Market Analysis with Bill Brooks

The cash dairy markets are anticipating Thursday’s release of the February Milk Production report. Cash butter continues to trade in the $1.30-$1.50 per pound range, according to Downes-O’Neill dairy economist Bill Brooks in Tuesday’s DairyLine, but whenever it gets close to the $1.50 level, it runs into price resistance and may be indicative that Easter-Passover buying is finished.

Projections are showing a slightly higher Class IV versus Class III price, according to Brooks, so more milk may be go into butter-powder, resulting in a little more supply than is going to cheese, he said, considering the drop in cheese prices, which Brooks believes is close to the bottom. He doesn’t see cheese rebounding real quick but he doesn’t see large declines and perhaps some sideways movement as we work into the spring flush.

He expects February milk production to be similar to the January numbers, down less than 1 percent, maybe a half-percent. Cow numbers are what people will be looking at, he said to see if the milking herd is increasing like in January or was that was a one-month blip.

“Slaughter rates are not real heavy right now,” Brooks said, “And we have a lot of animals that can come into the herd so it wouldn’t be a big surprise if we see the herd continuing to increase a bit.”

He projects the Class I base milk price to come in at around $13.16 per hundredweight. That would be a drop of $1.18 from March but would be $2.80 above April 2009. That will be low enough to trigger an MILC payment of about 23-24 cents, according to Brooks. MILC payments weren’t even expected until recently, he said, but with the drop off in cheese and nonfat dry milk, the base will fall below the $13.69 Congressionally-mandated trigger.

There’s also an outside chance of a feed cost adjustor, he said, based on futures markets but things might change by then, he concluded.