Enrollment and coverage election period for dairy margin coverage program is extended

The United States Department of Agriculture left its 2022 milk production forecast unchanged in the December 9 world agricultural supply and demand estimates report (WASDE), but raised the 2023 estimate slightly, citing higher expected cow numbers and slightly more rapid growth in output per cow.2022 production and marketings were estimated at 227 and 225.9 billion pounds respectively, unchanged on both from last month’s estimates. If realized, 2022 production and marketings would only be up 700 million pounds or 0.31% from 2021.2023 production and marketings were estimated at 229.5 and 228.5 billion pounds respectively, up 300 million pounds on production and up 400 million on marketings. If realized, 2023 production would be up 2.5 billion pounds or 1.1% from 2022 and marketings would be up 2.6 billion or 1.2%.The 2022 class III milk price average was projected at $21.95 per hundredweight (cwt.), up 15 cents from last month’s estimate, and compares to $17.08 in 2021 and $18.16 in 2020. The 2023 average was estimated at $19.80, up 15 cents from last month’s projection.The 2022 class IV average is projected at $24.50 per cwt., up 20 cents from a month ago, and compares to $16.09 in 2021 and $13.49 in 2020. The 2023 estimate is estimated at $20.10, down 25 cents from a month ago.The Dairy and Food Market Analyst says Southwest and Western breakeven milk prices are around $23.50 per cwt. for first quarter 2023, meaning “dairies in these regions are looking to a very tough start to the New Year.”You’ll recall that October milk production was up 1.2% from 2021. The latest dairy products report indicates the extra milk went primarily to cheese, especially cheddar and mozzarella.Total cheese output hit 1.167 billion pounds, highest since May, up 2.4% from September output, which was revised 1 million pounds higher, and was up 1.4% from Oct. 2021. Output year to date (year to date) was at 11.6 billion pounds, up 1.7% from a year ago. Thankfully, the October cold storage report showed a significant decline in cheese stocks which is indicative of firm demand.Wisconsin produced 286.2 million pounds of the cheese total, down 0.8% from September but 1.5% above a year ago. California produced 204.6 million pounds, up 6.0% from September but 0.6% less than a year ago. New Mexico vats produced 83.5 million pounds, up 7.8% from September and 2.1% above a year ago. Idaho contributed 85.1 million pounds, down 1.4% from September and 0.6% below a year ago.Italian cheese totaled 495.4 million pounds, up 0.3% from September and 1.4% above a year ago. Year to date Italian stands at 4.9 billion pounds, up 2.9%.American type cheese totaled 466.5 million pounds, up 5.6% from September and 1.3% above a year ago. Year to date output, at 4.6 billion pounds is down 0.5%.Mozzarella output amounted to 386.8 million pounds, up 2.2% from a year ago, with year to date at 3.9 billion pounds, up 3.8%.Cheddar production, the cheese traded at the CME, jumped to 334.3 million pounds, up a hefty 33 million pounds or 11.0% from September’s count, which was revised down 3.4 million pounds and was up 9.4 million pounds or 2.9% from October 2021. Year to date cheddar is at 3.2 billion, still down 1.4% from a year ago.Butter output jumped to 161 million pounds, up 20.2 million pounds or 14.3% from September, but down 3.3 million pounds or 2% from a year ago, the third month in a row to fall short of the previous year. Year to date butter stands at 1.7 billion pounds, down 2.2% from a year ago.Yogurt totaled 403.9 million pounds, up 4.6% from a year ago, with year to date output at 3.9 billion pounds, down 2.4%.Dry whey production slipped to 77.3 million pounds, down 800,000 pounds or 0.9% from September, but 2.4 million or 3.3% above a year ago, thanks to robust cheese production. Year to date whey was at 800.5 million pounds, up 2.4%. Stocks inched up to 67.8 million pounds, up one million pounds or 1.5% from September and 9.8 million or 16.9% 2021.Nonfat dry milk, at 124.2 million pounds, was up 700,000 pounds or 0.6% from September and 3.5 million or 2.9% above a year ago. Year to date powder was at 1.6 billion pounds, down 3.4%. Stocks dropped to 247.5 million pounds, down 25.7 million or 9.4% from September but up 27.5 million or 12.5% from a year ago.Skim milk powder output slipped to 56.2 million pounds, down 2.3 million pounds or 3.9% from September, and 21.4 million or 27.6% below a year ago. Year to date skim milk powder was at 446.9 million pounds, down 24.2% from 2021. October was also the third consecutive month nonfat and skim milk powder output was below a year ago.StoneX Dairy Group says the report was a bit bullish overall as most of the data was below expectations. Cheese perhaps was the exception, so slightly bearish for cheese, but bullish for butter, nonfat dry milk and skim milk powder.