The All Milk Price was estimated at $21.00 per hundredweight, up $1.40 from last month’s estimate, and $5.60 above a year ago. According to the CME’s Daily Dairy Report, the All-Milk price is the highest since December 2007.

The June Milk-Feed Price Ratio is 1.83, up from May’s 1.73 estimate, and compares to 2.26 in June 2010. 

Corn averaged $6.58 per bushel, up 28 cents from May, and $3.17 above a year ago. The soybean price, at $13.30 per bushel, was up 10 cents from May, and $3.85 above a year ago. Alfalfa baled hay at $180.00 per ton, was down $6.00 from May, but $61.00 above a year ago.

Spot butter at the Chicago Mercantile Exchange lost four cents to start the week, but regained a penny on Wednesday.

The strong butter price is surprising to Brian Gould, Associate Professor of Agriculture and Applied Economics at the University of Wisconsin-Madison. We have seen butter above $2.00 all year but it may be starting to soften

“Because of those relatively high butter prices the importance of butter in the determination of Class III milk prices has really increased this year,” he said.

Typically fat, which contributes to the value of Class III, represents about 40 percent of the Class III value. Last month it was 48 percent.

Whey prices are the highest in over four years and continue to be a big player.

“We’ve seen strong protein markets in both nonfat dry milk and dry whey and that importance of whey in the determination of Class III prices has doubled since the start of the year,” he said.

Last month dry whey averaged 49 cents for the May Class III. Typically it’s around 25-30 cents, so a big jump in price because of export demand.

The problem with export markets, according to Gould, is they tend to be more volatile than domestic markets and we saw that in 2008 and 2009.

“I’m not sure having such a large percentage of that whey coming from the export market is going to do anything but possibly increase our volatility,” Gould concluded.

To learn more about the current whey prices, go to the understanding dairy markets website that is maintained by the University of Wisconsin

USDA estimated 220,000 culled dairy cows were slaughtered under federal inspection in May 2011, down about 17,800 head from April 2011, but 10,900 head more than May 2010. January-May 2011 dairy cow slaughter was estimated at 1.239 million head, up 83,300 from the same period in 2010. Compared to May 2010, culling increased in the East, Southeast and Midwest, but declined in the Southwest.

May butter stocks totaled 170.4 million pounds, up 28.7 million pounds or 20 percent from April but 42.1 million pounds or 20 percent below May 2010, according to preliminary data in the Agriculture Department’s latest Cold Storage report issued Wednesday afternoon. 

The May American cheese inventory, at 620.5 million pounds, was unchanged percent from April, but 5.6 million pounds or 1 percent above a year ago.

 Total cheese stocks amounted to over 1.049 billion pounds, and was up 10 million pounds or 1 percent from April, and 22 million pounds or 2 percent above a year ago.

It looks like we didn’t produce as much cheese in May as we thought. That could be one reason for the strong CME spot cheese prices. 40 pound blocks are holding at $2.13, while barrel remains at $2.0675.

May’s milk production report was up 1.5 percent, which was a little stronger than what some analysts were looking for. “It was going the direction that we kind of thought that it would with the gains over the previous year,” FC Stone dairy economist Bill Brooks said.

Milk per cow numbers continues to slow. “We were looking at some very strong gains in milk per cow last year. It’s hard to maintain that level of growth.” he said.

The wet and cool weather negatively impacted forage growth. Even though cool weather is good for cow comfort, but for farmers relying on new forages, the cool weather wasn’t positive.

More cows were added in May to offset slower growth in milk per cow. At 9.2 million head, that’s only 8,000 head below the five year average.

From a U.S. standpoint, Brooks said we’re looking at two percent plus gains through the end of the year. “It will be hard to maintain those types of gains.” He’s looking for milk production gains within the half-percent to 1 ½ percent area, which isn’t really different then what we have seen in April and May.

The July Federal Order Class I price is $21.03, up 71 cents from June, and the highest in quite some time. It continues to increase on the strength of the butter-powder complex driving things.

“That could flip a little bit if we continue to maintain the strong cheese prices, but we have to go back quite a ways to when we were up over $21,” he said. November of 2007 the Class I price was over $21 and had been for four consecutive months. It peaked at $21.91.

It’s not a positive price for those that are struggling, especially for families. Fluid milk sales came out below a year ago and the current Class I price is going to take away some incremental sales.

We won’t see a full decline in sales , but folks are struggling at the end of the month and these higher Class I prices are not going to help them and that’s going to negatively impact sales just a little bit more, Brooks concluded.

May milk production in the top 23 states totaled 16 billion pounds, up 1.5 percent from May 2010, according to preliminary data in the USDA’s latest Milk Production report issued this afternoon. Output in the 50 states amounted to 17.3 billion pounds, up 1.3 percent. May cow numbers in the 23 states totaled 8.45 million head, 103,000 head more than May 2010, and 15,000 head more than April 2011.

