Posts Tagged ‘milk’

Milk Futures May See Another Wave Higher Thanks to El Nino

Milk futures, although $2.50 lower from its August highs and $2.00 less than its June highs, may be setting up for another run to those higher prices if El Nino threats to disrupt weather patterns for New Zealand dairy farmers come true. Class III milk futures are trading up .04 cents (per CWT) currently at $15.79 (CWT) today at the Chicago Mercantile Exchange.

The Australian official news bureau reportedly rated this forthcoming storm to be the strongest since 1997-98 and stated its not going to go away any time soon, but will be felt into the new year. This comes at a time when New Zealand has reportedly reduced the numbers of their dairy cows, culling “poor performing” cows and heifers.

Milk futures trend is currently down with no bottom yet in sight. It will take time and certain price action to change milk futures trend so let’s all enjoy the lower prices at the store while we can.

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Milk Prices Down One-Third Since Spring

Milk futures continue to make lower highs and lower lows since wholesale milk prices reached a five-year high last September and are now down one-third from this high making the Dairy State farmers feel the economic pinch. Milk futures for September delivery are up .04 cents today currently trading at $16.50 (per CWT) at the Chicago Mercantile Exchange.

The La Crosse Tribune reported wholesale milk prices topping out with a five-year high of $27.10 (CWT) in Minnesota and Wisconsin dairy farmers seeing $26.60 (CWT) for their milk, but since this past March – when the USDA reported milk prices as low as $17.10 and $17.60 (CWT) respectively in those states – milk prices have only come up slightly and are at a premium to the milk futures prices. Even the exports of milk have all but dried-up with economic sanctions in Russia, and glut of milk production in China, and New Zealand becoming a major player in the milk exporting business.

Milk futures trend is down with no bottom yet in sight. What is temporarily bad for the dairy producer is good for the family budget, but for how long will this last…?

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Domestic Production at Record Levels, Some Gets Dumped: Milk Futures

Domestic milk output is said to be set at the highest ever for the fifth straight year, but now some dairies are reportedly not able to find buyers because milk is so abundant. Raw milk supplies are reportedly over capacity at processing plants in some parts of the country, and although demand is said to be improving, the US milk production is contributing to an existing global surplus.

The USDA stated last month domestic milk output in May reached 18.4B pounds – the most in any month – and is on pace to reach a record 208.7B pounds this year. Contrast this to the global milk production said to be rising 2.1% to a record amount of 582.5M tons (with New Zealand being the top milk exporting nation).

Milk prices have been going up steadily for the past five years due to reasons such as drought and (formerly) high feed-grain prices. Now we learn some of our nation’s milk is going to spoil because there’s so much produced – well that cost in and of itself may be contributing to the current high price as well.

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Butter Prices On the Rise (Again…)

Butter prices are said to be rising substantially for two-fold reasons: a demand for milk-fat, and a recent drop in production. So what is going on with the domestic butter market that hasn’t seen these high $2 per pound butter prices since November?

California dairy farmers are the nation’s top producers of butter and they have been reportedly struggling with lower profit margins since last year which has caused a 1.5% reduction (that’s 8.8M pounds!) in butter production. In other parts of the nation the dairy-milk supply appears to being devoted toward the making of cheese – at the expense of the consumers of butter.

The Chicago Mercantile Exchange’s spot butter prices – according to my study – are clearly in an uptrend. Before butter prices get too crazy I’m confident the dairy producers will see the profit margin potential to step up production once again. At least from a business prospective this makes sense.

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Butter Futures Expected Lower With Milk Production Increase

Butter eaters around the world will delight with an extra helping as wholesale milk prices continue to drop from all-time highs in September. Dairies have kept the milk flowing like never before the former high milk (futures) prices have helped to expand production around the world.

USDA data shows farmers have taken advantage of the spike in milk prices as well as low animal-feed costs which has sent production for the year ending in October up almost 2% from the same period last year. Top producers around the globe are contributing to the global milk glut with our domestic dairy exports dropping to a year and a half low.

As with falling oil (lowering transportation costs) and overall commodity prices, milk futures and butter futures are not immune to glut prices. We don’t trade butter futures or milk futures from the Chicago Mercantile Exchange, but this human interest story is out to assure the financially “tapped-out” public that the pendulum does indeed swing the other way!

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