Archive for the ‘Bill Brooks’ Category

Cheese Spread Narrows

April 15, 2014 — The spread between the block and barrel cheese price was a concern up until yesterday, when the barrel price shot up 8 ¾-cents to narrow the spread with the

Bill Brooks, FC Stone

Bill Brooks, FC Stone

blocks to under two cents.

“With the amount of price decline that we have seen with both the blocks and barrels the last couple of weeks it’s not surprising for us to get a little bit of a correction,” FC Stone’s Bill Brooks told DairyLine.

Even though prices may be steep for cheese buyers, they may want to get some product locked up bringing cheese prices higher for the time being.

“I don’t know if the higher prices are going to have much life to it,” Brooks said. “It is warming up and cows will be producing more, so normally we would see prices dropping off.”

Still, it’s nice to see a bump in prices after dropping nearly 20 cents in the past week.

It’s a light week for USDA reports this week as we gear up for a busy week next week. USDA will release Milk production, Livestock Slaughter, Cold Storage and Commercial Disappearance reports. We’ll also get our Class I base price for May next week.

Current Cheese Prices May Be “Overcooked”

March 25, 2014 – The current record cheese price levels are probably a little misleading, according to FC Stone’s Bill Brooks. Dairy farmers have never seen prices like this

Bill Brooks, FC Stone

Bill Brooks, FC Stone

before, with CME 40 lb. block cheese trading at $2.4325 and 500 lb. barrels at $2.3775.

“We are in a tight market,” Brooks warned on Tuesday’s DairyLine Radio program.  “We haven’t seen a trade for block cheese since February 20th.”

Prices continue to set records because of the world market, weather, feed prices and featured dairy products in store shelves from the last football season and now March madness. But those are going to go away quickly, according to Brooks.

“That’s going to negatively impact our demand and hopefully not make the down-turn potentially worse than what we might anticipate,” he said. Brooks has that feeling that the markets are a bit “overcooked.”  

Even though inventory levels are below a year ago, we’re only three days below the amount of available supply we have in cold storage inventories. However prices are 60 to 70 cents above a year ago. U.S. prices are also 10-30 cents above international prices.

“We’re going to lose that competitive factor that helped us ship a lot of product offshore,” Brooks said. “But the market is always right; we just have to figure out the timing of when it is going to go in the other direction.”

Some producers have put in some risk management positions, like forward contracting with their milk buyer and some are also locking in feed prices. Both have started to work their way higher.

“We are starting to see dairy producers look at that,” he said. “They are being pretty judicious with those positions because they do see this market is continuing to go up.”

It’s more difficult to hit the exact high of the market when trying to sell milk in futures, options or a forward contract. So producers don’t want to miss it by too much and leave money on the table.

Weather, feed costs and feed quality are reasons to layer in protection on margins, according to Brooks. Producers are also looking at a new risk management tool from the new farm bill, and are learning how to implement margin insurance that will protect them against the massive price fluctuations that we seem to have in agriculture.

Profitable Times for Dairy Producers

March 3, 2014 — Dairy producer’s income over feed costs hit a record level gaining both a higher milk price and lower feed costs. The latest numbers show that income over feed more than

Bill Brooks, FC Stone

Bill Brooks, FC Stone

doubled from February of last year.

“It shows that U.S. dairy producers are in for some very profitable times,” FC Stone’s Bill Brooks said on Tuesday’s DairyLine broadcast.

Producers just need to get the milk out of their cows to take advantage of the profitability this year. Brooks expects a slow-down in 2015 based on where futures are trading for milk, corn, and the soybean complex, but still will be slightly above average for next year.

“You have your fingers crossed for livestock producers, but for our dairy producers in general we will have a couple of good years for them to try and build up those balance sheets and get more comfortable on their financial position,” he said.

Looking at prices at the CME – Cash butter shot up 10 cents Friday to $1.88, but has been quiet the first two days of trading this week.

“I believe there could have been end of the month issues,” Brooks reported.

We have seen the butter market pick up on previous Fridays. Six out of nine Fridays this year have seen double-digit trades.

“The butter market is adequately supplied,” he said. “There’s plenty of butter out there in storage but the folks that own it are holding on to it with pretty decent confidence because inventories aren’t burdensome.”

