Dairy farmers will see a little more in their milk check
Dairy farmers will see a little more in their milk check. The Agriculture Department announced the March Federal order Class III price at $16.15 per hundredweight (cwt.), up 40 cents from February, a dime below March 2020, but the highest Class III price since November 2020. The three month average stands at $15.98, down from $16.77 at this time a year ago and compares to $14.30 in 2019.
Thursday’s Class III futures settlements portended an April price at $17.50; May, $18.45; June, $18.61; July, $18.64; August, $18.65; September, $18.74; October, $18.64; November, $18.34; and December at $17.97. Those prices, added to the already announced Class IIIs, would result in a 2021 average of $17.79, down from $18.16 in 2020, and compares to $16.96 in 2019.
The March Class IV price is $14.18 per cwt., up 99 cents from February, 69 cents below a year ago, and the highest Class IV since March 2020.
Dairy farmers will need the extra cash to cover rising feed costs. We got some insight on that in two USDA reports this week. First, was the Prospective Plantings report which showed 2021 corn plantings at an estimated 91.1 million acres, up less than 1%, or an increase of just 325,000 acres from a year ago.
Soybeans were estimated at 87.6 million acres, up 5% from last year. The figures were less than expected for both crops, considering the prices they’re bringing.
Cotton planted area was estimated at 12.0 million acres, down less than 1%.
The March 31 Daily Dairy Report points out that “The next couple of months will determine whether farmers stick to their planting intentions. Last year’s Prospective Plantings report showed farmers intended to plant 97 million acres of corn, but then the rains came. By June’s Acreage report, farmers had planted only 92 million acres to corn.”
The second USDA report was Grain Stocks which showed shrinking supplies. Mar. 1, 2021 corn totaled 7.70 billion bushels, down 3% from Mar.1, 2020. The December 2020 to February 2021 period indicated disappearance at 3.59 billion bushels, compared with 3.38 billion during the same period last year.
Soybeans totaled 1.56 billion bushels, down 31% from 2020. Disappearance for the December 2020 to February 2021 quarter totaled 1.38 billion bushels, up a hefty 39% from the same period a year earlier.
You’ll recall that February milk output was up 2.0% from February 2020, after adjusting for Leap Day. The Dairy Products report shows where the milk went.
Cheese output totaled 1.04 billion pounds, down 8.1% from January but 4.7% above February 2020, when adjusted for the Leap Day. Output for the first two months of 2021 totaled 2.18 billion pounds, up 1.7% from 2020.
Italian type cheese totaled 444.3 million pounds, down 7.6% from January but 2.4% above a year ago. YTD Italian was at 925.3 million pounds, down 0.9%.
American type cheese totaled 425.4 million pounds, down 10.3% from January but 5.2% above a year ago. YTD American hit 899.7 million pounds, up 5.1%.
Mozzarella output, at 347.5 million pounds, was up 1.9% from a year ago. YTD mozzarella was at 722.4 million pounds, down 1.7% from 2019.
Cheddar output, the cheese traded at the CME, fell to 301.6 million pounds, down 45.3 million pounds or 13.1% from the January level which was revised up 9.3 million, but was 9.6 million pounds or 3.3% above a year ago. YTD Cheddar is at 648.5 million pounds, up 4.3% from 2019.
Churns produced 185.6 million pounds of butter, down 24 million pounds or 11.5% from January’s total which was revised up 2.7 million pounds, and was up 4 million pounds or 2.2% above a year ago, when adjusted. Butter output for the first two months totaled 395.3 million pounds, up 3.6% from 2020.
Yogurt production totaled 381.7 million pounds, up 5.4% from a year ago, with the YTD total at 767.3 million pounds, up 6.1%.
Dry whey totaled 77.0 million pounds, down 7 million or 8.3% from January but 3.1 million or 4.2% above a year ago, with YTD at 161 million pounds, up 0.2%.
Dry whey stocks grew to 70.4 million pounds, up 4.5% from January but 5.5% below those a year ago.
Nonfat dry milk output slipped to 186.3 million pounds, down 11.7 million pounds or 5.9% from January but 32.7 million or 21.2% above a year ago. Powder production YTD stands at 384.3 million pounds, up 14.6% from 2020.
Stocks, at 345.6 million pounds, were up 40.6 million pounds or 13.3% from January and a bulging 27.3 million pounds or 8.6% above a year ago, as shipping issues, including blockage of the Suez Canal likely backed up exports.
Skim milk powder production dropped to 29.6 million pounds, down 6.4 million pounds or 17.8% from January and 7.5 million pounds or 20.2% below a year ago. YTD skim milk powder hit 65.6 million pounds, down 16.5% from 2020.
Falling milk prices and rising feed costs, thanks to China’s purchases, continue to take a toll on dairy farm profitability. The USDA’s latest Ag Prices report shows the February milk feed ratio at 1.78, down from 1.98 in January, down from 2.35 in February 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 dairy ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk could only purchase 1.78 pounds of dairy feed of that blend in February.
The US All-Milk price averaged $17.10 per cwt., down 40 cents from January and $1.80 below the February 2020 average.
California’s All Milk price fell to $17.80, down 60 cents from January and 80 cents below a year ago. Wisconsin’s, at $17.20, was down 30 cents from January and $1.90 below a year ago.
The national average corn price jumped to $4.75 per bushel, up 51 cents per bushel from January, which followed a 27 cent rise the month before, and was a whopping 97 cents per bushel above February 2020.
