Monthly Dairy Comments by Dr. Andrew P. Griffith                                               December 31, 2019


 

Milk Production: Milk production in the 24 major states during November totaled 16.7 billion pounds, up 0.9% from November 2018. Production per cow for November averaged 1,892 pounds. The number of milk cows was 8.81 million head, unchanged from September 2019. October production was revised down 0.3% from preliminary estimates. For milk production in the top 5 producing states, California was up 0.7% from November a year ago; Wisconsin down 1.6%; Idaho up 3.1%; New York up 2.0%; and Texas up 6.9%. Other states with large production increases were Colorado (7.0%) and South Dakota (4.5%). The states reporting a large decline in production compared to November 2018 were Arizona (-6.3%), Virginia (-4.8%), and Illinois (-4.3%).

Milk Price and Utilization: The Southeast Uniform milk price for November was $20.98, up $0.33 from October and $2.27 higher than November 2018. The Appalachian Uniform milk price was $20.53, up $0.36 from October and $2.41 higher than November 2018. November’s Class III price was $20.45, up $1.73 from October, and $6.01 higher than November a year ago. The Class IV price was up $0.21 from October to $16.60, and $1.54 higher than November 2018. The Class I Mover price for January is $19.01, up $0.32 from December. The milk/feed ratio for November was 2.61, 0.22 higher than October.
Southeast Class I utilization was 77.23%, down 0.68% from October, and 1.16% lower than November a year ago. The Uniform butterfat price was $2.3705, down 11.05 cents from last month and 19.46 cents lower than November 2018. The November Class I price was $21.94. December Class I price is $23.13. Appalachian Class I utilization was 73.92%, down 1.41% from October, and 0.85% lower than November a year ago. The Uniform butterfat price was $2.3683, down 10.82 cents from last month and 19.52 cents lower than November 2019. The November Class I price was $21.54.

Cheese Production and Stocks: Total cheese production in October was 1.13 billion pounds, down 2.1% from a year ago while butter production was up 5.4% to 157 million pounds. Nonfat dry milk (NDM) production was up 11.1% compared to a year ago with total production at 135 million pounds while skim milk powder (SMP) production was down 9.0% to 44.2 million pounds compared to a year ago. Total cheese stocks at the end of November were down 2% from November a year ago and down 1% from the previous month while butter stocks were down 23% from last month and up 17% from a year ago.

Springer Prices and Cow Slaughter: At Smiths Grove, Kentucky on December 26, supreme springers were not tested and US approved springers were $1,125. Dairy cow slaughter in November was 256,100 head, down 30,000 head from October and 11,900 less than November 2018.


 

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.

Jun 19

19.58

20.87

16.27

16.83

57.17

2.6381

Jul 19

20.25

20.98

17.55

16.90

69.72

2.6885

Aug 19

20.85

21.69

17.60

16.74

73.60

2.6858

Sep 19

20.52

21.65

18.31

16.35

73.01

2.5820

Oct 19

20.65

21.64

18.72

16.39

77.91

2.4810

Nov 19

20.98

21.94

20.45

16.60

77.23

2.3705

 

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.

Jun 19

19.44

20.47

16.27

16.83

62.97

2.6372

Jul 19

19.84

20.58

17.55

16.90

70.71

2.6892

Aug 19

20.34

21.29

17.60

16.74

72.88

2.6857

Sep 19

20.04

21.25

18.31

16.35

72.57

2.5784

Oct 19

20.17

21.24

18.72

16.39

75.33

2.4765

Nov 19

20.53

21.54

20.45

16.60

73.92

2.3683

 


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

Ex: It is Dec. 31 and Mar. Class III milk futures are trading at $17.38. Local Mar. basis estimate is +$3.00.

If March futures

=

19.00

17.50

16.00

and actual blend price

=

22.00

20.50

19.00

Sample Strategies

 

 

Realized Prices for March Milk

1) Sold Futures


@

17.38


20.38

20.38

20.38

2) Bought Put

16.50

@

0.12


21.88

20.38

19.38

3) Bought Put

17.00

@

0.24


21.76

20.26

19.76

4) Bought Put

17.50

@

0.47


21.53

20.03

20.03

5) Synthetic Put








     Sold Futures


@

17.38





     Bought Call

18.50

@

0.08

 

20.80

20.30

20.30

 

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

Ex: It is Dec. 31 and Apr. Class III milk futures are trading at $17.35. Local Apr. basis estimate is +$3.00.

If April futures

=

18.75

17.25

15.75

and actual blend price

=

21.75

20.25

18.75

Sample Strategies

 

 

Realized Prices for April Milk

1) Sold Futures


@

17.35


20.35

20.35

20.35

2) Bought Put

16.25

@

0.10


21.65

20.15

19.15

3) Bought Put

16.75

@

0.21


21.54

20.04

19.54

4) Bought Put

17.25

@

0.40


21.35

19.85

19.85

5) Synthetic Put








     Sold Futures


@

17.35





     Bought Call

18.25

@

0.13

 

20.72

20.22

20.22