Skip to main content

Biden Administration announced that it will not renew Uncle Sam’s Food Box program


The Agriculture Department announced the February Federal order Class III benchmark milk price at $15.75 per hundredweight (cwt.), down 29 cents from January and $1.25 below February 2020.                       . 

Late Friday morning Class III futures portended a March price at $16.34; April, $17.56; May, $18.07; June, $18.16; July, $18.25; August, $18.25; September, $18.30; October, $18.25; November, $18.07; and December at $17.79.

The February Class IV price is $13.19 per cwt., down 56 cents from January, $3.01 below a year ago, and the lowest Class IV price since September 2020.

In politics, the House passed a $1.9 trillion stimulus bill on Feb. 27, sending it on to the Senate for passage. HighGround Dairy says Congress is expected to approve the bill for the President’s signature by Mar. 14, when current jobless benefits expire. The package includes funds for additional stimulus checks and extends the bolstered unemployment benefits through August. The 15% increase in food stamp benefits will be extended through September.

Global dairy traders triggered some shock waves Tuesday as the morning’s Global Dairy Trade auction’s weighted average skyrocketed 15.0%, biggest increase since Sept. 2015 and the eighth consecutive session of gain. All products offered were in the black except buttermilk powder, which was off 0.3%. The average winning price was $4,231 U.S., up from $3,746 on Feb. 16.

Gains were again led by whole milk powder, up 21%, following a 4.3% rise last time. Skim milk powder was up 3.5%, after inching up 0.3% on Feb. 16. GDT butter was up 13.7%, after a 2% gain last time, and anhydrous milkfat was up 7.4%, following a 1.1% gain. GDT Cheddar was up 1.3%, after climbing 2.4%.

StoneX Group says the GDT 80% butterfat butter price equates to $2.5780 per pound U.S., up 30.8 cents from the last event and compares to CME butter which closed Friday at a huge discount, $1.69. GDT Cheddar equated to $1.9415 per pound, up 5.8 cents, and compares to Friday’s CME block Cheddar at $1.7325. GDT skim milk powder averaged $1.4976 per pound, up from $1.4548, and whole milk powder averaged $1.9795, up from $1.64. CME Grade A nonfat dry milk closed Friday at $1.1775 per pound.

Another shock wave came this week from the Biden Administration’s announcement that it will not renew Uncle Sam’s Food Box program.

Speaking in the Mar. 8 Dairy Radio Now broadcast, Dairy and Food Market Analyst editor, Matt Gould, reported that the Administration says food security is still a priority but will go about it in a different way. Funding to food banks will be increased instead so they can purchase the foods they desire. Food welfare programs will also be increased, according to Gould.

The hit on dairy, says Gould, is that the Food Box program has purchased about 2% of total U.S. milk production and that will surely drop with the new program, and have a negative price effect on dairy.

On a brighter note, the surge in the week’s GDT had New Zealand whole milk powder prices up 22%, primarily driven by the purchases of China, he said. “The last time that we saw China be the aggressor in dairy markets, you’d have to go back to the 2013-2014 period, the period of all-time record high milk prices to U.S. dairy farmers and, near to, or the most profitable years ever for dairy farmers.” He said it remains to be seen if China will keep this up and thus put us into an inflationary milk price period, but “All eyes are on China right now.”

HighGround Dairy reports that New Zealand saw the strongest January on record for dairy moving into China, most notably whole milk powder and fluid milk & cream, but exports of skim milk powder, cheese and fat were also very strong. 

“Calendar year 2020 was an all-time high for cheese moving to China with the trend persisting thus far in 2021,” according to HGD. “Lower offer volumes at GDT events in recent months translated into weaker SMP exports into January. Significant declines were noted to Southeast Asia,” according to HGD.

Back on the home front; U.S. January cheese output totaled 1.12 billion pounds, down 1.2% from December but 0.5% above January 2020 and the strongest January on record, according to USDA’s latest Dairy Products report.

