Over four million people were without electricity and temperatures fell to record lows in Texas
Winter weather has hit the USA hard, especially in Texas where over four million people were without electricity and temperatures fell to record lows in some parts of the state. HighGround Dairy reported that regulators were prioritizing electricity access to residential areas and balanc-ing surging demand as people heat homes with significant generation loss. Natural gas powered plants were offline, wind turbines were frozen solid, and solar panels were covered in snow.
Needless to say, impacts were significant on dairy farms and processing plants over the holiday weekend, according to HGD. “Milk production and collection was impacted in the Texas pan-handle and in other parts of the state as record low temperatures created significant on-farm complications. Processing plants were shutdown, as utilities restricted electricity and natural gas availability to industrial users. Milk dumping was prevalent across the state,” according to HGD.
The Feb. 16 Daily Dairy Report stated that “Other states also faced power outages and slick roads as the storm barreled across the southern and central tiers of the country before moving into the Northeast. A separate developing storm was expected to dump more snow on Oklaho-ma and Arkansas.”
The storm was reminiscent of Goliath, a smaller winter storm that pounded west Texas and eastern New Mexico in late 2015, according to the DDR. The resulting fallout lasted for months, says the DDR, forcing extraordinarily high culling and adversely affected production in the re-maining cows. “One month after Goliath, milk production had fallen 12% in New Mexico and 6.7% in Texas, compared to January 2015,” the DDR stated.
Meanwhile the global dairy market continued to strengthen. The Feb. 16 Global Dairy Trade Auction saw its weighted average rise for the seventh consecutive event, up 3.0%, with all prod-ucts offered in the black. The weighted average followed a 1.8% rise on Feb. 2, 4.8% on Jan. 19, and 3.9% on Jan. 5. The average winning price was $3,746 U.S., up from $3,614 on Feb. 2.
Gains were led by whole milk powder, up 4.3%, following a 2.3% gain on Feb. 2. Cheddar was up 2.4%, after a 2.3% gain. Butter was up 2.0%, after jumping 6.2% last time, and anhydrous milkfat was up 1.1%, following a 1.3% rise. Skim milk powder was up 0.3%, after slipping 1.5% in the last event.
StoneX Dairy Group says the GDT 80% butterfat butter price equates to $2.2696 per pound U.S., up 4.5 cents from the last event, which saw a 13 cent rise. CME butter closed Friday at a bargain $1.55 per pound. GDT Cheddar equated to $1.9357 per pound, up 4.1 cents, and com-pares to Friday’s CME block Cheddar at $1.5375. GDT skim milk powder averaged $1.4548 per pound, up from $1.4506, and whole milk powder averaged $1.64 per pound, up from $1.5685. CME Grade A nonfat dry milk closed Friday at $1.0925.
Cooperatives Working Together (CWT) member coops accepted 14 offers of export assistance this week to help capture sales of 1.213 million pounds of Cheddar and Monterey Jack cheese, 330,693 pounds of butter, 480,608 pounds of anhydrous milkfat (AMF), and 152,119 pounds of cream cheese.
The product will go to customers in Asia, Europe, Central America, and Oceania through July and raised CWT’s 2021 sales to 5.492 million pounds of American-type cheeses, 5.668 million pounds of butter (82% milkfat), 1.973 million pounds of AMF, 3.038 million pounds of whole milk powder, and 2.661 million pounds of cream cheese. The products are going to 17 countries.
December commercial dairy product disappearance data shows total U.S. cheese disappear-ance was down from a year ago for the third consecutive month. Lower exports and domestic demand was blamed and HGD says it was the weakest December disappearance since 2016.
Butter was up for the second consecutive month, “a promising sign for demand,” says HGD, “but not enough to overcome bearish fundamentals in the oversupplied market.”
Total nonfat dry milk disappearance was up for the second consecutive month, thanks to strong domestic demand. Export sales sank to the lowest monthly volume since February, according to HGD.
