The largest fundamental change seen during the week was the fact that more milk is being used by bottlers.
Schools are and will be opening soon requiring milk to supply school accounts. Plants have been negotiating fluid contracts the past few weeks in preparation.
Tightening of manufacturing milk supply has increased the desire of cheese buyers to step up and purchase what they can for upcoming demand.
This has resulted in a leap-frogging effect as buyers attempt to outbid each other for available supply in the daily spot market. The result has been a substantial increase in milk futures in September, October and November contracts.
Buyers need to fill orders and they are coming to the spot market to do it. Seasonally, prices should increase at this time of year, but continued lower world prices were anticipated to have a greater impact on overall demand.
So far that has not been the case and price could increase into September when prices would seasonally reach a peak. For the week ending Aug. 15, cheddar blocks closed at $2.22, up 12 cents with 15 loads traded.
Barrels increased 8.75 cents to close at $2.21 with two loads traded. Butter jumped to $2.66, up 26 cents with 59 loads traded.
Grade A non-fat dry milk closed at $1.3975, down 14.25 cents with 5 loads traded.
Milk projection increase
USDA raised projected milk production 100 million pounds for both this year and next year on the World Agricultural Supply and Demand report. Production this year is projected to reach 206.0 billion pounds with 2015 production projected to reach 212.5 billion pounds.
Class III milk price for 2014 was raised 20 cents to an average of $21.35. Class IV was raised 30 cents to average $22.50. The All-milk price was raised 25 cents to average $23.65. These would be record prices for each category. Class III price next year was raised 5 cents to an average of $17.50.
Class IV price was left unchanged at $19.25. The All-milk price was unchanged at $20.25. These prices are not quite as exciting, but certainly good in light of lower grain price projections. Projected cheese price increased 1.5 cents this year to average $2.06 while price was left unchanged for next year at $1.72.
Dry whey price this year was raised 0.50 cents to 65.0 cents and raised 1.5 cents next year to 58.0 cents. U.S. Department of Agriculture (USDA) raised butter price 6 cents to average $2.06 with the average price next year of $1.72.
This is identical to cheese, which is very unusual. Non-fat dry milk price was raised a penny to $1.85 1/2 this year and left unchanged at $1.64 next year.
Milk sales decline
For the month of May, overall fluid milk sales are 3.5 percent lower than the previous year. Conventional milk sales declined 4.1 percent. Whole milk sales declined 1.7 percent, flavored whole milk sales were down 7.2 percent, reduced fat was down 2.6 percent, low fat declined 5.3 percent, flavored fat reduced milk was 12.0 percent lower, buttermilk slipped 2.4 percent and sales of other fluid milk products fell 5.5 percent.
Organic milk sales increased 8.1 percent. Organic Whole milk sales jumped 22.5 percent, reduced fat was up 11.5 percent, low fat milk increased 7.7 percent, fat-free skim milk sales declined 21.4 percent and sales of other organic milk products were unchanged from last year.
For the week ending Aug. 9, Agricultural Marketing Service (AMS) prices were mostly higher. Prices for 40-pound cheddar blocks declined 0.5 cents to $2.02. The price for 500-pound barrels, adjusted to 38 percent moisture, averaged $2.04, down 2.8 cents.
USDA grade AA butter averaged $2.48 for the week, down 4.8 cents. Non-fat dry milk averaged $1.80, down 4.6 cents. Dry whey averaged 69.7 cents, up 0.4 cents.
Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in commodity trading, which may not be suitable for recipients of this publication.
Robin Schmahl is the owner of AgDairy, LLC, a full-service commodity brokerage firm located in Elkhart Lake, specializing in marketing plans and trade execution in all agricultural markets. Contact him at 877-256-3253, firstname.lastname@example.org.