It was just a week ago that dairy markets were concerned about the 27-cent spread between blocks and barrels on the Chicago Mercantile cash cheese market. The fear was blocks would drop to bring the ratio back into to line. The fear became reality by Wednesday when the margin narrowed to 2-cents completing a 25-cent drop over five sessions.
The monthly Agricultural Prices Index from USDA puts the December all-milk price at $16.30 per hundredweight, up $1.00 from November and 80 cents more than December of 2008. Fluid grade was $1.00 higher at $16.30 and manufacturing grade increased $1.10 from last month to $16.10.
The December all-milk price in California jumped $1.46 to $15.40, Wisconsin is up 90 cents to $16.60. The highest all milk price for December is Florida at $19.40 while Arizona has the lowest at $15.20. Indiana, Kansas, Minnesota, Ohio, Oregon, Pennsylvania and Texas are all at or above $17.00 for December.
Meanwhile, the Prices Paid Index was unchanged from November; the corn price was down 6 cents to $3.59 per bushel and hay held steady. Soybeans were 43 cents higher at $9.96 per bushel. As a result, income over feed costs for December is $9.55 making it the most profitable month of the year for dairy producers.
Improved profitability had traders thinking culling will slow and production will rebound. Add to that, light post-holiday interest in cheese along with building cheese inventories and traders were nervous on the Chicago Mercantile Exchange on Wednesday. Dairy Market News says cheese production is heavy this week as processors take advantage of the extra milk available from the fluid market. Next week things should return to more normal as students get back to school and cheese buyers prepare for the Super Bowl.
Kansas City Commodity office announced it is seeking to buy 31.2 million pounds of cheddar and mozzarella; offers are due by January 12th. This is the $60 million in that dairy relief package in the Ag Appropriations bill.
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