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



Milk Production: Milk production in the 23 major states during September totaled 16.4 billion pounds, up 1.5% from September 2017. Production per cow for September averaged 1,880 pounds. The number of milk cows was 8.72 million head, down 12,000 head from August 2018. August production was revised down 0.1% to 17.2 billion pounds. For milk production in the top 5 producing states, California was up 4.8% from September a year ago; Wisconsin up 2.0%; Idaho up 1.6%; New York up 0.8%; and Texas up 8.9%. Other states with large production increases were Colorado (8.7%), Kansas (4.5%), South Dakota (2.8%), and Utah (2.7%). The states reporting a large decline in production compared to September 2017 were Virginia (-10.2%), Florida (-8.7%), Illinois (-6.7), and Indiana (-5.3).

 

Milk Price and Utilization: The Southeast Uniform milk price for September was $17.94, up $0.41 from August and $1.67 lower than September 2017. The Appalachian Uniform milk price was $17.35, up $0.32 from August and $1.71 lower than September 2017. September’s Class III price was $16.09, up $1.14 from August, and $0.27 lower than September a year ago. The Class IV price was up $0.18 from August to $14.81, and $1.05 lower than September 2017. The Class I Mover price for November is $15.52, down $0.81 from October. The milk/feed ratio for September was 2.10, up 0.07 from August.

Southeast Class I utilization was 74.76%, down 0.89% from August, and 1.81% lower than September a year ago. The Uniform butterfat price was $2.5903, up 0.06 cents from last month and 35.63 cents lower than September 2017. The September Class I price was $18.65. October Class I price is $20.13. Appalachian Class I utilization was 69.42%, down 3.05% from August, and 2.65% lower than September a year ago. The Uniform butterfat price was $2.5864, down 0.50 cents from last month and 35.40 cents lower than September 2017. The September Class I price was $18.25.

 

Cheese Production and Stocks: Total cheese production in August was 1.08 billion pounds, up 2.8% from a year ago while butter production was up 2.1% to 134 million pounds. Nonfat dry milk (NDM) production was down 10.1% compared to a year ago with total production at 123 million pounds while skim milk powder (SMP) production was up 6.3% to 47.6 million pounds compared to a year ago. Total cheese stocks at the end of September were up 4% from September a year ago and up 1% from the previous month while butter stocks were down 3% from last month and up 11% from a year ago.

 

Springer Prices and Cow Slaughter: At Smiths Grove, Kentucky on October 30, supreme springers were not tested while US approved springers were $1,000 to $1,175 per head, down $113 from the previous month. Dairy cow slaughter in September was 247,400 head, down 32,300 head from August and 2,200 less than September 2017.

 

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.

Apr 18

16.88

17.90

14.47

13.48

65.02

2.4944

May 18

17.46

18.74

15.18

14.57

67.75

2.5813

Jun 18

18.12

19.05

15.21

14.91

67.83

2.6597

Jul 18

18.12

19.16

14.10

14.14

73.31

2.6108

Aug 18

17.53

17.95

14.95

14.63

75.65

2.5897

Sep 18

17.94

18.65

16.09

14.81

74.76

2.5903

 

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.

Apr 18

16.56

17.50

14.47

13.48

65.80

2.4957

May 18

17.20

17.84

15.18

14.57

67.75

2.5845

Jun 18

17.81

18.65

15.21

14.91

67.00

2.6607

Jul 18

17.52

18.76

14.10

14.14

69.06

2.6030

Aug 18

17.03

17.55

14.95

14.63

72.47

2.5914

Sep 18

17.35

18.25

16.09

14.81

69.42

2.5864

 


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

Ex: It is Oct. 31 and Jan. Class III milk futures are trading at $15.18. Local Jan. basis estimate is +$3.00.

If January futures

=

16.75

15.25

13.75

and actual blend price

=

19.75

18.25

16.75

Sample Strategies

 

 

Realized Prices for January Milk

1) Sold Futures


@

15.18


18.18

18.18

18.18

2) Bought Put

14.25

@

0.06


19.69

18.19

17.19

3) Bought Put

14.75

@

0.18


19.57

18.07

17.57

4) Bought Put

15.25

@

0.40


19.35

17.85

17.85

5) Synthetic Put








     Sold Futures


@

15.18





     Bought Call

16.25

@

0.07

 

18.61

18.11

18.11

 


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

Ex: It is Oct. 31 and Feb. Class III milk futures are trading at $15.98. Local Feb. basis estimate is +$3.00.

If February futures

=

16.75

15.25

13.75

and actual blend price

=

19.75

18.25

16.75

Sample Strategies

 

 

Realized Prices for February Milk

1) Sold Futures


@

15.24


18.24

18.24

18.24

2) Bought Put

14.25

@

0.10


19.65

18.15

17.15

3) Bought Put

14.75

@

0.23


19.52

18.02

17.52

4) Bought Put

15.25

@

0.45


19.30

17.80

17.80

5) Synthetic Put








     Sold Futures


@

15.24





     Bought Call

16.25

@

0.12

 

18.62

18.12

18.12