Wisconsin produced 278 million pounds of that total, down 0.8% from December but 0.3% above a year ago. California output, at 211.1 million pounds, was up 1.2% from December but 0.9% below a year ago. Idaho, with 87.8 million pounds, was up 2.7% from December and 2.9% above a year ago. 

Italian type cheese totaled 481.5 million pounds, down 0.7% from December and 0.8% below a year ago. 

American type cheese totaled 459.3 million pounds, down 0.8% from December but 5% above a year ago. Mozzarella output, at 374.6 million pounds, was down 1.9% from a year ago. 

Cheddar, the cheese traded daily at the CME, crept up to 337.6 million pounds, up 0.1% from December and 18.4 million pounds or a bearish 5.7% above a year ago. 

Churns produced 206.9 million pounds of butter, a record for January, up 0.3% from December and a bearish 13.5 million pounds or 7.0% above a year ago. 

Yogurt production totaled 384.2 million pounds, up 10.5% from a year ago.

Dry whey totaled 83.9 million pounds, up 2.2 million or 2.8% from December but 400,000 pounds or 0.4% below a year ago. Dry whey stocks inched up to 67.4 million pounds, up 2.8% from December and 7.1% above those a year ago.

Nonfat dry milk output slipped to 197 million pounds, down 9.4 million pounds or 4.6% from December but were 20.7 million or 11.7% above a year ago. Stocks grew to 305.3 million pounds, up 22.1 million pounds or 7.8% from December and a 24.8 million pounds or 8.8% above a year ago. 

Skim milk powder production fell to 36.9 million pounds, down 4.3 million pounds or 10.4% from December and 3.2 million pounds or 8.0% below a year ago. The shipping container shortage may be affecting exports of U.S. powder.

One of the measures of dairy farm profitability continues to slip, as milk prices fall and feed costs keep rising. The USDA’s latest Ag Prices report shows the January milk feed ratio at 1.98, down from 2.18 in December, down from 2.42 in January 2020, and the lowest since May 2020’s 1.77.

The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay, thus one pound of milk could only purchase 1.98 pounds of dairy feed of that blend in January.

The US All-Milk price averaged $17.50 per cwt, down $1.00 from December and $2.10 below the January 2020 average.

The national average corn price climbed to $4.24 per bushel, up 27 cents per bushel from December, which followed an 18 cent rise the month before, and was priced 45 cents per bushel above January 2020. 

Soybeans averaged $10.90 per bushel, up 40 cents from November, which followed a 20 cent rise from November and $2.06 per bushel above a year ago. 

Alfalfa hay averaged $171 per ton, up $2.00 from December and a year ago. 

Looking at the cow side of the ledger; the January cull price for beef and dairy combined averaged $59.70 per cwt., up $1.60 from December, $1.70 below January 2020, and $11.90 below the 2011 base average of $71.60 per cwt.

In the week ending Feb.20, 59,600 dairy cows were sent to slaughter, down 6,900 from the previous week and 6,100 or 9.3% less than that week a year ago.  

The National Milk Producers Federation (NMPF) reports “The Dairy Margin Coverage program margin dropped below the maximum $9.50 per cwt. coverage level to deliver a final monthly payment for 2020 of 72 cents per cwt. in December, bringing the average payments for the maximum coverage level during all of 2020 to 73 cents per cwt. Payouts under the program, the main federal safety net for dairy producers, are expected for most of this year.”

“With year-end data now reported, the annual average U.S. all-milk price for 2020 was $18.30 per cwt., 30 cents below 2019,” says NMPF. “But with the uncharacteristically high level of direct Coronavirus Food Assistance program payments and payment disparities due to the high level of Class III milk de-pooled from federal orders last year, the all-milk price is less reflective of average farmer revenues than typical. Also, the number of licensed U.S. dairies declined to 31,657 in 2020, a decrease of 7.5% from the previous year. That is slower than the loss rate in 2019 but still above historical averages,” NMPF concludes.

Meanwhile, the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC., stated that “With the exception of the spot period in first quarter, dairy margins improved over the last half of February as higher milk prices, which advanced to new contract highs in deferred months, offset generally steady feed costs over the past couple weeks.”

