The outlook for milk prices continues to improve. May is experiencing increases in dairy product prices. If these dairy product prices can hold, average May prices compared to April on the CME could average about 4 cents per pound higher for butter, about 14 cents for cheddar barrels, 4 cents for 40-pound cheddar blocks, 8 cents for nonfat dry milk, and 3 cents dry whey. As a result the May Class III price would be near $15.25 compared to $14.47 in April the low of $13.40 back in February. The May Class IV price would be near $14.45 compared to $13.48 in April and the low of $12.87 back in February.
Good domestic sales and dairy exports have improved the dairy stock situation and adding strength to the dairy product prices. Compared to a year earlier March 31st stocks of butter was just 0.4% higher with American cheese slightly lower at 0.4%, but other than American cheese stocks were 14.2% higher bringing total cheese stocks 5.2% higher. The strength in nonfat dry milk prices is surprising since stocks were still 20.9% higher than a year ago. Dry whey stocks which have been relatively high were 3.5% lower than a year ago.
The price of butter, cheese, nonfat dry milk and dry whey remain lower than and competitive with world market prices. U.S. dairy exports set a record high in March on a total volume basis surpassing the previous record high set in March 2014. Compared to March a year ago butterfat exports were 180% higher, cheese 9% higher, nonfat dry milk/skim milk powder 38% higher and dry whey 19% higher. March exports as a percent of milk production on a total solids basis was 17.3% compared to 14.1% a year ago. The outlook for dairy exports appears positive for the immediate months ahead.
Milk prices will continue to strengthen and possibility topping out in October or November. The degree of strength will continue to depend upon the level of milk production and dairy exports. The summer weather, quality of forages harvested and the condition of the corn and soybean crop that will impact feed costs will have a bearing on milk production this summer, fall and into winter.
USDA’s report for April milk production was positive for milk prices. Compared to April a year ago milk production was just 0.6% higher. Milk cow numbers declined slightly, down 2,000 head from March, the second consecutive monthly decline. April milk cow numbers were just 8,000 head or 0.1% higher than a year ago. The April increase in milk per cow continues to increase much less than the normal trend being just 0.5% higher.
April milk production was lower than a year ago in major dairy states. Decreases were: New York -2.4%, Pennsylvania -1.7%, Michigan -1.4%, Minnesota -2.2% and Wisconsin -0.6%. There was relatively small increases in California +0.4%, Arizona +1.1%, Iowa +1.6% and South Dakota +1.8%. Relatively strong increases occurred in Idaho +3.5%, Texas +7.0%, Colorado +9.9%, Kansas +5.1% and Utah +5.5%.
It now looks like the Class III price could reach near $16 in June and the mid to high $16’s by July and for the remainder of the year. The average for the year could end up near $15.60 compared to $16.17 last year. The Class IV price could be in the low $15’s in June and then in the mid to high $15’s the remainder of the year even reaching $16 by October averaging near $14.70 compared to $15.16 last year. Dairy margins (returns over feed cost) will improve but the improvement is now being dampen some by higher feed prices.