Putin annexed parts of Ukraine in a war that has no end in sight

Hurricane Ian, for all intense and purposes, was a Category 5 that grabbed the headlines as well as the lives of the residents of Florida, Georgia and the Carolinas. That was added to the frightening nuclear threats from Russia’s Putin as he annexed parts of Ukraine in a war that has no end in sight.

Cash dairy markets were mixed and had little to feed on this week in the way of USDA reports that we regularly monitor, adding to the uncertainty everyone feels. After dropping a dime the week before, the 40-pound cheddar blocks closed the week and the month at $1.9675 per pound, up 0.75 cents on the week, 23.25 cents higher than they were on September 1 and 11.75 cents above a year ago. 

The 500-pound cheddar barrels climbed to $2.2450 per pound Thursday, highest since June 9, but closed Friday at $2.20, up 1.50 cents on the week, up 35 cents on the month, up 45.50 cents from a year ago and 23.25 cents above the blocks. 

Sales totaled three cars of block for the week and 21 for the month of September, up from 19 in August. Barrel sales totaled 10 for the week and 35 for the month, down from 64 in August.

Midwest cheese makers tell Dairy Market News that milk volumes have fallen the past few weeks, as farmers wait for corn silage inventories to increase. Reported spot milk prices ranged this week from class to $1 over. Cheese producers say the lighter milk has resulted in some plants shutting down for a day. Cheese interest remains healthy throughout the region and for multiple weeks, contacts say cheese spots were unavailable. In particular, barrels are tight. CME barrel prices continue above the blocks and “exhibits the current firmness on process cheese markets,” says Dairy Market News, “but overall cheese market tones are somewhat hearty moving into the holiday demand season.”

Retail cheese demand in the West is steady to lower, as higher consumer prices have reportedly caused customers to pare back purchasing. Food service sales are unchanged and international demand remains strong, thanks to U.S. competitive prices. Traders say greater spot availability of blocks is contributing to the price inversion. Cheesemakers report that milk is available, allowing plants to run steady production, but labor shortages and delayed deliveries of production supplies continues to prevent some from operating full schedules.

Butter remains in the clouds, climbing to $3.1650 Wednesday, but closed Friday at $3.1450, 1.25 cents higher on the week, 5.25 cents above its September 1 level and $1.3975 above a year ago. Sales totaled 32 for the week, 23 on Tuesday alone and 87 for the month, down from 144 in August.

Demand remains “hearty” for Midwestern butter producers, says Dairy Market News, and production lines are busy trying to fulfill orders even at near record prices. Cream availability continues to vary from one report to the next. After a couple weeks of tightened cream supplies, this week had some plants clearing cream at multiples in the middle to upper $1.20s from regional suppliers. Still, fourth quarter holiday demand for cream from manufacturers of cream cheese and other fall and winter staples remains strong, according to Dairy Market News, so near-term expectations are uncertain and butter market tones remain bullish.

Cream inventories are tight in the West, but contacts say they can generally find what they need to meet current needs. Demand for cream is strong as butter makers are running busy schedules though some were down this week for scheduled maintenance. Contacts report strengthening demand for butter as purchasers prepare for increased holiday sales. Contacts suggest that tight inventories are contributing to the high market prices, as evidenced in the latest cold storage report showing August 31 butter stocks down 10% from the end of July and down 22% from a year ago.

Grade A nonfat dry milk saw its Friday finish at $1.57 per pound, down a penny on the week, five cents higher on the month and 17.25 cents above a year ago. There were five cars sold on the week and 78 for the month, up from 70 in August.

CME dry whey closed the week and the month at 44 cents per pound, down a penny on the week, down three cents on the month and 14 cents below a year ago. Sales totaled two for the week and 19 for the month, up from 10 sales in August.

StoneX dairy broker Dave Kurzawski analyzed the markets in the October 3 Dairy Radio Now broadcast, starting with the block and barrel price spread. He said the expectation was/is that the barrels would fall to a closer to normal alignment however “We’re in the peak demand time seasonally so we could be seeing $2 per pound cheese for several more weeks.”

