Friday, May 29, 2009

May Component Prices - Announced Friday

The May Class III milk component prices and the Class II, III, and IV prices will be announced Friday afternoon - June 5, 2009. Will the prices improve? Unfortunately, no, they won't.

While the final details for the calculation will not be available until Friday when the final last four weeks of data are available, we can look at the last four weeks that are available now to get a pretty good idea of where the prices will be.

Butterfat pricing is pretty straight forward. Butter has been increasing and the National Agricultural Statistical Service (NASS) price average over the last four weeks is $1.19. The Butterfat formula (simplified - see April 23 post) is as shown below:

Butterfat Price = 1.21 x Butter Price - $0.21

Therefore, the butter fat price should be near $1.23/lb, a slight improvement over last month.

Cheese prices are down! The graph below depicts the Chicago Mercantile Exchange (CME)prices. The protein formula (simplified) is as follows:

Protein Price = 3.22 x Cheese Price - 1.28 x Butter price - $.43

Given the four week NASS average for Cheese of $1.17 and Butter of $1.19 , that would calculate to a protein price of $1.81/lb, a very dramatic drop from last month.

The Class III milk price formula (simplified) is as follows:

Class III milk price = 9.6 x Cheese Price + 5.9 x Dry Whey Price + .04 x Butter Price - $3.20.

With Cheese at $1.17, Butter at $1.19, and Dry Whey at $.22, we can expect a Class III milk price around $9.38 a significant drop from last month's Class III price.

The actual data will be slightly different once the four week averages are advanced two weeks and the final calculations are made, but it will be ugly.

The final numbers and their impact on the long term trend and the milk pay check will be explored in the June 6 post.

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