The GDT helped propel CME cash butter higher in the President’s Day holiday-shortened week and added to the previous week’s 12.75 cent gain. Traders jumped the butter price 6 cents Tuesday, 4 cents Thursday, and 5.50 cents Friday, hitting $1.55 per pound, up 15.50 cents on the week, highest since Sept. 22, 2020, but 26 cents below a year ago. Only 9 sales were re-ported on the week.
Central butter production is strong due to seasonal demand and the current availability of cream, says Dairy Market News, and churning was notably active. The current weather situation in the southern U.S. had some Midwestern butter producers taking on cream that would otherwise lack a destination. Some contacts told DMN that their respective brands are moving well in the retail sector but food service demand is generally lackluster. Butter market tones are in a short term bullish push, says DMN, and prices have moved from $1.21 per pound on Feb. 1 to a Feb. 19 close at $1.55 per pound.
Western butter makers report demand for bulk and print butter is higher, compared to the last few months. Retail sales have picked up but inventories are heavy and old crop butter is readily available. While shoppers are finding deals for the butter in storage, processors say end users are looking for coverage of second and third quarter. Bulk butter orders are strong, a good sign for the upcoming months, says DMN, but the region has plenty of cream available and most churns are running full schedules. A strong winter storm in the Pacific Northwest, the week of Feb. 8, stymied some of the butter output. Heavy snows, freezing rain and power outages that weekend created challenges for shippers trying to get milk and cream to creameries, and for workers trying to get to work, says DMN.
Cheese was unchanged Tuesday but headed south from there. The Cheddar blocks fell to $1.51 per pound Thursday, lowest since May 12, 2020, but regained 2.75 cents Friday to close at $1.5375, down 2 cents on the week and 23 cents below a year ago.
The barrels finished 7.75 cents lower, at $1.4125, 17.75 cents below a year ago, and 12.50 cents below the blocks. 7 cars of block traded hands on the week at the CME and 26 of barrel.
Cheese market tones remain uncertain, says DMN, though demand is strong, according to a growing number of Midwestern producers. More areas are lifting dining restrictions at restaurants and bars. Spot milk prices at midweek were slightly higher than previous weeks but still below previous years. Weather throughout the country spawned hauling delays in the Midwest but cheese output was generally quite busy with ample milk available. Cheese inventories are not an overwhelming stressor for producers in the region, says DMN, “Particularly when demand seems to have received a shot in the arm in recent weeks.”
The western cheese market appears to be in the same holding pattern that it has been in the last few months. Manufacturers report that milk is ample and are running plants at or near full capac-ity. The storms in the Pacific Northwest, Eastern New Mexico, and Texas had milk handlers pushing milk to facilities that could take it. Truckers found it difficult to pick up milk on farms and transport it to their usual manufacturing facilities, some of which were running with a reduced crew. Cheese inventories are heavy and while cheese is moving well, buyers are hesitant to take on more. Uncertainty regarding the impact of further government purchases and weak food ser-vice demand are putting a damper on the market, says DMN, even as retail demand is ahead of sales from last year.
Grade A nonfat dry milk was down 2 cents on the week, finishing at $1.0925 per pound, 7.75 cents below a year ago, with 17 sales for the shortened week.
CME dry whey climbed to 55 cents per pound Wednesday, highest since Oct. 19, 2018, but closed Friday at 54.75 cents per pound, up a half-cent on the week and 17.75 cents above a year ago. Only 2 sales were reported on the week.
As stated previously, uncertainty surrounds the dairy markets which are waiting to see what will happen to government assistance. StoneX Dairy broker Dave Kurzawski said in the February 22 ‘Dairy Radio Now’ broadcast that, word on the street at week’s end was that the food box pro-gram would continue in March with funding close to what was spent in February or about $350 million. Bottom line, he says, the food box program, Section 32 funds for commodity purchases, and all of the other government programs on the table combined could potentially mean Uncle Sam will spend more money on food in 2021 than it did in 2020.
As to the impact on cheese prices, Kurzawski cautioned that we have a lot more milk to deal with right now, especially as we come into the spring flush, plus cheese demand has slowed throughout the pandemic. Retail sales may be up 10-15%, he said, but hasn’t offset the loss is restaurant and foodservice demand.
