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By the Numbers: November Class III futures top $19.85; Class I base moves above $18

Progressive Dairy Editor Dave Natzke Published on 30 October 2019

Here are some relevant numbers as October comes to a close:

September DMC factors to be released

The USDA’s October Agricultural Prices report, which includes factors used to calculate September Dairy Margin Coverage (DMC) program margins and potential payments, was released after this week’s Progressive Dairy Extra deadline. With current milk and feed futures prices and outlooks forecasting a margin near $10 per hundredweight (cwt), it’s unlikely an indemnity payment will be triggered for September or anytime soon.

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November Class III futures top $19.85; Class I base moves above $18

Editor's note: Chicago Mercantile Exchange Class milk futures prices moved even higher after Progressive Dairy Extra's news deadline. At the close of trading on Oct. 30, November 2019 contracts settled at $20.21 per cwt, with December 2019 contracts at $19.48 per cwt.

All indications are milk prices will be stronger in the final quarter of 2019 as Chicago Mercantile Exchange (CME) Class III milk futures prices moved to new contract highs. As of the close of trading on Oct. 29, Class III futures prices settled at $18.67 per cwt for October, $19.86 for November and $18.92 per cwt for December.

Late last week, the USDA announced the November 2019 Federal Milk Marketing Order (FMMO) Class I base price is $18.14 per cwt, the first time it’s surpassed that level since January of 2015.

November’s price, a 58-month high, is up 30 cents from October 2019 and $2.62 more than November 2018.

Through the first 11 months of 2019, the Class I base price is $16.78 per cwt, up about $1.95 compared to the same period a year ago.

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On Oct. 30, the USDA announced the FMMO Class III milk price moved to another five-year high in October 2019. At $18.72 per cwt, it was up 41 cents from September and $3.19 more than October 2018. It’s the highest Class III price since November 2014.

The October 2019 Class IV price also moved up, but the increase was much smaller. At $16.39 per cwt, it’s up 4 cents from September and $1.38 more than October 2018.

Year-to-date, 2019 Class III and Class IV prices now average $16.37 and $16.23 per cwt, respectively. Over the same period a year earlier, the average Class III price is up $1.65 per cwt, while the Class IV average price is up $2.17 per cwt.

USDA to buy fluid milk

The USDA’s Agricultural Marketing Service (AMS) announced it would purchase $50 million in fresh fluid milk for distribution to various food nutrition assistance programs. Purchases will include fluid whole milk, reduced fat (2%) and low-fat (1%) in gallons and half-gallons. The USDA will solicit bids:

  • in November 2019, for delivery in the first quarter of 2020
  • in February 2020, for delivery in the second quarter of 2020
  • in May 2020, for delivery in the third quarter of 2020
  • in August 2020, for delivery in the fourth quarter of 2020

October was a busy month for USDA dairy product purchases and bid solicitations for future purchases. In addition to the announcement regarding fluid milk, the USDA also:

  • awarded bids for more than 403,000 pounds of mozzarella cheese for delivery to domestic food distribution programs in December 2019.
  • announced the intent to purchase 604,800 pounds of mozzarella string cheese for delivery in January-February 2020. Bids closed Oct. 29, 2019.
  • announced the intent to purchase nearly 580,000 pounds of flavored yogurt for delivery in January-March 2020.
  • awarded bids covering 76 million pounds of block, barrel and shredded cheddar cheese; 97.1 million pounds of mozzarella cheese; and 53.8 million pounds of process cheese, all for delivery in 2020.

First batch of ‘whole milk in schools’ petitions delivered

The first batch of petition signatures seeking to make whole milk available for school children was delivered to USDA staff and members of Congress late last week.

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Petition organizers printed and copied the first batch of 9,300 online signatures and 2,000 of 4,000 mailed in signatures, delivering the packets to USDA Food Nutrition Service Deputy Undersecretary Brandon Lipps and various members of Congress.

The petition drive is being circulated by Grassroots Citizens for Whole Milk for Healthy Kids. As of Oct. 30, about 11,235 online signatures and 4,000 paper signatures had been gathered.

The petition asks Congress and President Trump to support proposals to allow whole milk to be included on school feeding program menus. Current proposals expanding school milk options include the Whole Milk for Healthy Kids Act (House Bill 832) the Milk in Lunches for Kids Act (Senate Bill 1810).

September 2019 dairy cow slaughter estimates released

The pace of U.S. dairy cull cow slaughter slowed somewhat in September, although the total was still the highest for the month since 2013. Federally inspected milk cow slaughter was estimated at 255,700 head in September, 10,900 head less than August 2019 but 8,300 head more than September 2018, according to the USDA’s Livestock Slaughter report.

So far this year, dairy cull cow slaughter has averaged about 10,400 per day (weekdays and Saturdays), 450 head more per day than January-September 2018. At 2.42 million head, January-September 2019 slaughter is about 81,800 ahead of the same period a year ago. The year-to-date 2019 estimate remains the highest eight-month total to start a year since 1986, the year of a federal whole-herd buyout program.

Despite the comparable slaughter numbers, the USDA’s September milk production report estimated U.S. cow numbers at 9.315 million, down just 2,000 head from the previous month. And, cow numbers in the 24 major dairy states were estimated at 8.796 million, a 7,000-head increase from August 2019. (Read: Major dairy state cow numbers indicate trend reversal)

As in previous months, heaviest culling is in the Upper Midwest. A breakout of September 2019 dairy cull cow slaughter estimates in major dairy regions follows:

  • 65,700 head in an area including Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin
  • 63,700 head in Arizona, California, Hawaii and Nevada.
  • 44,500 head in Delaware, Maryland, Pennsylvania, West Virginia and Virginia.
  • 27,100 head in Arkansas, Louisiana, New Mexico, Oklahoma and Texas
  • 26,400 head in Alaska, Idaho, Oregon and Washington end mark
Dave Natzke
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