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Natural gas prices have nearly doubled since the beginning of the year

The Agriculture Department announced the April Federal order Class III milk price at $24.42 per hundredweight, up $1.97 from March, $6.75 above April

2021, highest Class III since July 2020 and eighteen cents shy of the record high.

Late Friday morning Class III futures portended a May price at $25.05, which

would be a new record high, June at $24.47 and July at $24.19 per cwt.

The four month Class III average stands at $22.04, up from $16.40 at this

time a year ago, and compares to $15.84 in 2020 and $14.71 in 2019. The April Class IV price set another new record at $25.31 per cwt., up forty-nine cents from March, and $9.89 above a year ago. Its four-month average is at $24.31, up from $14.14 a year ago, $14.78 in 2020 and 15.69 in 2019.

You’ll recall March milk production was down 0.5% from March 2021 but the month’s Dairy Products report shows cheese vats and churns still got a workout.

Cheese production totaled 1.197 billion pounds, up 8.3% from February and 1.1% above March 2021. Cheese stocks were down one percent from a year ago. Cheese output for the first three months of

2022 totaled 3.5 billion pounds, up three percent from the same period a year ago, so we’re going through a lot of cheese. Wisconsin produced 296.6 million pounds of the March total, up 9.6% from

February but three percent below a year ago. California provided 213.0 million pounds, up five percent from February and one percent above a year ago. Idaho added 89.3 million pounds, up 22.2% from

February but down one percent from a year ago.

Italian cheese totaled 512.8 million pounds, up ten percent from February and 2.1% above a year ago. YTD Italian stands at 1.5 billion pounds, up 3.8% from 2021. American type cheese, at 473.6 million

pounds, was up seven percent from February but 1.4% below a year ago. YTD output, at 1.4 billion pounds is up 0.1%. Mozzarella totaled 406.4 million pounds, up 3.5% from a year ago, with YTD at 1.2

billion pounds, is up 4.2%. Cheddar output, the cheese traded at the CME, jumped to 327.1 million pounds, up nineteen million pounds or 6.2% from February’s output, which was revised down 4.2 million pounds, but was down 9.7 million pounds or 2.9% below March 2021.

U.S. churns produced 202.6 million pounds of butter, up 19.1 million or 10.4% from February and three million or 1.5% above a year ago. That ended eight consecutive months output topped the previous

year. But, YTD butter is at 580.1 million pounds, down five percent from a year ago. Butter stocks were down twenty percent from March 2021, according to USDA’s Cold Storage data.

March yogurt output totaled 434.7 million pounds, down two percent from a year ago, with YTD output at 1.2 billion pounds, down 2.5%.

Dry whey production climbed to eighty two million pounds, up 11.7 million pounds or 16.6% from February’s total which was revised 4.7 million pounds lower, and was 5.1 million pounds or 6.6%

above a year ago. YTD is at 232.7 million pounds, down 1.3%. Dry whey stocks crept up to 68.1 million pounds, up 5.1 million or 8.1% from February and 4.5 million or 7.1% above those a year ago.

Nonfat dry milk output climbed to 190.5 million pounds, up 19.7 million pounds or 11.5% from February but was down 7.8 million or 3.9% below a year ago.

YTD powder was at 531.6 million pounds, down ten percent. Stocks totaled 288 million pounds, down 400,000 pounds or 0.2% from February and down twenty five million pounds or eight percent below

those a year ago.

Skim milk powder output climbed to 33 million pounds, up 3.4 million or 11.4% from February but was down 19.6 million or 37.2% below a year ago. YTD SMP was at 106.0 million pounds, down 26.7% from a year ago. March was the ninth consecutive month of weaker powder production, says HighGround Dairy.

Fat provided the biggest pull on Tuesday’s Global Dairy Trade auction, which saw its fourth consecutive decline. The weighted average plunged 8.5%, biggest drop since August 4, 2015, and follows the 3.6% drop on April 19. Traders brought 55.5 million pounds to the market, up from 48.9 million on April 19.