When asked about butter remaining so long above $3 per pound, Kurzawski stated that butter demand is good because “We turned a corner on demand about 10 years ago,” referring to the perception that butter was not good for you.

Currently there are production issues, he explained, as butter output is not keeping up with demand and inventories are well below year ago, but he pointed to a new and growing use of butter as part of an appetizer on culinary “butter boards” promoted on the often controversial social media, TikTok. 

A butter board is covered in soft spread butter, many of them flavored, along with toasted bread, cheese, olives, fruits, nuts or whatever you like. People love the taste of butter, he said. “People want dairy fat and we underestimate this in the industry to our peril.” 

He warned that $3 butter will not be here forever. It will come down as cream multiples are not keeping pace with this bump in price, but $2 plus butter will most likely be the norm ahead, he concluded.

Dairy prices need to stay elevated to support milk prices and keep dairy producers in business. The September 23 dairy and food analyst estimates fourth quarter production costs at about $3 per hundredweight more than one year ago, with the national average cost of production around $21.15 per hundredweight. 

“Western production costs have soared alongside record high hay prices,” according to the Analyst. “Today, our model pegs California cost of production at about $23.05 per hundredweight.”

Meanwhile, whole milk powder inched higher in the September 27 Global Dairy Trade Pulse where 2.2 million pounds was offered and sold, at an average $3,610 per metric ton, up $45 from the September 13 Pulse however, was down 1.6% from Fonterra’s regular contract two in the last Global Dairy Trade, according to StoneX’s Nate Donnay, who blamed weak demand versus supply. 

In other global news, HighGround Dairy reports that “The Dairy Companies Association of New Zealand (DCANZ) recorded another negative milk production print in August, down 4.9% year over year on a milk solids basis and SGX futures are still running sharply above both this week's Pulse and last week's main Global Dairy Trade settlements.”

Additionally, July dairy exports for the European Union and United Kingdom were the worst for the month in five years due to continued steep losses in fluid milk and cream shipments moving to China, according to HighGround Dairy. The EU-27 and United Kingdom exported 36,032 metric tons to China, says HighGround Dairy, down 25,623MT or 42% from 2021.

Skim milk powder volumes were weak again, the lowest July since 2016, says HGD, led by a slowdown in demand from China, Nigeria, Ghana and Malaysia. The EU also reported lower cheese shipments to its top three destination countries, the U.S., Japan, and Switzerland.

U.S. dairy exports remain strong. Cooperatives Working Together member cooperatives accepted 41 offers of export assistance this week from Cooperatives Working Together that helped them capture sales contracts for 4.4 million pounds of American type cheese, 198,000 pounds of butter, 432,000 pounds of whole milk powder and 62,000 pounds of cream cheese. 

The product is going to customers in Asia, the Caribbean, Middle East-North Africa and Oceania. It will be delivered through March 2023. Year to date Cooperatives Working Together sales total 79.9 million pounds of American type cheeses, 657,000 pounds of butter, 30.3 million pounds of whole milk powder and 7.2 million pounds of cream cheese. The products are going to 19 countries in six regions and are the equivalent of 1.030 billion pounds of milk on a milkfat basis.

Dairy culling in the week ending September 17, totaled 60,900 dairy cows, down 1,500 head or 2.4% below a year ago, however slaughter levels are still slightly above the volume of replacement heifers entering the market, according to StoneX.

The United States Department of Agriculture’s latest crop progress report shows 92% of U.S. corn dented, as of the week ending September 25, 4% behind a year ago and 2% behind the five-year average. 58% was rated mature, 14% behind a year ago and 3% behind the average. Harvest is at 12%, up from 7% the previous week and 5% behind a year ago. 52% was rated good to excellent and 7% behind a year ago.

