This column was written for the marketing week ending Sept. 4.
The U.S. Department of Agriculture recently announced the August Federal order Class III benchmark milk price at $19.77 per hundredweight. This is down $4.77 from July, but still $2.17 above August 2019 and the highest August Class III since 2014. The 2020 Class III average sits at $17.61, up from $15.83 a year ago and $14.44 in 2018.
As of late morning Sept. 4, Class III futures showed September at $16.99; October, $18.73; November, $17.47; and December at $16.69.
The August Class IV price is $12.53 per cwt., down $1.23 from July, $4.21 below a year ago, and the lowest August Class IV since 2009. Its 2020 average is at $13.62, down from $16.19 a year ago and $13.85 in 2018.
Farm cash receipts are expected to decrease $12.3 billion (3.3 percent) to $358.3 billion in 2020, according to the USDA’s Farm Sector Income forecast issued Sept. 2. Total animal-animal product receipts are expected to decrease $14.3 billion (8.1 percent) following declines for broilers, cattle-calves, hogs, and milk.
Milk receipts were projected to decrease $900 million (2.2 percent) during the year. The Dairy Margin Coverage Program was forecast to make net payments of $200 million to dairy operators in 2020.
Direct government farm payments, including federal farm program payments paid directly to farmers and ranchers were forecast at $37.2 billion, a $14.7 billion increase (65.7 percent). These payments exclude USDA loans and insurance indemnity payments made by the Federal Crop Insurance Corporation. The expected increase is due to supplemental and ad hoc disaster assistance for Covid-19 relief.
You’ll recall that July milk production hit 18.6 billion pounds, up 1.5 percent from July 2019. The July Dairy Products report shows where that milk went.
Total cheese output slipped to 1.106 billion pounds, down 0.4 percent from a revised June total of 1.111 billion, but was 1.8 percent above July 2019. Year-to-date production stood at 7.65 billion pounds, up 0.8 percent from a year ago.
Wisconsin produced 288.6 million pounds of the total, down 0.6 percent from June, but 1.2 percent above a year ago. California output, at 202.5 million pounds, was down 0.6 percent from June and 3.8 percent below a year ago. Idaho vats contributed 89.2 million pounds, up 2.2 percent from June and 2.4 percent above a year ago.
Italian type cheese totaled 457.1 million pounds, down 4.2 percent from June and 1.5 percent below a year ago. Year-to-date, Italian output was at 3.3 billion pounds, down 0.2 percent.
American type cheese jumped to 451.7 million pounds, up 3.5 percent from June and 4 percent above a year ago. Year-to-date, American was at 3.1 billion pounds, up 1.8 percent.
Mozzarella output slipped to 368.8 million pounds, down 3.5 percent from June but 0.2 percent above a year ago, with year-to-date at 2.6 billion pounds, unchanged from 2019.
Cheddar, the cheese traded at the Chicago Mercantile Exchange, climbed to 321.2 million pounds. This is up 12.2 million pounds or 3.9 percent from June and 15.3 million or 5 percent above July 2019. Year-to-date, cheddar stood at 2.2 billion pounds, up 1.7 percent from a year ago.
Butter production hit 151.8 million pounds. This is up 1.6 million pounds or 1.1 percent from June and 1.1 million pounds or 0.7 percent above a year ago. Year-to-date butter output was at 1.27 billion pounds, up 6.2 percent from 2019.
Dry whey totaled 84.5 million pounds, down 0.3 percent from June but 1.9 percent above a year ago, with year-to-date whey at 576.6 million pounds, up 3.7 percent. Dry whey stocks totaled 84.5 million pounds, down 0.1 percent from June but 24.9 percent above a year ago.
Nonfat dry milk totaled 163.4 million pounds, up 16.3 million pounds or 11.1 percent from June, but 8.9 million or 5.2 percent below a year ago. Year-to-date powder sits at 1.17 billion pounds, up 0.7 percent from 2019. Stocks climbed to 309.6 million pounds, up a bearish 20.6 million or 7.1 percent from June and 17.5 million or 6 percent above 2019.
Skim milk powder output fell to 51.2 million pounds, down 10.1 million pounds or 16.4 percent from June but 4.5 million pounds or 9.7 percent above a year ago. Year-to-date skim milk powder hit 319.3 million pounds, up 10.1 percent from a year ago.
