October 20, 2017

Production Is Slowing Down

 |  By: Know Your Market

Milk production is increasing, but at a decreasing rate. So said the USDA on Friday afternoon on their September milk production report. Cow numbers from the month before dropped 4,000 head to 9.4 million. Production rose from the previous year 1.1% to 17.1 billion pounds for the month.

The 1.1% growth is the smallest of the year after factoring in leap day for February and that follows a further adjustment to August numbers released last month which took the year over growth in August from 2% up to 2.1%. Given the sharp contrast between August and September growth one must wonder - are producers taking the foot off the gas?

Buyers of products sure thought that way. Blocks dropped a nickel in Friday's CME spot trade to $1.67, that marks the single largest selloff that's been seen in spot blocks since the rally began in early September. Barrels followed suit, dropping 3/4 cents to $1.64. The butter market dropped 1/2 cent to $2.35 and the grade A nonfat dry milk market dropped another 1 3/4 cents to finish at 74 cents, taking out the low from earlier in the week at 74 1/2 cents. 

Weak product values led to lower milk prices. Class III markets finished down 16 cents in their first half of 2018 average at $15.29. Class IV dropped 15 cents to $14.81.

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