Soybeans averaged $12.70 per bushel, up an astounding $1.80 per bushel from January, which followed a 40 cent rise from December. Soybeans were an unbelievable $4.10 per bushel above February 2020.
Alfalfa hay averaged $175 per ton, up $4.00 from January and $7 above a year ago.
Looking at the cow side of the ledger; the February cull price for beef and dairy combined averaged $65.60 per cwt., up $5.90 from January, 20 cents below February 2020, and $6.00 below the 2011 base average of $71.60 per cwt.
In the week ending Mar. 20, 62,300 dairy cows were sent to slaughter, down 6,500 from the previous week and 5,200 or 7.7% less than that week a year ago.
Cash dairy prices moved higher in the Good Friday holiday shortened week. The Cheddar blocks closed Thursday at $1.7750 per pound, up 5.50 cents on the week and 62.50 cents above a year ago when the blocks saw the second largest week to week plunge ever, losing 44 cents.
The barrels finished at $1.5125, up 5 cents on the week, 37.50 cents above a year ago when the barrels lost 20.25 cents, and are 26.25 cents below the blocks. Sales for the week amounted to 11 cars of block and 4 loads of barrel.
Central cheesemakers tell Dairy Market News that regional dairy farmers are seeing increases in day to day milk output. Cheese demand has remained steady on the retail side and food service orders have picked up. Barrel producers report that steadily busy customer activity has kept loads moving out the door. Some report hearing of potential carnivals and fairs, but this year's spring summer events could be eleventh hour decisions due to the pandemic. Cheese market tones are “holding somewhat steady, although some contacts view them more bullishly than not,” says DMN.
Western retail cheese demand was slightly lower this week, while food service demand continued to increase. Export demand is also strong. There is plenty of milk available for cheese as plants continue to run at or near capacity. Inventories are mixed as some inventories grow, others are committed to surging food service sales. Plenty of Cheddar style cheese is available, though much is currently contracted. Hard Italian cheese demand is currently stable.
Butter climbed to a Thursday close of $1.8450 per pound, 7 cents higher on the week and the highest since Jun. 19, 2020. It was 56.50 cents above a year ago when the butter fell 20.75 cents to $1.28. 19 cars found new homes on the week.
The last trading day in February saw butter at $1.47 per pound but, as food service demand continues its upswing, butter producers say the push into the $1.80s at the end of March is not surprising. Retail orders have continued to outdo expectations, but food service customers refilling pipelines have definitely given the market tones some life. That said however, contacts question the longevity as butter prices push higher, which could offset some of the recent international luster. Cream availability remains somewhat tight and plant managers say the heavy availability of much of the pandemic era has dissipated.
Some western butter makers are producing additional 82% unsalted butter to keep up with steady export interest. Inventories are up year-over-year but much of it is already on contract, and butter makers expect to work through the stock over the next few months. Contacts hold varying opinions on how responsive consumers will be to retail holiday promotions; changes in grocery shopping habits and in-home gatherings pose challenges to accurate forecasting. However, as spring weather returns and vaccination rates increase, consumers are venturing out more, and food service demand is burgeoning, says DMN.
Grade A nonfat dry milk closed Thursday at $1.19 per pound, up 2 cents on the week and the highest it has been since Jan. 20, 2021, and was 32.75 cents above a year ago. 8 cars were traded on the week.
CME dry whey set another CME record high on Wednesday and stayed there Thursday to close at 66 cents per pound, up 3.25 cents on the week and 33 cents above a year ago. There were 4 sales recorded for the week.
Exports are moving again now that the stuck cargo ship in the Suez Canal has been freed. The canal is a busy one. About 30% of the world’s shipping container volume moves through the 120 mile canal daily, according to Maersk, a Danish integrated shipping company that has been the world’s largest since 1996.
There seems to be no end to money from Uncle Sam to offset the effects of the COVID. We talked about it in the April 5 Dairy Radio Now broadcast with Matt Gould, analyst and editor of the Dairy and Food market Analyst newsletter. Gould said USDA provided an update on its plan for COVID relief but, with respect to dairy, “They left us with as many questions as we probably had before.”
Starting with the Food Box program, which successfully lifted cheese prices last year, we know it will end at the end of April, Gould said, however we don’t know what will happen then.
They also left open ended the possibility of any future direct payments to dairy farmers or dairy processors or any new programs. That said, Gould reported that the USDA has stated it will implement a $400 million dairy donation program, which was funded in the Stimulus bill passed last December.
They will also reopen the Coronavirus Food Assistance program II payments for dairy farmers who may have missed the deadline the last time around.
A lot of details are not available yet, he said, but he expects some pretty material changes in policy from the new administration. He believes there be a bigger emphasis on trade agreements and be more trade friendly compared to the Trump Administration however, in terms of direct payments, farmers probably fared better under Trump than they will under the Biden Administration.
Cooperatives Working Together (CWT) member cooperatives accepted 14 offers of export assistance this week from CWT that helped them capture sales of 354,958 pounds of Cheddar cheese, 408,958 pounds of butter, and 374,786 pounds of cream cheese. The product is going to customers in Asia, North Africa, and Oceania from April through August.
CWT’s year-to-date export sales now total 11.56 million pounds of American-type cheeses, 8.757 million pounds of butter (82% milkfat), 3.649 million pounds of AMF, 13.54 million pounds of whole milk powder, and 4.239 million pounds of cream cheese. The products are going to 26 countries in six regions and are the equivalent of 534.9 million pounds of milk on a milkfat basis, according to CWT.
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.