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Deadline to enroll in Dairy Margin Coverage extended


U.S. dairy exports were record high in 2021 but hit some headwinds in December. Starting with our biggest category, nonfat-skim milk powder exports totaled 127 million pounds, down 3.9% from December 2020, but they were up 10.7% for all of 2021.

Speaking in the February 14 ‘Dairy Radio Now’ broadcast, HighGround Dairy’s Lucas Fuess said the decrease is “a concerning sign that possibly signifies that logistical and shipping issues are finally negatively impacting the ability of U.S. exporters to move product overseas.” He adds that volume was down 27% from November, “even as global demand remained firm into the end of the year with prices continuing to climb in the absence of available product from key global exporters. Mexico remained the top destination but volume was down 2%.”

Cheese exports totaled 68.4 million pounds, up 20.1% from a year ago, with YTD up 14.2%. HGD says December was the sixth consecutive month cheese topped exports of a year ago and set a new record on a calendar year basis. The largest year over year gain was in cheese moving to Mexico, up 17%.

Butter totaled 7.6 million pounds, up 19.6% from a year ago and up 110.7% YTD.

Dry whey exports fell to 31.8 million pounds, down 16.3% from Dec. 2020, but 5.6% ahead of 2020 overall, as it appears China’s hog herd has been rebuilt.

December was a 23-month low for dry whey exports, weakest of any month since January 2020, according to Fuess. Chinese market share fell from 53% last year to just 27% this year, and volume was down 58% from a year ago.

The increased dairy product prices drove the value of December exports to just under $595 million, up $90 million from a year ago.

Exports for all of 2021 totaled 5.93 billion pounds, up 10% from 2020, and value hit a record $7.7 billion and accounted for over 17% of U.S. milk production. 

Fuess says it’s encouraging for farmers to see product leave our shores and not weigh down our markets, depressing prices, but he warned that, with 2021 being such a great year, it may be difficult to match in 2022. Continued good exports and robust domestic demand should keep prices well supported, he concluded. 

The strong export data drew praise from the National Milk Producers Federation, U.S. Dairy Export Council, and the International Dairy Foods Association, all of whom decried current backlogged port conditions and supply chain challenges.

We have plenty to sell despite December milk output being down 0.1% from 2020. The December Dairy Products report showed cheese output totaled 1.156 billion pounds, up 3.0% from November and just 0.1% above December 2020, but output for all of 2021 totaled a record 13.6 billion pounds, up 2.8% from 2020. 

Wisconsin produced 292.1 million pounds of the December total, up 4.7% from November but 1.6% below a year ago. California output, at 187.8 million, was down 7.4% from November and 9.5% below a year ago. Idaho vats turned out 88.2 million pounds, up 14.1% from November and 3.1% above a year ago. 

Italian style cheese totaled 484.6 million pounds, up 1.3% from November but 1.3% below a year ago. Italian year to date (YTD) hit 5.8 billion pounds, up 2.5%.

American type cheese, at 469.3 million pounds, was up 4.5% from November but 1.2% below a year ago. YTD American totaled 5.5 billion pounds, up 3.6%.

Mozzarella output totaled 371.3 million pounds, down 3.0% from a year ago, with output for the year at 4.5 billion pounds, up 1.0% from 2020.

Cheddar, which is traded at the CME, totaled 334.6 million pounds, up 20.7 million pounds or 6.6% from November’s output, which was revised up 6.5 million pounds, but was 14.6 million pounds or 4.2% below a year ago. December was the third month in a row that Cheddar output was below a year ago. Output for the year totaled 3.9 billion pounds, up 2.1% from 2020.

Butter churns produced 180.1 million pounds, up 24 million pounds or 15.4% from November, but 27.4 million or 13.2% below a year ago. December was the sixth consecutive month butter output was below a year ago. Output for all of 2021 totaled 2.1 billion pounds, down 3.8% from 2020. 

HGD points out that the Darigold butter plant in Caldwell, Idaho remained out of commission in December due to an October fire. 