HighGround’s Lucas Fuess, in the May 9 Dairy Radio Now broadcast, said Fonterra increased its offer volumes Tuesday as it attempted to clear inventories before the start of the next new milk production


All products offered again lost ground, led by butter, down 12.5%, following a 3.7% dip on April 19. Anhydrous milkfat dropped 12.1%, after slipping 1.3%. GDT Cheddar was down 8.6%, following a 3.9%

loss and the powders followed. Whole milk powder and skim milk powder were both down 6.5%, following respective 4.4% and 4.2% drops last time Buttermilk powder was down 6.1% StoneX says the GDT eighty percent butterfat butter price equates to $2.5698 per pound U.S., down 36.9 cents, after

dropping eleven cents in the last event, and compares to CME butter which closed Friday at $2.64, 7 cents above the GDT.

GDT Cheddar, at $2.5635, was down 24.2 cents after losing thirteen cents last time, and compares to Friday’s CME block Cheddar at $2.35. GDT skim milk powder averaged $1.8731 per pound, down from

$1.9995, a drop of 12.6 cents. Whole milk powder averaged $1.7764 per pound, down from $1.9083, a loss of 13.2 cents. CME Grade A nonfat dry milk closed Friday at  $1.74 per pound.

Nate Donnay, StoneX Director of Market Intelligence, warn in last week’s ‘Udder Intelligence’ report that China’s imports in March were much lower than forecast, down 28.6% from 2021, and “When the largest buyer in the world is down 20% to 30%, we have a significant global demand problem.”

Thankfully, this week’s GDT saw a bit of an uptick from China, according to StoneX. “The slowdown came from the Middle East. We don’t know if that was related to Ramadan or if there is something

else driving the weaker demand.” The global market is vital for U.S. farmers and processors and March provided confirmation. Cheese exports totaled a record 91.9 million pounds, up 12.9% from

March 2021. HighGround Dairy points out that volume was driven by product moving to Mexico, up twenty six percent and the second largest monthly figure on record.

Butter exports totaled 13.5 million pounds, up 47.4%, highest since April 2014, thanks to Canada which imported a record amount for the month, up twenty six percent.

Nonfat dry milk shipments totaled 176.7 million pounds, down 7.4%, but was measured against a strong year in 2021.

Exports were the highest of any month since June 2021, according to HGD, but a ninety eight percent decline in product moving to Egypt, negatively impacted the total. Powder moving to Mexico improved

from the prior year and recent months, reaching the highest monthly volume since August 2021, up nine percent, according to HGD.

Dry whey totaled 43.3 million pounds, down 17.9% and down 23.2% year to date.

Even as the U.S. experiences a baby formula shortage, CME dairy prices saw little reaction to Tuesday’s GDT fall or the Dairy Products report, buoyed perhaps by the strong export data. The Cheddar blocks

closed Friday at $2.35 per pound, down two cents on the week but 60.25 cents above a year ago.

The barrels saw a Friday finish at $2.38, up four cents on the week, 65.25 cents above a year ago, and three cents above the blocks, as America puts cheeseburgers on the grill again. There were seven sales of block on the week and eighteen of barrel.

Cheese producers continue to report logistical issues to Dairy Market News, but more on the supply side. Shortfalls included production and packaging equipment but no shortness in milk. Spot prices midweek were around two dollars under Class III. Demand remains robust, according to

Midwest cheese plants, and some expect demand to remain healthy through second quarter and beyond. Domestic cheese demand was steady to lower in the West. Contacts report that purchases have begun to slow as schools approach summer break. Retail demand is steady and food service demand is increasing, according to DMN. Export demand is strong. Cheese output is steady, as milk is available, but port congestion and a shortage of truck drivers continues to cause delays.

CME butter closed Friday at $2.64 per pound, down 3.50 cents on the week but eighty seven cents above a year ago, on fourteen sales for the week. Butter producers report seasonal demand slowdowns are giving them time to build inventory. The churning question among contacts is how tight butter will be by the expected seasonal upshift in demand. Cream volumes are slightly lower, according to Midwestern butter producers, as ice cream production upticks are beginning to, at least slightly, “thin out the cream pool,” says DMN.

Demand for cream is steady in the West. Ice cream makers are running busy schedules. Some butter makers are processing their cream internally to build inventory. Butter production is steady, though some plants report labor shortages and delayed deliveries of production supplies continues to prevent running full schedules. Butter demand is steady in food service, though declining at retail as higher

store prices may have caused some switching to butter substitutes. Grade A nonfat dry milk saw its close

Friday at $1.74 per pound, 1.50 cents lower but 41.75 cents above a year ago, with twelve sales reported on the week. Dry whey continued to head lower, closing the week at 58.50 cents per pound,

down two cents and 4.25 cents below a year ago, on seven sales at the CME.

