Dairy margins were mixed over the last two weeks of December, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging LLC. Dairy margins continue to project negative through the first half of the year on heavy milk production and high supplies of dairy products, while expectations for this balance to shift in late 2016 are helping support deferred milk prices and dairy margins.
USDA reported November milk production up 0.6% compared to the same month a year earlier, with strong Midwest production more than making up for weaker production in western states. Gains in Wisconsin and Michigan completely offset the decline in California.
USDA's latest Cold Storage report showed November cheese stocks up 21.8% compared to a year earlier, which should continue to pressure Class III prices. Butter stocks fell in November, but are still up 26% compared to a year earlier, and the highest November stocks since 2009.
Feed costs trended down, with corn and soybean meal marking new contract lows to end 2015. While news has been largely absent, Argentina's aggressive push to cut export taxes, combined with renewed U.S. Dollar strength, has put pressure on both markets.