California milk output was up 3.7 percent from a year ago, thanks to a 55 pound gain per cow. Cow numbers were up 17,000 head. Wisconsin was down 1.8 percent on 5,000 more cows. Output per cow was down 40 pounds. New York was down 1.4 percent with output per cow down 25 pounds. Cow numbers were unchanged. Idaho was up 5.4 percent, thanks to 18,000 more cows. Output per cow was up 40 pounds. Pennsylvania was down 0.8 percent due to a loss of 20 pounds per cow. Cow numbers were up 2,000 head however. Minnesota was down 2.7 percent on a 50 pound per cow loss. Cow numbers were up a thousand head.

The biggest gain was in Texas, up a 8.8 percent, followed by Colorado, up 6.7 percent, and Arizona, up 6.4 percent. Ohio recorded the biggest loss, down 5.9 percent, followed by Illinois, down 4 percent, and Missouri down 3 percent

The July Federal order Class I base milk price is $21.03, up 71 cents from June, $5.37 above a year ago, the highest since November 2007, and equates to about $1.81 per gallon. Its 2011 average now stands at $18.55, up from $14.60 a year ago, and compares to $11.08 in 2009. 

The Class IV advanced pricing factor remained the “higher of” in driving the Class I value and National Milk’s Roger Cryan does not project an MILC payment to producers. Feed prices would have to go up quite a bit for the target to reach the announced price, according to Cryan, and would take something like $10 corn and $16 soybeans.  

The NASS-surveyed butter price averaged $2.1343 per pound, up 8.8 cents from the previous month. Nonfat dry milk averaged $1.6462, up 4 cents. Cheese averaged $1.7934, up 15.2 cents, and dry whey averaged 52.01 cents, up 2.9 cents.

Dairy price discovery has been a contentious issue for dairy farmers, especially when those prices are used to determine how much they receive for their milk.

This week, USDA proposed a rule making electronic dairy product price reporting mandatory.

“It’s been a while in coming, but electronic dairy product price reporting may finally be implemented,” Dave Natzke, Dairy Profit Weekly editor reported.

With wholesale prices for cheese, butter and other products used in complex federal milk marketing order formulas which set minimum milk prices paid to farmers, accurate and timely information is necessary.

For years, that has meant processors have filed weekly paper reports.

Electronic reporting requirements were included in the 2008 Farm Bill, but only when USDA was able to come up with the money to implement the program.

Last year, however, Congress passed the Mandatory Price Reporting Act, setting a one-year deadline for USDA to implement electronic reporting.

The plan introduced by USDA this week doesn’t change the frequency or numbers of dairy products that must be reported, and exempts processors marketing less than 1 million lbs. of products a year.

It requires USDA to publish weekly price report summaries on Wednesday each week, instead of the current Friday morning report. USDA is accepting public comments until Aug. 9, and will issue a final rule some time this fall.

That program will likely have the most impact on dairy processors, but Natzke told DairyLine that a bill introduced this week could impact dairy farmers even more.

“Ironically, the legislation also has to do with electronic reporting, this one dealing with the system that tracks workers in the United States,” he said.

Under the Legal Workforce Act, introduced by Texas Republican Lamar Smith, use of the federal government’s “E-Verify” system would become mandatory for all U.S. employers within two years.

Designed to identify illegal immigrants in the U.S. workforce, the bill repeals the current “I-9” paper-based system, and requires businesses to verify the immigration status of all new employees on a federal electronic database. The bill offers a 1-year extension to agriculture, including dairy farms, making use of E-Verify mandatory within 3 years.

Dairy imports in the first quarter of 2011 continue to trend downward. That’s been the trend the past several years. Imports of Milk Protein Concentrate and most types of foreign cheeses have been lower this year than the previous quarter in 2010.

Chris Galen, from the National Milk Producers Federation, told DairyLine that the U.S. isn’t quite the draw as an import market the way it was years before.

“It’s just a reflection of the relative value of U.S. dairy prices and the world price where there is actually a bit of alignment right now,” Galen said.

Safeguard levels for certain products that have quotas have also dropped. If the U.S. exceeds a certain amount of quota product coming in then the safeguard levels allow to temporarily putting additional duties on those products.

“In certain situations when product imports spike up, we can ask the U.S. government to impose the extra duties under these safeguard levels,” he said.

Galen said it doesn’t look like any of those products will be near the safeguard levels for 2011.

Rob Vandenheuvel, general manager of the Milk Producers Council, shares with us his thoughts on Foundation for the Future, IDFA and the dairy debate in Washington.

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