Looking at the current cheese prices – CME blocks are holding at $2.2275, while the barrel price continues to slip, losing 3 1/4-cents on Tuesday to $2.1275.

“I think we’ll see some seasonal declines, but not necessarily large drops,” Brooks said.

Current Prices Reflect a $23.75 Class III Price

Bill Brooks

Bill Brooks

February 4, 2014 –  Record high cheese prices remain unchanged to start the week. FC Stone dairy economist Bill Brooks told DairyLine that the lofty price levels will eventually start to drop. But given our production levels, cheese could remain above $2.30 through February. Currently, CME block cheese is at $2.36 and the barrels are trading at $2.32 per pound. 

“We don’t have a lot of excess product out there and milk production at the farm level hasn’t responded like dairy producers had hoped it would,” he said. 

Forage could be the main culprit, as the quality hasn’t been good enough for the cows to respond to strong milk production. Another factor is below average temperatures for a swath of the country, which pulled some of the feed consumption from milk production to maintaining body condition. 

“This all added up to where we don’t have a great deal of supply,” he said. 

The Ag prices report released last Friday showed a $23.20 All Milk price. With the way prices are now, we’re looking at a $23.75 Class III price. While Brooks is not positive we will see a $23-plus Class III price, dairy producers are looking at some decent profitability with lower input costs.

“Dairy producers have had a couple of good months, and it looks like we’ll have a couple more good months until the time planters start running and how timely a crop gets put in and the breakdown between corn and beans,” Brooks concluded.

2014 Should Be Decent Year

January 7, 2014 — 2014 is shaping up to be a decent year for U.S. dairy producers. FC Stone dairy economist Bill Brooks shares his insights this week on DairyLine Radio:



Steady to Lower Milk Prices Anticipated

October 22, 2013 — There’s been a bit of resistance from buyers in the CME block cheese price this week. FC Stone dairy economist Bill Brooks told us it’s probably because buyers are not

Bill Brooks

Bill Brooks

comfortable with the current price of $1.8575. The spread between blocks and barrel cheese narrowed to 6-1/2 cents today after the barrel price rose 3-1/4 cents to $1.7925.

“A wide spread at this time is not out of the ordinary,” Brooks said. This is because of a shift on the demand side as folks are looking to market block cheddar products for the upcoming holidays.

Last year at this time the spread between blocks and barrels was about the same. Traders battled that wider than normal spread throughout the holiday season where spreads were in the 8-11 cents range.

“Nothing out of the ordinary,” Brooks said. “But because of weakness in the barrel market it does lead you to believe that we might see some erosion in the block price as we go forward.”

He said we currently don’t have any negative indicators, like bad weather, that will hurt milk production.  Plus, low feed prices could also push milk prices lower. That means we could see $15 milk next spring.

“Some guys in parts of the country are still paying a pretty high level for forages. But corn and beans continue to be much lower than just a month or two ago and drastically lower than last year with the drought,” he said.

It’s not going to be surprising when we see a fair number of cows on dairy farms in the next milk production report, scheduled to be released by USDA next week.

“That’s going to allow us to see pretty strong milk production levels as we go into next year as well,” Brooks commented. “Until we start getting into late first quarter, early second quarter when we start seeing some early heat waves come in an impact things.

Cheese Prices Dip – No Big Surprise

September 17, 2013 — The dip in the cash cheese market recently was no big surprise to FC Stone dairy economist Bill Brooks.BillBrooks

“We had been trading sideways with an upward bias for the last two months …and now see a bit of weakness come into play because that’s kind of been our pattern since we peaked the price out in early May,” Brooks said.

The market has been bouncing around since then.

“From a dairy producers standpoint you don’t like to see a decline, especially this time of year when milk production is seasonally,” Brooks said. “at least in the Midwest we went through a pretty decent heat wave at the beginning of September and end of August and that probably  hit milk production a little more than we would normally see.”

Cooler weather came into play in the Midwest the middle part of last week bringing with it a fair amount of moisture.

