Futures Market Portends Gains
US - The February federal order Class III benchmark milk price gained another 62 cents, hitting $14.18 per hundredweight (cwt.), $1.98 above February 2006. The futures market portends more gains to come. The March contract was trading late last week at $14.52, April was at $14.32, May $14.45, June $14.50, July $15, August $15.30, with a peak of $15.49 in September. The February Class IV price is $12.71, up 18 cents from January and $1.61 above a year ago.
6 March 2007
3 minute read
California's February 4b cheese milk price is $13.20 per cwt., up 73 cents from January and $2.06 above a year ago, but is 98 cents below the comparable federal order Class III price. The 4a butter-powder price is $12.34, up 42 cents from January and $1.76 above a year ago.
Meanwhile, cash cheese weakened the last week of February following the previous week's gains. Block closed March 2 at $1.3450 per pound, down 2 1/2 cents on the week but still 22 1/4 cents above that week a year ago, when block hit its low point of the year at $1.1225.
Barrel, after some ups and downs, closed at $1.35, unchanged on the week but 24 1/2 cents above a year ago. Seven cars of block traded hands on the week and 39 of barrel. The latest NASS-surveyed block price averaged $1.3189, down 0.5 cent. Barrel averaged $1.3309, down 2.8 cents.
Butter closed March 2 at $1.3150, up a surprising 10 1/2 cents on the week and 9 3/4 cents above a year ago. Twelve cars were sold. There's plenty of butter on hand. NASS butter averaged $1.1998, down 1.1 cent. NASS nonfat dry milk averaged $1.1366, up 3.5 cents, and dry whey averaged a record 65.51 cents, up 4.1 cents on the week.
Market analyst Mary Ledman, principal of Dairy Direct in Chicago, said butter and cheese has been trading in a fairly narrow range in the last 30 days. A month ago the barrel price was near $1.3650 and block was at $1.3475.
Inventory numbers on cheese and butter indicate strong positions, according to Ledman, and people are likely preparing for potential shortages or a lack of growth in production in the second half of the year. She said she's not surprised to see a stronger buildup in inventory.
Class III futures prices are strong. Many people believe there'll be shortages down the road, but Ledman is not totally convinced. She is concerned about uncertainty in the whey market, as prices have gone from 30 cents per pound in September to more than 60 cents currently, and that 30-cent gain has added $1.80 to the Class III price.
"The strength of the Class III prices may be due to the uncertainty in what milk production is going to do in the second half of the year," Ledman said. "It's also due to the uncertainty of what the whey price is going to do."
The January Livestock Slaughter Report showed a strong slaughter number at 228,000 head, up 27,000 from a year ago and up 16,000 from December. Ledman said that may be the reason January cow numbers only increased by 3,000.
Source: Capital Press