The USDA finalized 2019 fluid milk data, reporting that sales for the year totaled 46.4 billion pounds. This is down 828 million pounds or 1.8 percent from 2018. Whole milk sales totaled 16.1 billion pounds, up 218 million pounds or 1.4 percent from 2019; and made up 34.7 percent of the year’s total beverage milk sales, up from 33.7 percent in 2019. Skim sales totaled 3.5 billion pounds, down 424 million pounds or 10.7 percent from 2019 and made up 7.6 percent of total milk sales, down from 8.4 percent in 2019.
Dairy and Food Market Analyst editor Matt Gould informs us that 2019 was the sixth consecutive year whole milk sales topped the previous year, and the sixth consecutive year that skim sales dropped by double digits.
The Sept. 1 Global Dairy Trade auction saw a 1 percent decline in its weighted average, which followed the 1.7 percent decline on Aug. 18. Sellers brought 78.6 million pounds of product to market, up from 69.1 million on Aug. 18, and the highest total since Dec. 17, 2019.
The declines were led by whole milk powder, down 2 percent after dipping 2.2 percent on Aug. 18. Butter was down 1.2 percent following a 2 percent slip, and anhydrous milkfat was off 0.5 percent following a 2.9 percent drop. GDT cheddar was down 0.4 percent after dropping 3.6 percent in the last event.
Buttermilk powder was up 3.9 percent. It did not trade last time. Skim milk powder was up 1.8 percent after a 1.1 percent rise, and lactose was up 0.8 percent after falling 3.3 percent last time.
StoneX equated the GDT 80 percent butterfat butter price to $1.4753 per pound U.S., down 1.6 cents from the last event. CME butter closed Sept. 4 at $1.4925. GDT cheddar cheese equated to $1.5551 per pound, down 6.3 cents after losing 5.7 cents in the last event, and compares to Sept. 4’s CME block cheddar at $2.1250. GDT skim milk powder averaged $1.2080 per pound, up from $1.1831, and whole milk powder averaged $1.3080, down from $1.3317. CME Grade A nonfat dry milk closed Sept. 4 at $1.03 per pound.
July U.S. dairy exports topped year-ago levels on almost all products. Nonfat dry milk exports were the highest for the month on record, according to HighGround Dairy. Year-to-date exports are the strongest on record, says HighGround Dairy, with 2020 poised to be a record export year as global skim milk powder demand persists.
Cheese exports dropped seasonally from the record June high but were up 5.4 percent from a year ago. Exports to Mexico were down, but South Korea took up the slack
According to HighGround Dairy, whey exports were up 65.1 percent — the strongest volume for the month since 2013 with volumes to China up 14.3 million pounds from 2019.
CME block cheddar topped $2 per pound ahead of the Dairy Products report and the Labor Day weekend and closed Sept. 4 at $2.1250. This is up 29.75 cents on the week, the highest since July 31, and 12.75 cents above a year ago. The barrels closed at $1.70, 27 cents higher on the week, 4.25 cents below a year ago, and 42.50 cents below the blocks. Seventeen cars of block sold on the week and 14 of barrel.
As I reported last week, Uncle Sam chipped in another $1 billion in food aid due to the COVID pandemic. StoneX says, “Round 2 of the food box program has been very positive; but the total program is expected to conclude soon, as the bid deadline for Round 3 is Sept. 30 and deliveries must be completed within 30 days after that. If this program is to continue, Congress will have to allocate funding for the next fiscal year.”
“The main point,” says StoneX, “is that the U.S. government will be buying cheese in September and that, along with what we expect will be some additional ‘value’ buying from commercial interests.”
Dairy broker Dave Kurzawski stated in the Sept. 7 Dairy Radio Now broadcast that there’s plenty of uncertainty in the markets. When asked about the significance of many schools not returning to the classroom, Kurzawski said he believes it will be significant. “We also have to consider the impact of holiday parties and gatherings not occurring because of Covid. Plus, the weather right now is great and people are eating outside at restaurants. But what is that going to look like in Boston, Chicago, New York and others Nov. 1st?”
Midwest cheese output remains busy, according to Dairy Market News, and orders have been robust on the retail side. Continued governmental assistance has spurred customers to get ahead of potential price increases; but the wide spread between blocks and barrels is viewed as a sign of uncertainty, says Dairy Market News. Anything less than 10 cents is indicative of “healthier market tones.”
“The western market is volatile and impacted by the effects of Covid. USDA’s additional Food Box purchases has some contacts believing this will continue to help clear cheese while others fear it might bring more volatility to the market. Retail cheese sales are strong, but orders from the food service are still down. International sales are active with the lower prices. Some manufacturers are preparing for the expected growth in year-end holiday demand but difficulties finding qualified staff at a few plants has disrupted output,” says Dairy Market News.
