By  E. W.  Lang

It looks like barrel cheddar lost a cent, and blocks lost five on the CME this week. Orphaned loads of milk were trading from 75 cents to $2.50 under Class III. This is a little lower than a couple weeks ago, but compares favourably to last year when spot price was $1 to $3 under Class.

Two years ago, homeless tankers were fetching $5 under Class, going in to the Thanksgiving holiday. Buyers can now be more readily be found for all of the milk being produced.  The last few  years have prompted construction and expansion of milk processing facilities because some individuals, corporations and cooperatives want to make more money on cheap milk. 

 Markets are cruel,  markets are good,  and we thank them for our livelihood...

Dairy farmers produce a perishable product, and are exposed to market forces more violent than most.   But markets address the needs of both industry and society, however tragic the process may be, and it's been tragic, as we've seen these last few years.       

Butter lost four cents this week and the cream supply is called adequate for seasonal products such as delicious egg nog,  sour cream and holiday ice cream, etc.

November Class III on the CME is currently $20.37 per cwt. Dec. and Jan. are $18.69 and $18.19, and the rest of 2020 runs from $17.25 to $17.75 per cwt.

Blessed are the Cheesemakers...

I had a call from an internationally known Jersey cow broker. One of his customers changed from Holsteins to Jerseys and got almost $27 for his October hi test, low count milk. This would have been based on October's announced price of $2.40 for butterfat and $3.17 per lb. for protein. Brown Swiss herds should also have seenzx bigger milk checques from $3.17 protein, the highest price we've seen in five years. 

Holstein folk should have come in close to $21.00 per cwt. for October pay price, but with higher volume per cow, mostly.

Cheese price, however, has recently lost ground and milk protein value isn't likely to remain this high, but at least there was some relief on the countryside when the November 18 milk checques arrived. For those of you who may not already know this, it would take well over a year of milk price like this to even approach the dairy farm equity levels of January, 2015.  Let's hope for strong cheese prices going forward. 

Hay price at auction in northeast Iowa went north of $300 per ton this week on mixed alfalfa/grass large square bales. USDA listed Iowa alfalfa hay topping out at $330 per ton last week, so this is pretty early in the season for hay cost this much.

We've had higher hay markets before, but usually after the winter has been joined for a couple months, or after corn and beans have been high for a couple years. High corn and bean prices will usually draw the moldboard plow out from retirement and into alfalfa fields, pasture and Conservation Reserve Program acres, thus reducing the total forage supply.

USDA includes hay price in their revenues over feed cost and monthly government subsidies for milk producers. As such, almost all farms are somewhat insulated from high hay prices to some degree. However, it looks like producers who sell much more than their government milk base are in for a winter of discontent if they have to buy hay.

In February a lady from Wisconsin called to tell me she was selling her dairy cows, but the hay bales she no longer needed were being actively coveted by dealers and farmers from near and far. That was some consolation for the end of milking at her place. Also, it was going to be something for her to do once the herd left. I got a similar call from another dairy farmer this week.

Straw and corn stalks are pricey too. The Dyersville, Iowa, auction reports straw at $110 per 3 x 4 large square bale, and new corn stalks at $90 per 5 x 6 large round bale. $90 corn stalks may currently be a better enterprise than corn, beans or alfalfa, and less paper work than raising registered livestock or marijuana, which we are now supposed to call hemp.

Here is some more information on Dean Foods (DF) from "Market Watch."

"Two of the company’s four pension plans are listed as 'critical,' according to the Pension Protection Act classification system. Dean Foods’ net debt as of June 30 was $968 million. And the company’s market cap was $73.5 million as of Monday’s close."

Market capitalization is the value of DF on the stock market, calculated by multiplying the total number of shares by the share price, which was 73 cents when they filed for reorganization a couple weeks ago. $73 million is even less than I though it would be. Pension funds labeled 'critical' are a human tragedy from any perspective.

"And the company’s deeply distressed 6.5% bonds maturing in March 2023 recently traded at 15.5 cents on the dollar to yield 87.6%, according to IHS Market. The spread is 8,584 basis points above comparable Treasury yields."

A basis point is 1/100th of one percent of interest and U.S. Treasuries are the safest investment in the world, so yeah. Wow, none of that sounds good. Show cows are better property than DF bonds right now.