The MW admitted that U.S. milk output has been increasing, but “is occurring against a backdrop of stronger demand which is helping to support prices.” Most of the milk gain was from increasing cow numbers, according to the MW. It cited the “rising output in Midwestern states, with the new Glanbia cheese plant in St. Johns, Michigan helping to support growth in that part of the country.”

The cash dairy market has to balance the GDT’s exuberance with January’s Dairy Products data. Block Cheddar closed the first Friday of March at $1.7325 per pound, up 11.50 cents on the week and the highest since Jan. 19, but 1.75 cents below a year ago. 

The barrels finished at $1.5075, up 8.75 cents on the week, 3 cents above a year ago, but 22.50 cents below the blocks. There were 12 cars of block that traded hands on the week at the CME and 9 of barrel.

Dairy cooperatives are again leading efforts to curb milk output growth, according to NMPF, by reviving base plans imposed in 2020 to deal with output that grew by nearly 3% during last year’s fourth quarter. NMPF says that “removed some volatility from markets, with cheese and milk prices settling at relatively stable, but also relatively low levels, as domestic commercial use of milk in all products dropped to nearly flat levels and increases in exports also slowed.”  

Midwestern cheesemakers tell Dairy Market News they are keeping ahead of the widely available milk priced at $7 to $2 under class. Some block cheesemakers suggest buyers are hesitant, as the availability of blocks has grown. 

Western cheesemakers also say there is plenty of milk to buy and cheese output is active. Inventories are building but much is already sold. Congestion at ports has delayed some shipments, backing them to manufacturers’ warehouses. International buyer interest is present due to favorable U.S. prices but they often want to forward buy several months out. The gap between cash prices and futures prices makes manufacturers hesitant to do this, says DMN. Cheese is moving well through contracts but domestic buyers are “reticent.” Retail sales are ahead of last year and there’s been a small uptick in food service interest but overall demand is “shaky,” says DMN.

Spot butter shot up to $1.7150 per pound Tuesday, highest since July 27, 2020, but saw a Friday close at $1.69, still 22 cents higher on the week but 16.50 cents below a year ago when it fell 13 cents. 35 sales were made on the week.

Butter contacts expected some upside following the "new crop" butter rule on the CME, but few expected the nearly 25 cent bump in its first two days. Some question the sustainability of the markets with the amount of bulk butter available, but domestic prices continue to be a good value to exporter interests and there are some bullish indicators moving forward, says DMN.

Western butter makers are actively churning with plentiful cream available and heavy inventories. Demand has increased in domestic and export markets as U.S. butter is favorably priced compared to international competitors. A few contacts say export butter manufacturing lines are “maxed out.”

There was a butter-battle of sorts north of the border the last week of February, as the Canadian dairy industry dealt with a controversial local news article that went viral. The Feb. 26 Dairy and Food Market Analyst (DFMA) reported that the article claimed Canadian butter was “overly hard because the country’s dairy farmers are relying on palm oil and palmitic acid as feed ingredients.”

“The article set off a public relations storm that resulted in Canada’s dairy processing lobbyist issuing a statement condemning its use and Dairy Farmers of Canada, the country’s dairy farm lobby, asking farms to voluntarily stop feeding the ingredients,” according to the DFMA.

Cash Grade A nonfat dry milk closed at $1.1775 per pound, highest since Jan. 21, up 4.50 cents on the week and 6.25 cents above a year ago, with a hefty 33 carloads finding new homes on the week.

Dry whey finished Friday at 58 cents per pound, a record high for its three year lifespan, besting its Oct. 17, 2018 peak by 0.50 cents, and 23.25 cents above a year ago. There were 5 sales reported for the week at the CME.

Cooperatives Working Together members accepted 19 offers of export assistance this week to capture sales of 756,186 pounds of Cheddar, 771,618 pounds of butter, and 868,621 pounds of cream cheese. The product will go to Asia, the Middle East, North Africa, Oceania, and South America through July.

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 lkmielke@juno.com.