Cash butter closed the week at $1.4925 per pound, up 4.5 cents but 68 cents below a year ago, with 58 sales reported at the CME.
Bulk butter is reportedly available in and outside the Midwest — though, for most of the summer, cream has been up and down. Unsurprisingly, as the holiday weekend approached, cream was more available; though some suggest it may lighten near term because less cream will be spun off from bottlers due to lighter school demand. Dairy Market News says, “Butter market tones are trying, but struggling, to find any bullish notes.”
Western butter makers were preparing for a surge of cream over the weekend. Ice cream production is slowing. Some schools have reopened or are planning to soon, engaging school milk bottling so that is adding more cream. Butter stocks are heavy. Retail orders have cooled, but manufacturers expect more demand closer to the holiday baking season. Dairy Market News says it’s difficult to assess what impacts the mix of virtual, hybrid and in-person classrooms will have on near-term butter needs for food service, baking and at-home family meal preparations. “Regional dining out is improving, but food service demand is still languishing.”
Grade A nonfat dry milk finished Sept. 4 at $1.03 per pound, a penny higher on the week, but 1.75 cents below a year ago, on 13 sales for the week.
StoneX says U.S. powder holds a steep discount to world prices and with EU prices generally higher demand for U.S. product should be keen.
CME dry whey closed Sept. 4 at 33.25 cents per pound, down 0.75 cents on the week and 6.25 cents below a year ago, with four carloads finding new homes.
A higher All Milk price more than offset higher feed prices and shot the July milk feed price ratio higher for the second month in a row, reaching the highest level so far this year. The USDA’s latest Ag Prices report put the ratio at 2.69, up from 2.36 in May, and compares to 2.16 in July 2019.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. One pound of milk could purchase 2.69 pounds of dairy feed of that blend in July.
The U.S. All-Milk price averaged $20.50 per hundredweight. This is up $2.40 from June and $1.80 above July 2019.
California’s All Milk price jumped to $20.90, up $2.20 from June and $2.30 above a year ago. Wisconsin’s, at $22.30, was up $2.80 from June and $3.50 above a year ago.
Feed prices crept higher. The national average corn price averaged $3.21 per bushel. This is up 5 cents per bushel from June but 95 cents per bushel below July 2019. Soybeans averaged $8.51 per bushel, up 17 cents from June and 13 cents per bushel above a year ago. Alfalfa hay averaged $174 per ton, down $5 from June and $9 per ton below a year ago.
Looking at the cow side of the ledger, the July cull price for beef and dairy combined averaged $70.50 per cwt., down 50 cents from June, $3.50 above July 2019, but was $1.10 below the 2011 base average of $71.60 per cwt.
U.S. dairy cow slaughter for the week ending Aug. 22 totaled 54,600 head. This is up 1,100 head or 2.1 percent from the previous week, but 5,400 or 9 percent below a year ago.
The latest Crop Progress report showed 62 percent of U.S. corn as good to excellent (as of the week ending Aug. 30), up from 58 percent a year ago. Ninety-four percent was in the dough stage, up from 78 percent a year ago and 5 percent ahead of the five-year average. Sixty-three percent is dented, up from 37 percent a year ago and 7 percent ahead of the five-year average.
The report shows 95 percent of U.S. soybeans are setting pods, up from 84 percent a year ago and 2 percent ahead of the five-year average. Sixty-six percent were rated good to excellent, up from 55 percent a year ago.
The cotton crop showed a 44 percent good to excellent rating, down from 48 percent a year ago.
Cooperatives Working Together members accepted 16 offers of export assistance this week, helping them capture sales of 438,720 pounds of cheddar cheese, 641,545 pounds of cream cheese, and 864,212 pounds of whole milk powder. The product is going to customers in Asia, Central and South America, the Middle East, and Oceania through February 2021.
CWT’s 2020 exports now totaled 24.297 million pounds of American-type cheeses, 6.93 million pounds of butter (82 percent milkfat), 1.98 million pounds of anhydrous milkfat, 5.02 million pounds of cream cheese and 36.02 million pounds of whole milk powder. The product is going to 28 countries in seven regions and are the equivalent of 736.3 million pounds of milk on a milkfat basis.
Lee Mielke is a syndicated columnist who resides in Everson, Wash. His weekly column is featured in newspapers across the country and he may be reached at email@example.com.