December yogurt output totaled 369.1 million pounds, up 3.0% from a year ago, with YTD at 4.7 billion pounds, up 4.2%.

Dry whey production totaled 77.2 million pounds, up 2.2 million pounds or 2.9% from November, but 4.1 million pounds or 5.0% below a year ago. Dry whey for the year totaled 924.4 million pounds, down 2.8% from a year ago. 

Dry whey stocks slipped to 58.3 million pounds, down 2.3 million or 3.8% from November, and were 7.3 million pounds or 11.2% below those a year ago.

Nonfat dry milk output totaled 166.4 million pounds, up 10.6 million pounds or 6.8% from the November level, which was revised up 23.6 million pounds, but was down 41.9 million or 20.1% from a year ago. Powder for the year totaled 2.0 billion pounds, up 1.1% from 2020. 

Stocks climbed to 243.9 million pounds, up 17 million pounds or 7.5% from November, which was revised up 30.4 million pounds, but stocks were down 44.0 million pounds or 15.3% below a year ago.

Skim milk powder production amounted to 38.0 million pounds, down 11.1 million pounds or 22.5% from November and down 12.6 million or 24.9% below a year ago. SMP for the year totaled 565.1 million pounds, down 18.7% from 2020.

In the week ending January 29, 64,000 dairy cows were sent to slaughter, up 1,500 from the previous week, but 5,500 head or 7.9% below a year ago.

Dairy product prices were mostly higher the second week of February. The Cheddar blocks held at $1.90 per pound for four sessions, then gained 0.75 cents Friday to close at $1.9075, 35 cents above a year ago. 

The barrels saw a Friday finish at $1.91, up 1.50 cents on the week, 42 cents above a year ago, and 2.50 cents above the blocks. There were 2 sales of block and 10 of barrel.  

The Feb. 4 Dairy and Food Market Analyst reported that foodservice sales are beginning to improve again as the latest Covid-19 surge dies down. Dairy Market News says Midwestern cheesemakers reported stronger customer demand the previous week but, as January progressed and prices fell, customers began to pace their orders. The recent bullish movements brought the buyers back. Cheese production is busy though some plants still face employee shortages. Spot milk prices were discounted around $1 under Class, according to DMN.

Retail demand for cheese is steady in the West while food service demand continued to decline. Many restaurants in the region continue to operate with reduced hours or are closed due to COVID concerns and labor shortages. International cheese demand is strengthening as U.S. prices were below European prices. Loads of cheese continue to face delays due to a shortage of available truck drivers and exports continue to face delays from port congestion. Spot inventories are meeting current demand. Milk is available for cheese producers to run busy schedules though some are still dealing with labor shortages and delayed deliveries of production supplies, says DMN.

Butter soared to a $2.7550 per pound close, up 25.50 cents on the week, highest since Jan. 24, $1.36 above a year ago, with 8 sales reported on the week

Central region butter producers are wrapping up spring holiday inventory preparations. With cream available in and out of the region, they are running busy churns, but still note employee shortages are inhibiting full production. Some plants are still receiving cream from the West, but driver shortages, particularly out West, are prevalent. 

Cream inventories are available in the West, but demand is holding steady. Transportation delays and labor shortages are causing some plants to run below capacity. Demand for butter is strong in both domestic and international markets. Retail butter sales are steady while food service sales have declined in recent weeks. Inventories of salted and unsalted butter are tight. Butter deliveries are also facing delays due to port congestion and a shortage of truck drivers but butter production is trending higher, according to DMN.

Grade A nonfat closed Friday at $1.8975 per pound, up 6.50 cents on the week, highest since April 15, 2014, and 78.50 cents above a year ago, on 16 sales.

CME whey saw its first loss since Dec. 21 on Feb. 9, dropping 4 cents, biggest single day drop since Jan. 26, 2021. It fell to 79 cents per pound on Thursday, lowest since Jan. 19, but regained 3.25 cents Friday to close at 82.25 cents per pound, down 3.50 cents on the week but still 28 cents above a year ago. There were 15 sales on the week, the most since the week of June 29, 2020.

