Class IV milk prices look much more promising with futures anywhere from $1.00 - $3.50 higher than Class III. The reason is the strength of butter and nonfat dry milk prices. Butter price has moved steadily higher since October with buyers being very aggressive over the past month. Nonfat dry milk has been more choppy but has been trending higher since July (see chart). The strength in both of these markets has increased the price potential for Class IV milk. It has not been very often that Class IV milk has been above Class III milk historically and I have never seen Class IV this much higher.
Dry whey has been the surprise with price reaching a new record high of 80 cents. The previous record high was for the week of April 21, 2007, when the weekly price average reached 79.33 cents per pound. Keep in mind that prior to March 2018, whey price was only recorded on the weekly National Dairy Products Sales report. Now we have daily spot trading for dry whey. In 2007, the high dry whey price resulted in demand being substantially reduced as end users of dry whey substituted alternatives for feed and food additives where they could. By the end of 2007, price had fallen back to 44 cents eventually finding a price bottom at 15.50 cents in early February 2009. It had been a long, slow decline over the period. The market is quite a bit different now as whey is being used in many more food products and sports drinks as well as having a substantial export business. Thus, higher price may not have quite the impact as it did 15 years ago. However, the job of higher prices is to find a level at which demand will slow and product availability will increase. That is the way of all markets.
Robin Schmahl is a commodity broker with AgDairy, the dairy division of John Stewart & Associates Inc. (JSA). JSA is a full-service commodity brokerage firm based out of St. Joseph, MO. Robin’s office is located in Elkhart Lake, Wisconsin. Robin may be reached at 877-256-3253 or through the website
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