While June may be Dairy Month, so far it has not been a happy month for dairy farmers. The Agriculture Department announced the May Federal order Class III benchmark milk price at $16.11 per hundredweight, down $2.41 from April, due to sharply lower cheese and dry whey prices, $9.10 below May 2022, and is the lowest Class III price since August 2021.

The five-month Class III average stands at $17.99, down from $22.67 at this time a year ago, but compares to $16.94 in 2021. Bottom line is, very few if any, dairy farmers can make milk at current prices.

Late Friday morning Class III futures portend a June price at $15.33; July, $16.17; and August at $17.02, with a peak at $18.68 in November.

The May Class IV milk price is $18.10, up 15 cents from April, but $6.89 below a year ago. Its five-month average is at $18.66, down from $24.44 a year ago and compares to $14.54 in 2021.

StoneX dairy broker Dave Kurzawski called the situation “ugly” in the June 5 ‘Dairy Radio Now’ broadcast. Farmers have told him that it feels like 2009, when milk prices plummeted and he admitted “I don’t have a great response to this.”

Typically lows are put in, in May or June, he explained, so it’s a seasonal norm. “The good news is that we are seeing a number of buyers step in to buy loads of cheese at the CME and they are getting a fantastic deal.”

That’s good for them, but the lower prices are attracting more export interest in third quarter, he said. The USDA also solicited bids to purchase 47 million pounds of cheese through June 5 and will award them June 14. He believes that purchase will all be made before Christmas and result in more price stabilization.

Corn and alfalfa hay prices climbed higher in April, according to the USDA’s latest Ag Prices report, and the All Milk price dropped some more. The milk feed ratio fell to 1.48, down from 1.56 in February, lowest since July 2012’s 1.33, and compares to 1.95 in April 2022. The all-time low was 1.02 in August 1974.

The All Milk Price average fell for the sixth consecutive month, falling to $20.70 per hundredweight, down 40 cents from March, and $6.30 below April 2022.

California’s All Milk price averaged $20.70, down 50 cents from March, and $5.60 below a year ago. Wisconsin’s, at $20.40, was up a dime from March, and $6.70 below a year ago.

Meanwhile, the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC., says “Dairy margins continued to erode over the second half of May on a further decline in milk prices that more than offset the impact of lower projected feed costs. In addition to abundant supplies of cheese, whey prices have also pressured Class III milk values as they continue to drop.”

The MW detailed the April Milk Production report, stating it showed “the slowest year-over-year growth since June 2022. Production gains remained heavy in Central and Midwestern states with South Dakota, Kansas, and Iowa up 7.7percent, 5 percent and 2.9 percent, respectively” and detailed cow numbers which I reported last week.

“U.S. dairy producers are expected to suffer their worst losses this spring since the 2009 campaign that led to massive industry liquidation,” the MW warned. “There are already indications of increased cow culling in Western states and this will likely expand into Central and Midwest regions soon. In 2009, it took 13 months before there was a significant recovery in milk prices, so this process may take time,” the MW warned.

Tuesday’s GDT Pulse saw another 2.2 million pounds of Fonterra whole milk powder sold, same as on May 23, but at $3,100 per metric ton, down $50 from the last Pulse and down $95 or 3.0 percent from the May 16 GDT. HGD says “With ample supplies outpacing weak global demand, there is little challenge for buyers to procure product resulting in further WMP price declines.”

Block Cheddar, in five successive declines, fell to $1.42 per pound Wednesday, lowest CME price since May 11, 2020 when it traded at $1.3875. It regained 7.25 cents Thursday but gave some back Friday to close the Memorial Day holiday shortened week at $1.43, down 4.75 cents, and 84 cents below a year ago.

The barrels closed Friday at $1.5125, up 2.25 cents on the week, 73.25 cents below a year ago, and an inverted 8.25 cents atop the blocks. Sales at the market of last resort totaled 25 loads of block for the week and 122 for the month of May, the highest monthly total in two years, and up from 76 lots in April. Barrel sales totaled 35 for the week and 184 for the month, down from 212 in April.

To give a little Dairy Month “perspective,” a load of cheese is approximately 40,000 pounds. If you add May’s CME block and barrel sales, you get 306 loads of cheese or about 12.2 million pounds. That does not include the privately traded cheese. Keep in mind, it takes 10 pounds of milk to produce one pound of cheese. 

Midwest cheesemakers are running full schedules, according to Dairy Market News. A number of plants worked through the holiday weekend and plants that had been down for updating in recent weeks were back online. Cheese demand is mixed but more processors are reporting upticks. Cheese inventories are moving somewhat briskly. Milk availability is “readily accessible,” and plants are turning spot milk offers away as they are already full. Mid-week spot milk prices ranged $11 to $4 under Class III, compared to $2.75 under to Class a year ago.

Retail and food service cheese demand is steady to lower in the West as some reports of decreased sales activity surfaced. Some cheese makers relay contract obligations are making heavy pulls on their supply. Inventories are available with production keeping moderately ahead overall. Export demand is steadier from Mexico and South America, compared to softer Asian demand, says DMN.

CME butter climbed to $2.4650 per pound Thursday, highest since Dec. 22, 2022, but it closed Friday at $2.4450, up 1.50 cents on the week, while 47 cents below a year ago. Sales totaled 6 cars for the week and 29 for May, down from 38 in April. A car of butter is also about 40,000 pounds.

Some butter plants churned cream through the weekend while others scheduled downtime. Contacts say as Class II processing ticks up, along with temperatures, cream accessibility is not expected to remain as widely available as it is now.

Cream is widely available in the West and cream multiples were largely unchanged this week. Butter production has been quieter as some facilities planned downtime for the holiday weekend and some cream shifted from butter making to ice cream in recent weeks.