It was a mixed week in the dairy markets, while cash cheese on the Chicago Mercantile Exchange saw barrels hold steady at $1.505 blocks gained 3.5 cents to end the week at $1.515. But Class III futures slipped through the week with the February contract losing 13 cents, March fell 54 cents, April lost 76 cents and May dropped 80 cents. The March, April and May contracts all fell below the $14.00 mark with February just holding-on at $14.05.
There were a couple of factors providing a pressure on the futures on Friday. Daily Dairy Report notes the income-over-feed-cost for January was $9.77 up from $9.68 in December as both corn and soybean prices declined for the month. Improved profitability could lead to increased milk production.
Another factor, USDA reports there were 4.52 million replacement dairy heifers as of January 1, 90,000 more than on January 1 of 2009 and the most since 1986. That works out to 49.7 replacements for every 100 cows in the milking line up from 47.2 a year ago. So, while Cooperatives Working Together herd retirement program and low prices prompted a 3 percent reduction in milk cow numbers in 2009, 4.5 million replacements waiting in the wings mean the herd could be rebuilt quickly.
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