Fluid Milk and Cream - Western U.S. Report 7

Farm level milk output is mixed in California. Some stakeholders report production is     steady, with an uptick over the previous week, as paddocks have had time to dry up from the     heavy rains California received to start 2023. Some stakeholders report production is steady     to higher with the heavy rainfall not affecting cow comfort. Volumes of available milk is     also reported as mixed this week. Milk supplies in the Central Valley have tightened up with     limited availability over this past week. However, milk availability was strong in the rest     of the state this past week. Some stakeholders note increased production for February     compared to last month from preliminary reports, but also below forecasted levels for     February thus far. Sellers from out of state offering spot loads at below Class prices have     been reported from some contacts. All Classes have steady demand. 

In Arizona, farm level milk output is unchanged. Throughout the area, milk volumes are available for processing. Demand for Class III is lighter, while demand for all other Classes is steady. Farm level milk output in New Mexico is steady to lighter. Milk volumes are available for processing throughout the area. Demand is steady for all Classes. 

In the Pacific Northwest, farm level milk output is steady, and contacts report milk levels are manageable. Stakeholders note production is at forecasted levels. However, some stakeholders also note concern that farmers will lower milk output because of where milk prices are at. Some stakeholders relay reduced herd sizes, but increased efficiency has kept production up. Milk is available throughout the area. Demand is steady for all Classes, and stakeholders note some sales are priced below Class prices. 

In the mountain states of Idaho, Utah, and Colorado, farm level milk output is steady. Although milk volumes available for processing have tightened up some, regional volumes remain ample. Demand is unchanged for all Classes. 

Demand is steady for condensed skim milk. Contracted loads of condensed skim milk are steady, while the spot load market has lightened in activity. Regional availability of condensed skim milk is reported as mixed by stakeholders. While some note comfortable milk volumes in plants, others note condensed skim milk is widely available. Butter producers continue working through available cream volumes. Cream multiples moved farther apart on both ends this week.


     Western U.S., F.O.B. Cream
     Price Range - All Classes; $/LB Butterfat:   2.0383 - 2.9016
     Multiples Range - All Classes:               0.8500 - 1.2100
     Price Range - Class II; $/LB Butterfat:      2.6138 - 2.9016
     Multiples Range - Class II:                  1.0900 - 1.2100

Secondary Sourced Information:

     Federal Milk Marketing Orders

     Milk pooled on the Southwest Federal Milk Marketing Order 126 totaled 1.158 million         pounds in December 2022. Class I utilization was 328 million pounds and accounted for         28.36 percent of pooled producer milk. The Statistical Uniform Price for milk delivered      to handlers in Dallas/Tarrant counties in Texas was $22.15, down 83 cents from November      2022.

     Milk pooled on the California Federal Milk Marketing Order 51 totaled 2.021 billion         pounds in December 2022. Class I utilization was 409 million pounds and accounted for         20.30 percent of pooled producer milk. The Statistical Uniform Price for milk delivered      to plants in Los Angeles County, CA was $21.58, down 77 cents from November 2022.

Thursday Morning Dairy Market Update - Further Weakness of Butter Expected

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	5 to 10 Lower
Butter Futures:	1 to 2 Lower

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Lower
Soybean Futures:	2 to 5 Lower
Soybean Meal Futures:	$1 to $2 Lower
Wheat Futures:	3 to 5 Lower

MILK:

Milk futures have the potential to slip lower as underlying cash prices show further weakness. However, the choppy nature of the market keeps traders guessing. Sometimes when underlying cash moves lower, futures move higher and vice versa. With the selling pressure we have seen the past few days, it is possible milk futures may bounce Thursday. Overnight trade showed activity only in March Class III futures with 35 contracts traded. Price did trade 5 cents lower but moved back to steady by early morning. Someone learned a hard lesson Wednesday in Class IV trading with one contract traded $1.02 lower at one point. Someone learned that placing market orders or a stop order is not the activity to employ in a thinly traded market.

CHEESE:

The weakness of cheese Wednesday seems to indicate prices are just not yet ready to trend higher. Barrels moved to the lowest level since Nov. 29, 2021, even though there was good activity during spot trading. Manufacturers in some areas will have more milk available next week as some schools will be closed for much of the week while some will be closed only on President's Day. Cheese production remains strong.

BUTTER:

The weakness of spot butter Wednesday after three weeks of steady to higher prices may move buyers to the sidelines, waiting to see how aggressive sellers might be. Buying interest may have pushed price higher than current fundamentals would support, leaving the market vulnerable for a retracement. Supply is readily available for demand with inventory increasing.

Wednesday Closing Dairy Market Update - Spot Milk Prices Remain Under Pressure

MILK

Class IV futures were under significant pressure again today and substantial losses over the past two days. Class III futures were but with not quite as much pressure. There had been anticipation that a low might have been established in the market with buyers stepping up to purchase for later demand. There has been no concern over supply, but some traders were looking back over their shoulders to the market movement of last year and believed some of that movement will unfold again this year. That may be the case over time, but buyers are not fearing a tightening of milk production anytime soon. That may change if the milk production report to be released next week shows a significant decrease in cow numbers from December again. It is reported that some schools with be closing next week for spring break which will allow more milk to move to manufacturing. Spot milk in the Midwest continues to run as much as $10.00 below class for the eighth consecutive week which is very unusual. Most spot milk is around $5.00 under class.

AVERAGE CLASS III PRICES

3 Month:	$17.81
6 Month:	$18.33
9 Month:	$18.86
12 Month:	$19.06

CHEESE

Cheese sales are termed as mixed. Barrels supplies are more plentiful which is one reason the block/barrel spread is at 34.25 cents after spot trading today. Barrel price moved to the lowest level since November 29, 2021. Some manufacturers report customers have reduced the volume of cheese that they had been getting. Some varieties of cheese continue to see good demand. Weekly cold storage from selected storage centers so far this month show a reduction of cheddar cheese stocks of 1%. However, inventory is expected to show an increase for the month of January.

BUTTER

Butter sales are reported to be good and generally meeting expectations. That being said, it is a bit lower than usual for this time of year. Cream is readily available and flowing into churns keeping plants busy. This is what is keeping demand satisfied and inventory increasing. Weekly cold storage indicates butter inventory in selected storage center up 11% so far this month.

OUTSIDE MARKETS SUMMARY

March corn declined 6 cents closing at $6.7625. March soybeans declined 11.75 cents closing at $15.2575 with March soybean meal down $9.90 per ton closing at $491.10. March wheat declined 16.75 cents ending at $7.6925. February live cattle gained $0.40 closing at $162.55. March crude oil declined $0.47 closing at $78.59 per barrel. The Dow gained 39 points closing at 34,128 while the Nasdaq gained 110 points closing at 12,071.