Paid prices up 2 percent, prices received down 3 percent
Editor’s note: The following are available market reports and futures data as of October 3, 2008.
The Chicago Mercantile Exchange (CME) Group cash butter price remains firm. Churning activity across the country is seasonally active as cream supplies are available to butter producers. Many butter producers are taking advantage of the cream offerings and generating butter for upcoming year-end needs. Butter demand in general is seasonally steady. Some retail and food service buyers are concerned about consumer spending patterns at current unsettling economic times, but remain optimistic about butter sales for the balance of the year.
On September 29, CWT announced that 14 bids were accepted to subsidize the exports of 325 metric tons (MT) (716,000 pounds) of anhydrous milkfat and 923 MT (2.03 million pounds) of butter. For the two items, CWT’s total 2008 export obligations are: butter, 19,437 MT (42.9 million pounds) and anhydrous milkfat, 5,197 MT (11.5 million pounds).
The cheese market is weak. Prices at the CME Group cash cheese market declined sharply at the end of September, though values rebounded on October 2 before falling again on October 3. Current interest is steady to lighter. The September surge in movement and tighter milk supplies, at least in traditional dairy areas, has helped cheese plants to reduce inventories.
Cheese importers/distributors are more aggressive in offering product. Slower U.S. exports are increasing offerings from some operations. Customers continue to seek reassurance that products do not contain dairy ingredients sourced from China.
Milk production has begun increasing in southernmost areas, but widespread seasonal increases throughout the country are still on the horizon. Grocery stores in some areas have begun fluid milk price promotions. This seasonal period near the trough of the milk production cycle is being utilized by a number of plants for scheduled maintenance prior to the fall and winter season when production will increase.
The whey market is mixed, with weakness in the West, tightness in the Northeast and a somewhat stronger market tone in Central areas. In the West, discounts are being offered and both domestic and export sales are being made at lower prices. Nonfat dry milk (NDM) prices in all regions for all heat categories show declines.
Buttermilk market interest in all regions is weak, with little trading or buyer interest. Dry whole milk prices are unchanged, the market undertone is weakening and less drying is occurring nationally.
Class and component prices for federal dairy programs
The following are the September 2008 prices under the Federal Milk Market Order (FMMO) pricing system: Class II $17.58 (+$0.13), Class III $16.28 (-$1.04); and Class IV $15.45 (-$1.19). Product price averages used in computing class prices are: butter $1.6365, NDM $1.2131, cheese $1.7773, and dry whey $0.2183. The Class II butterfat price is $1.8266 and the Class III/IV butterfat price is $1.8196.
CCC price support purchases (FSA)
During fiscal year October 1, 2007 - September 30, 2008, no dairy products were offered to the Commodity Credit Corporation (CCC) under the price support program. The last purchases to the program occurred during the 2005 - 2006 year.
September agricultural prices highlights (NASS)
The index of prices paid by farmers for commodities and services, interest, taxes and wage rates in September 2008 advanced 2 points to 194. Compared with September 2007, the index was up 32 points (19.8 percent). The index of prices received by farmers for dairy products declined 3 points during the month of September 2008 to 138. Compared with September 2007, the index was down 29 points (17.4 percent). Prices received by farmers in September with changes from August were: for All Milk, $18.00, down $.40; Fluid Grade Milk, $18.00, down $.40; and for Manufacturing Grade Milk, $17.40, down $.20.
October announced co-op Class I prices
For October 2008, the all-city average announced cooperative Class I price was $20.74 per hundredweight, $2.57 higher than the FMMO Class I price average for these cities. The October cooperative Class I price was $2.22 lower than the September price, while the FMMO Class I price was $2.12 lower. On an individual city basis, the difference between the FMMO and announced cooperative Class I price ranged from $.50 in Phoenix, Arizona, to $3.79 in Miami, Florida. For October 2007, the all-city average announced cooperative Class I price was $25.91, $1.79 higher than the FMMO Class I price average for these cities.
Consumer price index (BLS)
The August 2008 CPI for all food is 216.4, up 6.1 percent from August 2007. The dairy products index is 214.7, up 6.4 percent from a year ago. The following are the August-to- August changes for selected products: fresh whole milk is +0.9 percent; cheese, +12.6 percent; and butter, +3.2 percent.
Commercial disappearance (ERS, AMS)
Commercial disappearance of dairy products during the first seven months of 2008 totals 110.4 billion pounds, 2.8 percent above the same period in 2007. Comparing disappearance levels with year-earlier levels: butter is +18.8 percent; American cheese, +0.4 percent; other cheese, -1.6 percent; NDM, +22.9 percent; and fluid milk products, -0.8 percent.
Dairy outlook (WAOB)
The milk production forecast was raised slightly in September from last month as cow numbers were adjusted to continued herd growth. Cow numbers are projected to average 9,260,000 head for 2008. Next year, herd size is forecast to contract to 9,235,000 head. Production is expected to rise incrementally to 190.8 billion pounds in 2009, less than a 1 percent rise from 2008. PD