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Milk price and margin hits 12-month high – Dairy Economic Update January 2017

Progressive Dairyman Editor Dave Natzke Published on 04 January 2017

Both the U.S. average milk price and margin over feed cost hit 12-month highs in November, marked improvements compared to earlier this summer, according to monthly summaries from the U.S. Department of Agriculture.

As of Jan. 4, USDA had not posted the November 2016 national average margin under the Margin Protection Program for Dairy (MPP-Dairy). According to a Dairy Farmers of America newsletter, the margin for the month was $9.98 per cwt, just under the $10.01 per cwt margin in November 2015.

November’s margin estimate is the first half of the November-December 2016 MPP-Dairy pay period, making it almost certain there will no be indemnity payment for the final two months of the year. The December estimate will be announced Jan. 31.

The November 2016 U.S. average all-milk price was $17.60 per cwt, up $1 per cwt from October but still 60 cents per cwt less than November 2015’s average of $18.20 per cwt (Table 1).

010217 natzke economic update tbl1

While the higher milk price helped create the higher margin, feed costs also helped.

The U.S. average corn price was $3.23 per bushel in November, down 6 cents from October; the soybean meal price was $322.41 per ton, the lowest since April; and alfalfa hay was $130 per ton, a 70-month low. Under the MPP-Dairy formula, that resulted in an average feed cost of $7.62 per cwt in November (Table 2).

010217 natzke economic update tbl2

Based on current milk and feed futures prices, the Program on Dairy Markets and Policy website puts MPP-Dairy margins between $10.50-$11 per cwt through the first half of 2017, then moving above $11 per cwt in the third quarter of the year.

Most states saw better milk prices

With the exception of Florida, New Mexico and Virginia, the major dairy states saw price improvement in November.

Producers in California, Idaho, Iowa, Minnesota, South Dakota and Wisconsin saw gains of $1.50-$1.70 per cwt.

The trend was somewhat different compared to a year ago. Producers in 10 states (Arizona, Florida, Michigan, New Mexico, New York, Ohio, Pennsylvania, Vermont, Virginia and Washington) saw November 2016 prices between $1.80-$2.70 less than November 2015.

The November price brings the 2016 U.S. average to $16.01 per cwt, $1.08 (6.3 percent) less than the same period a year ago.

Florida had the highest average price in November at $19.90 per cwt; New Mexico had the lowest at $15.60 per cwt.

October fluid milk sales

October 2016 packaged fluid milk sales totaled 4.18 billion pounds, down 3.5 percent from October 2015, according to USDA’s Dairy Market News.

Sales of conventional products totaled 3.96 billion pounds, down 4 percent from the previous year, while sales of organic products, at 217 million pounds, were up 6.3 percent. Organic represented nearly 5.2 percent of total sales for the month.

In the conventional aisle, whole and flavored whole milk sales were up 1.4 percent and 5.4 percent compared to the previous year, respectively. Sales of organic whole milk were up 15.7 percent compared to a year earlier. Conventional and organic fat-free milk varieties had the largest sales declines compared to a year earlier.

Year-to-date, total packaged fluid sales totaled 40.65 billion pounds, down 0.8 percent from a year earlier.

Conventional fluid milk sales totaled 38.52 billion pounds, down 1.1 percent from a year earlier. January-October organic milk sales total 2.14 billion pounds, up 5.6 percent. Organic sales represented about 5.3 percent of total fluid sales for the period.

The figures represent consumption of fluid milk products in federal milk order marketing areas and California, which account for approximately 92% of total fluid milk sales in the U.S.  end mark

Dave Natzke
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