.00.

If April futures

=

15.00

13.50

12.00

and actual blend price

=

18.00

16.50

15.00

Sample Strategies

 

 

Realized Prices for Apr. Milk

1) Sold Futures


@

13.59


16.59

16.59

16.59

2) Bought Put

12.50

@

0.08


17.92

16.42

15.42

3) Bought Put

13.00

@

0.18


17.82

16.32

15.82

4) Bought Put

13.50

@

0.36


17.64

16.14

16.14

5) Synthetic Put








     Sold Futures


@

13.59





     Bought Call

14.50

@

0.16

 

16.93

16.43

16.43

 


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

Ex: It is Jan. 30 and May Class III milk futures are trading at $14.02. Local May basis estimate is +$3.00.

If May futures

=

15.50

14.00

12.50

and actual blend price

=

18.50

17.00

15.50

Sample Strategies

 

 

Realized Prices for May Milk

1) Sold Futures


@

14.02


17.02

17.02

17.02

2) Bought Put

13.00

@

0.15


18.35

16.85

15.85

3) Bought Put

13.50

@

0.29


18.21

16.71

16.21

4) Bought Put

14.00

@

0.50


18.00

16.50

16.50

5) Synthetic Put








     Sold Futures


@

14.02





     Bought Call

15.00

@

0.21

 

17.31

16.81

16.81