The Agriculture Department lowered its estimate for 2022 milk production in its latest World Agricultural Supply and Demand Estimates report, blaming lower dairy cow numbers. The Cattle report estimated the January 1 dairy cow inventory almost 1% below 2021 and the number of replacements 3% lower.

2021 production and marketings were estimated at 226.3 and 225.2 billion pounds respectively, up 100 million pounds on production from last month’s estimate, and unchanged on marketings. If realized, 2021 production would be up 3.1 billion pounds or 1.4% from 2020. 

2022 production and marketings at 227.2 and 226.1 billion pounds respectively, down 500 million pounds on both. If realized, 2022 production would be up 900 million pounds or just 0.4% from 2021. 

Annual product price forecasts for cheese, butter, nonfat dry milk, and whey were raised from the previous month, based on current prices, lower expected milk output, and tightening stocks. Cheese was projected to average $1.90 per pound in 2022, up 2.50 cents from last month’s estimate, and 22.5 cents above the expected 2021 average.

Butter was projected at $2.39 per pound, up 9 cents from a month ago and 65.75 cents above 2021. Nonfat dry milk and whey were projected to average $1.6650 and 70.50 cents per pound respectively, up 40 cents and 13.1 cents respectively from their 2021 averages.

Class III and IV milk prices were raised. Look for the 2022 Class III to average $20.30 per hundredweight, up 65 cents from what was expected a month ago.

That compares to a $17.08 average in 2021. The Class IV price was projected at $22.30, up $1.40 from a month ago, and compares to $16.09 in 2021.

This month’s corn supply and use was unchanged. The season-average farm price remains at $5.45 per bushel. Global coarse grain production was projected 2.7 million tons lower to 1.497 billion. This month’s grain outlook is for lower production and consumption, and smaller ending stocks relative to last month.

The soybean crush was forecast at 2.215 billion bushels, up 25 million from last month. Soybean meal exports were reduced for Argentina, Brazil, and Paraguay as drought-reduced crops limit crush prospects. Ending stocks were reduced 25 million bushels to 325 million. The season-average soybean price was forecast at $13.00 per bushel, up 40 cents from last month partly reflecting drought in South America. Soybean meal was forecast at $410.00 per short ton, up $35. 

U.S. dairy margins “strengthened sharply to start the year,” according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC., “as a continued surge in milk prices combined with a mild correction in the feed markets to boost projected profitability.” The W said that “The milk market has caught fire from a perfect storm of declining global production at the same time as demand for dairy products soar,” and cited the record November export data, up 17.3% from 2020 and 60 million above the previous record set in 2017.

Increased exports of nonfat dry milk has helped to support Class IV prices, according to the MW. “The USDA announced price in December of $19.88 per cwt., up $6.46 from 2020 and the highest announced price in seven years. In addition, Class IV futures were trading above $22 per cwt. in each of the next four months. Fonterra was forecasting their highest pay price ever as production declines in New Zealand, according to the MW.

Australia’s December milk output was down 1.2% from a year ago, according to StoneX. “Protein and fat content levels were greater than last year, bringing component adjusted production down only 0.4%. Production this season has been below year ago levels every month. Moisture levels are very mixed across Australia with the western part facing dryer than normal conditions, while the eastern part particularly in the south, seeing wetter than normal conditions.”

The USDA reports 2020 receipts of milk pooled under Federal Orders totaled 137.8 billion pounds marketed by 24,906 dairy producers. Total receipts were 11.9% lower than 2019. Pooled producer numbers were 15.5% lower. The average daily delivery of producer milk per pooled producer was 4.1% higher compared to 2019. Milk marketed through Federal orders accounted for 63% of all milk sold and 62% of fluid grade milk sold to U.S. plants and milk dealers.

USDA has extended the deadline to enroll in Dairy Margin Coverage and Supplemental Dairy Margin Coverage for program year 2022. The deadline to apply for 2022 coverage is now March 25, 2022. 

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.