The report shows 63% of the soybeans dropping leaves, 10% behind a year ago and 2% behind the five-year average. Harvest is at 8%, up from 3% the previous week, 7% behind a year ago and 5% behind the five-year average. 55% of the beans are rated good to excellent and 3% behind a year ago.

Checking politics, the U.S. Food and Drug Administration issued a proposed rule pertaining to the definition of ‘healthy’ as a nutrient content claim. The International Dairy Foods Association’s, Joseph Scimeca, PhD, senior vice president of regulatory and scientific affairs, stated “Today, according to the federal 2020 through 2025 dietary guidelines for Americans, more than 90% of Americans do not consume enough dairy to meet daily nutritional requirements. Therefore, the International Dairy Foods Association believes it is essential that the voluntary, proposed rule released today by the FDA must clearly establish criteria for dairy products that encourage the consumption of dairy foods while also helping consumers select the options that meet their health, taste, and lifestyle needs.” 

“While the proposed rule takes some positive steps toward encouraging consumption of dairy products, it falls short in many other important areas by limiting how dairy labels communicate the full nutritional benefits of dairy to consumers.” Complete details are posted at the International Dairy Foods Association website.

Jim Mulhern, president and CEO of the National Milk Producers Federation spoke at this week’s White House Conference on hunger, nutrition and health. He stated that “Ensuring people have access to the nutrition they need to live, develop and be healthy is key priority for dairy farmers across the U.S. We are hopeful today will serve as a launching pad for the dedication and collaboration we will need to end food insecurity and reduce diet related disease in the U.S., goals National Milk Producers Federation shares with the conference.”  

“We know from decades of working in this area that dairy products and the 13 essential nutrients they provide such as protein, calcium, vitamin D and potassium will be vital ingredients to meeting these goals. The dietary guidelines for Americans shows that dietary patterns that include dairy are associated with beneficial health outcomes, such as lowered risk for cardiovascular disease, obesity and Type 2 diabetes. The guidelines also note that dairy is under consumed across all age categories.”  

“Scientific evidence clearly indicates that milk and dairy foods are part of the solution to challenges like food and nutrition insecurity, health equity and diet related and other noncommunicable diseases,” Mulhern testified.

National Milk Producers Federation also weighed in on the importing of infant formula. In a September 29 press release stated, “National Milk Producers Federation has not opposed the temporary, short-term lifting of restrictions on infant formula imports to address the rare formula availability crisis and did not oppose the just passed bulk infant formula to retail shelves act given its targeted volume and limited time frame. Those guardrails are necessary to ensure that imports temporarily complement U.S. supplies rather than displace existing available dairy formula ingredients.”

“National Milk Producers Federation emphatically opposes efforts that would create long-term dependence on foreign suppliers for a critical nutritional food. The focus must be to develop additional production in the United States necessary to ensure that this crisis isn’t repeated. As the COVID-19 pandemic has taught us, only a robust domestic supply chain with American workers and U.S. sources of production can best protect families against potentially tragic disruptions of critically needed products,” the National Milk Producers Federation warned and “opposes giving foreign companies regulatory advantages that domestic producers don’t have. Overseas milk production that doesn’t meet the same stringent regulations met by our own producers shouldn’t be allowed into the U.S. under any but the most extreme circumstances.”

Lastly, a new poll of registered voters conducted by Morning Consult on behalf of the Coalition for a Prosperous America, shows that an overwhelming majority of voters (90%) are concerned about beef imports deceptively labeled as "Product of U.S.A." In response, 86% support legislation currently under consideration in Congress that would require mandatory country of origin labeling for all beef products sold in the United States.

“This is a no brainer,” said the Coalition for a Prosperous America Chair Zach Mottl. “Americans deserve to know where their beef is raised and harvested. It’s astounding that, at present, importers can put a ‘Product of U.S.A.’ label on beef that’s an exclusively foreign product. It’s time to end such deceptive food labels and require mandatory country of origin labeling.”

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.