The Dairy Industry: A Wild Ride, But Next Year Looks Better
January 2, 2020
by Fred Hall, Dairy Program Specialist
After two months of inverted barrel and block prices that set market highs, on December 10 the prices came together at $1.94 ¾ per pound. Since then, they maintained the traditional block/barrel spread even as they hit new lows on December 17 at $1.57 for barrels and $1.74 ¾ for blocks.
Pricing corrections were expected, as end users have limited purchasing to a near-term/necessity basis due to the high prices. With barrel prices declining, blocks back in the driver's seat, which aligns with market balance. Cheese production is steady to higher.
With more butter in storage, buyers have been enticed by the sub $2 butter market prices, as its their first time to see that since 2016. Current stores are higher year over-year, and current production is only adding to stocks. Cream is available nationwide. This week, butter prices have been steadily increasing coming back to $2 on Thursday.
Some producers have noted the negative producer price differential (PPD). Class I milk is the average of Class III and Class IV and is announced six weeks before Class III; so in a rising market, the negative PPD is a deduction on the milk check. As prices moderate then it is the more traditional bonus.
It would look like the 2019 class III average will be close to $17.00/cwt and as of Thursday and months in 2020 were above $17.00. Compared to sub-$14.00 class III milk in January 2019, the first half of 2010 should see mid to upper $17 milk and the second half over that.
Milk production in Iowa during November 2019 totaled 426 million pounds, down one percent from the previous November according to the latest USDA, National Agricultural Statistics Service – Milk Production report. The average number of milk cows during November, at 217,000 head, was the same as last month but down 3,000 from last year. Monthly production per cow averaged 1,965 pounds, even with last November.
Milk production in the 24 major States during November totaled 16.7 billion pounds, up 0.9 percent from November 2018. October revised production, at 17.2 billion pounds, was up 1.4 percent from October 2018. The October revision represented a decrease of 60 million pounds or 0.3 percent from last month's preliminary production estimate.
Production per cow in the 24 major States averaged 1,892 pounds for November, 16 pounds above November 2018. The number of milk cows on farms in the 24 major states was 8.81 million head, 8,000 head more than November 2018, but unchanged from October 2019.
Milk production in the United States during November totaled 17.4 billion pounds, up 0.5 percent from November 2018. Production per cow in the United States averaged 1,869 pounds for November, 15 pounds above November 2018. The number of milk cows on farms in the United States was 9.33 million head, 27,000 head less than November 2018, but unchanged from October 2019.
Best wishes for Happy Holidays and a prosperous New Year!