“I know in the Kansas City area we received about an inch (of rain) over the weekend and that will help out with the beans and at the moment there is not much of any frost or freeze to the southern Minnesota and northern Iowa. So that may add up to the estimates USDA put out last week for lower feed costs for us,” said.

People are more confident with corn.

“We have heard some good yields scattered across the Midwest…It’s the soybean complex, soybean meal that folks are concerned about.”

Butter Inventories Push Spot Price Lower


Bill Brooks, FC Stone Dairy Economist

August 19, 2013 — Butter gave up another penny Friday (8/16/13) and finished last week at $1.37, down 2.75¢ on the week, 42.25¢ below a year ago, and the lowest it has been since May 2012. Only two cars were sold all of last week. AMS butter averaged $1.4523, up 1¢.

The low prices are thanks in part to more inventory than demand.  We are still more than two months away from more shipments going out for the Thanksgiving holiday, which will be our next big push for butter consumption.

“A lot of carry-over from the buildup in inventories in the spring at a time when we don’t consume a lot of it,” FC Stone dairy economist Bill Brooks said. “It’s all lining up to push the prices down,”

“It’s just a matter of the inventories out there and keeping pressure on the market at a time we normally wouldn’t anticipate it happening,” Brooks said.

The block cheese price ended last week on an up note after losing 2.75¢ on Monday (8/12/13) and recouped 0.75¢ Friday morning (8/16/13) to close at $1.7775/lb., down 2¢ on the week, 9 1/4¢ below a year ago, and ended six weeks of gains, plus widened the spread between the barrels.

Brooks said we have “decent levels” of cheese inventory. “That’s part of the reason prices are not marching higher at a consistent rate. They’re just moving higher in fits and starts,” he said.

We have been in a position from a spot market basis that the Class IV price has been at a higher level than the Class III price, and it’s been that way for quite some time.

“If you have your option to sell milk…look to somebody who is going to put it into Class IV products (butter and powder), because they’re going to have the ability to pay just a little bit more,” he said.

The barrel price held Friday at $1.7650, unchanged on the week but 7¢ below a year ago. The lagging Ag Marketing Service-surveyed U.S. average block price gained 1.5¢, hitting $1.7307. Barrel averaged $1.7735, up 3.2¢.

Mother Nature Impacting Spot Markets

July 23, 2013 — BillBrooksThe cash cheese market continues its upward climb thanks in part to Mother Nature. CME block cheese shot up another 4 ½-cents Wednesday to $1.7725, while the barrels increased 1 ½-cent to $1.72.

“I believe a lot of it has to do with the weather that we’re seeing across the country,” Bill Brooks, FC Stone dairy economist told DairyLine. It’s been hot in the Pacific Northwest and a typical July in the Midwest with average temperatures.

“In the area where I live in (near Kansas City), we’re slowly getting dry again as the drought works its way from the Southwest,” he said. That’s having an impact on dairy cow comfort and milk production, especially on the cheese side of it.

“That probably is getting a little bit tight, or if it isn’t, folks are hanging on to it because of the heat and the fact they are seeing lower milk receipts come in from farms and components are lower so the yields are less as well and buyers are trying to get ahead of that,” he said.

This is despite the fact that we continue to see heavy inventories of cheese in our cold storage facilities, but Brooks said it doesn’t fit the category that we would trade at the exchange.

“I’m not positive that (these prices) are completely sustainable given our inventories out there, but at least at the moment it’s a positive for dairy producers to move up above last year’s levels.”

June’s milk production showed an increase of 1.6 percent over a year ago for the 23 reporting states, and an estimated increase of 1.5 percent for the U.S. This marks the third straight month of high milk production compared to the same month year earlier. However a year ago increases in milk production began to decline in May due to a widespread drought.

“From a historical standpoint…we see the biggest reduction in month-to-month milk production in July and then the reductions start to get a little bit smaller as we go towards October,” Brooks said. “By November, we’re back into the situation where milk production is increasing over the previous month and sometimes that happens in October…and that might be the case this year, especially if the forecast holds up and we see a little bit cooler temperatures over the next couple of weeks.”

Slight Decline Expected in 2014 Milk Prices

June 18, 2013 — FC Stone dairy economist Bill Brooks recaps the World Agricultural Supply and Demand Estimates report that was released last week.