The government has made up a lot of that difference, he said in closing, but U.S. cheese manu-facturing has been somewhat constrained through the end of last year and if that changes this year, we could see additional pressure on prices.
The Agriculture Department’s monthly Livestock, Dairy, and Poultry Outlook, issued February 16, mirrored milk price and production projections in the February 9 World Agricultural Supply and Demand Estimates report. I t also stated that the recent NASS Cattle report shows that milk cows numbered 9.44 million head on January 1, 2021, about 3,000 fewer than the December average reported in the Milk Production report. Milk replacement heifers totaled 4.605 million head on January 1, about 48.8% of the milking herd, lowest percentage since Jan. 1, 2009, says USDA.
Milk cow numbers in 2021 are projected to average 9.435 million, up 5,000 from last month’s forecast but numbers are expected to decline from the first quarter to the third quarter due to “relatively low milk prices, relatively high feed prices, and a relatively low number of replacement heifers.” Milk per cow was projected to average 24,100 pounds per head in 2021, up 5 from last month’s forecast.
In the week ending February 6, 67,600 dairy cows were sent to slaughter, down 1,900 from the previous week but 100 head more than that week a year ago.
Dairy farm margins were mixed over the first half of February, though trending firmer on higher milk prices with feed costs largely unchanged over the past couple weeks, according to the lat-est Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.
The MW stated “There is growing optimism that part of the new stimulus package being put to-gether by Congress will include another round of food box purchases which would be supportive for dairy prices while continued vaccine distribution and declining COVID caseloads are allowing restaurants to restore and expand indoor dining which should likewise help to increase dairy de-mand.”
The GDT’s $3,746 per metric ton average winning price is a 6-year high, according to the MW. It also pointed out that 2020 U.S. dairy product exports totaled $6.5 billion in value, up 8.5% from 2019, and the highest since the record figure of $7.1 billion in 2014 led by strong shipments of nonfat dry milk and whey.
The MW cited USDA’s increased projection on U.S. milk output in its latest World Agricultural Supply and Demand Estimates report, and warned that “USDA estimates that abundant produc-tion will push down cheese and butter prices.”
The March Federal order Class I base milk price was announced by the USDA at $15.20 per hundredweight, down 34 cents from February, $2.26 below March 2020, and equates to $1.34 per gallon, down from $1.50 a year ago. The three-month Class I average stands at $15.29, down from $18.01 a year ago.
Speaking of Class I, the plunge in fluid sales reversed direction in December. USDA’s data shows 4.0 billion pounds of packaged fluid products were sold, up 1.5% from December 2019, and followed a 4.4% drop in November.
Conventional product sales totaled 3.8 billion pounds, up 1.1% from a year ago.
Organic products, at 253 million pounds, were up 8.9%, and represented 6.3% of total sales for the month.
Whole milk sales totaled 1.3 billion pounds, up 1.4% from a year ago. Sales for the year totaled 15.5 billion pounds, up 2.6% from 2019, and made up 33.5% of total milk sales for December and 33.6% for the year.
Skim milk sales, at 234 million pounds, were down 11.0% from a year ago and down 14.6% for the year.
Total packaged fluid milk sales, January through December, amounted to 46.2 billion pounds, down just 0.1% from 2019. Conventional product sales totaled 43.3 billion pounds, down 0.7%. Organic products, at 2.9 billion pounds, were up 10.4% and represented 6.2% of total fluid milk sales in 2020.
In politics, the National Milk Producers Federation praised the immigration bill introduced Feb. 18 in Congress.
NMPF President Jim Mulhern Stated; “We applaud President Biden, Representative Sanchez, and Senator Menendez for stepping up and leading with the U.S. Citizenship Act of 2021, mak-ing clear that immigration legislation is a significant, immediate priority. Still, reforms to our immi-gration system must include changes crucial for the dairy workforce. These include extending to current workers and their families the legal protections they have earned and enabling dairy farmers to use a guest worker program to supplement their domestic workforce when needed.”
Lee Mielke is a graduate of Brown Institute in Minneapolis, MN. He’s formerly the voice of the radio show “DairyLine,” and his column appears in agricultural papers across the U.S. Contact him at firstname.lastname@example.org.