The April 29 Dairy and Food Market Analyst reported “USDA keeps upping its estimate of retail dairy prices. The bureau now predicts the Consumer Price Index (CPI) for dairy products will increase six

percent to seven percent this year, according to the latest Food Price Outlook report.”

“That increase marked the fourth consecutive month of USDA revising prices higher. In March, the Bureau of Labor Statistics calculated the Dairy CPI had already increased by 7.0% YoY. The latest revision suggests that the government now believes prices are going to stay at this elevated level at least for the rest of the year,” the Analyst stated.

High farm milk prices are not giving dairy producers much comfort. While the March All Milk Price hit a record high and jumped $1.20, rising feed prices and fuel, particularly diesel, and fertilizer are eating

up the milk returns.

The USDA’s latest Ag Prices report shows the March milk feed price ratio at 2.06, down from 2.07 in February, but compares to 1.76 in March 2021. The U.S. All Milk Price averaged a record high $25.90 per cwt., up $1.20 from February, seventh consecutive increase and was $8.60 above March 2021.

California’s price hit $26.20, up $1.30 from February and $9.50 above a year ago.

Wisconsin’s, at $25.30, also up $1.30 from February, was $7.60 above a year ago. The national average corn price jumped to $6.56 per bushel, up forty six cents from February, after gaining fifty

three cents in February and was $1.67 per bushel above March 2021.

Soybeans averaged $15.40 per bushel, up sixty cents from February, after shooting $1.90 higher in February and $2.20 per bushel above March 2021.

Alfalfa hay averaged $221 per ton, up seven dollars from February and forty four dollars above a year ago.

The March cull price for beef and dairy combined averaged $84.70 per cwt., up $6.80 from February, $17.60 above March 2021 and $13.10 above the 2011 base.

Quarterly milk cow replacements  averaged $1,570 per head in April, up one hundred and ninety dollars from January, and two hundred dollars above April 2021.

Cows averaged $1,440 per head in California, up one hundred and ten dollars from January and forty dollars above a year ago. Wisconsin’s average, at $1,710, was up two hundred and forty dollars from

January and two hundred and twenty dollars above April 2021.

Dairy economist Bill Brooks, of Missouri-based Stoneheart Consulting, says “The milk margin over feed costs will be above the maximum coverage of $9.50 per cwt. every month in 2022 with a range of $10.70 in December to $12.35 in April.”

Meanwhile, the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC, says “Dairy margins weakened slightly as the milk market has dropped from recent highs while feed costs have held steady. Milk prices have been facing resistance lately as they trade at historically high price levels with concern of potential demand destruction as inflation continues to bite consumers’ purchasing power.”

The MW highlighted the GDT’s 8.5%  drop, stating, “The lockdowns in China have obviously had a big impact although there has been a generally weaker tone recently in the global dairy market.” It reported on USDA’s Milk Production report, stating “The March contraction represented the slowest rate of year-overyear declines so far in 2022,” and warned “A growing herd and expanding milk yields may be signaling that producers are responding to high milk prices, although input costs likewise have risen sharply and cut into producer margins, particularly in states like California.”

“Diesel costs are up 70% from a year ago to an all-time high of $5.29 per gallon,” according to the MW, “while natural gas prices have nearly doubled since the beginning of the year. Feed prices likewise remain at very elevated levels, and slow corn planting progress has supported prices,” the MW concluded.

The USDA’s latest Crop Progress report shows fourteen percent of U.S. corn in the ground, as of the week ending May 1, up from seven percent the previous week but a concerning twenty eight percent behind a year ago and nineteen percent behind the most recent five year average.

The report says three percent of the corn has emerged, down from four percent a year ago and three percent behind the five year average. Soybeans are eight percent planted, up from three percent the previous week, but fourteen percent behind a year ago and five percent behind the five year average. In the week ending April 23, 56,400 dairy cows were sent to slaughter, up 1,600 head from the previous week but 2,700 or 4.6% below a year ago.

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