By  E. W. Lang

Block cheese closed today at $1.78 per lb., up from a recent low of $1.00 on April 15. 500 lb. barrels closed today at $1.72 per lb., up from $1.00 on April 16. For reference, recent highs were on December 4, 2019, when 40 lb. blocks were $1.97 and barrels were $2.24 per lb. All time highs were in 2014 when blocks averaged $2.35 during the months of March and September.

Butter ended the week at $1.64 per lb., following a recent low of $1.10 on April 23. Butter was $2.00 for the last half of December, and spent most of last year between $2.14 and $2.70 per lb.

Food service orders are picking up, abruptly so during the last few days, as restaurants begin to open. Thus the dramatic increase in cheese and butter prices. Let us hope that those weren't all start up orders that will decrease with time for lack of restaurant capacity and customers without spare cash.

It looks like Class III Milk Futures right now are $12.24 for May, up from the recent low of $10.35 per cwt. on April 23, and off of the contract high of $18.00 on January 23. Class III Milk for September, 2020 is $16.85, down 75 cents on the day, but up from a $14.71 low on March 31.

Milk-Feed Indices average nearly $10 for the last half of this year, and currently indicate no monthly USDA Dairy Margin Coverage subsidies after July. But who knows, I've said that kind of thing before. Yesterday, by the way, they averaged will over $10 per cwt.   By comparison on April 22, M-F Indices averaged $4.00 for April and May. This would be a good time, with the benefit of hind sight, to quote from the November 29, 2019 OCaM, paragraph nine.

"Within the process of planning and getting financing for 2020, milk and feed price risk can be mitigated with options and forward pricing. I've made and wasted a lot using both, and offer no strategy or encouragement for their use. They do allow a producer the opportunity to eliminate the highs and lows of both milk income and feed expense, when used consistently over time. That said, options aren't free and neither are commodity advisors, but Milk-Feed Indices average a historically high $10+ for next year (2020), and warrant consideration. In our lifetimes, annual revenue over feed cost has been higher only during 2014."

The key words are "...historically high $10...warrant consideration... used consistantly...higher only during 2014."

We could indeed have $25 milk in September, and we could also be in the early weeks of a 10 year recession similar to the one that plagued Japan during the 1990's. If I knew now what I will know in December, I would buy the right show cows and the right options on milk and feed. Or I would just forward contract milk sales and feed purchases at the right moment in time, or not.    I don't know what's in store. I can, however, cite a couple reference points from history, and offer them for your consideration in the days and weeks ahead.