“Unaccounted for fat production continues to run well above expectations,” says StoneX. “We thought we would see a decrease in the unaccounted for fat in this report, but that didn’t happen. If it did, production levels would likely have been higher as expected for fat-based products. The only product that had volume climbing above our expectations was yogurt.”Recovery is coming slowly to the Global Dairy Trade. The second to last event of 2022 saw the weighted average inch 0.6% higher, following a 2.4% jump on November 15, which followed a 3.9% decline November 1, 4.6% on October 18 and 3.5% on October 4.Traders brought 65.2 million pounds of product to market, up from 63.9 million on November 15. The average metric ton price slipped to $3,610 U.S., down from $3,623 last time.Buttermilk powder led the gains, up 4.7%, after not trading in the last event. Cheddar was up 1.8%, after falling 1.3%. Anhydrous milkfat was also up 1.8%, after a 2.7% rise, though butter was down 1.9%, after slipping 0.8% last time. Lactose was also down 0.8% and after leading the gains last time. The powders saw smaller gains Tuesday. Skim milk powder was up 1.7% after jumping 3.1% and whole milk powder inched up 0.1% after rising 3.1% last time.StoneX says the Global Dairy Trade 80% butterfat butter price equates to $2.0909 per pound U.S., down 4.6 cents from November 15 and compares to CME butter which closed Friday at $2.8125. Global Dairy Trade cheddar, at $2.1890, was up 3.6 cents and compares to Friday’s CME block cheddar at $2.0950. Global Dairy Trade skim milk powder averaged $1.4072 per pound, up from $1.3864. Whole milk powder averaged $1.5424 per pound, up from $1.5410. CME grade A nonfat dry milk closed Friday at $1.3650.China remains the big factor in the poorer performing Global Dairy Trade and we have attributed that to the country’s coronavirus lockdowns, but changes may be a foot. StoneX broker Dave Kurzawski reported in the December 12 Dairy Radio Now broadcast that that one of his colleagues from their Singapore office spent some time in China, talking with farmers, processors and even government officials.Many cities and areas there will no longer require negative coronavirus tests before using public transportation and “Chinese officials have had a big change in their rhetoric around COVID, now comparing it to the common cold.”We will see what results in the next three to six months, Kurzawski said, but we’ll probably see a spike in outbreaks and hospitalizations, a country of over 1.3 billion people, with only 55,000 ICU beds and 42% of their doctors don’t even have a bachelor’s degree.The other factor, according to Kurzawski, is that China has increased its milk production 11% to 12%, due to record prices last year stimulating output. The government is also “encouraging” farm production and processing to “insulate themselves from having to go to the world market all the time.”This new development may mitigate things on the Global Dairy Trade for a while yet, he said, “However, it’s still cheaper to bring in product from abroad than to make it in China, so the reopening trumps all of it, he concluded. “Get the people back to living their lives and feeling comfortable again and then you may have a real good surge in Chinese demand as we go into the second half of 2023.”Speaking of the global market, the October U.S. export ledger looked impressive. Cheese exports totaled 81.5 million pounds, up 4.5% from October 2021, however that is the second lowest volume in eight months, according to the Dairy and Food Market Analyst. Year to date cheese exports were up 11.7%. Cheese imports were up just 1.4%.Butter exports totaled 15.7 million pounds, up 62.3% from a year ago, highest volume since April 2014, according to HighGround Dairy, who said the gain was driven primarily by increased shipments to Canada, South Korea and Mexico, however, the U.S. high butter price was also a magnet, as butter imports totaled 10.8 million pounds, up 43.6% from a year ago.Skim nonfat dry milk powder exports, at 161.3 million pounds, were up 10.5%, topping those a year ago for the first time since November 2021. The biggest gain came from Mexico followed by Indonesia, Malaysia, and Dominican Republic.Dry whey shipments amounted to 50.9 million pounds, up 20.2%, though year to date whey exports are still down 3.2% from a year ago.Total lactose shipments fell below prior year levels for the first time since March, triggered by declines to southeast Asia and Oceania, according to HighGround Dairy.Cooperatives Working Together (CWT) members accepted 17 offers of export assistance this week that helped capture sales of 1.6 million pounds of American type cheese and 717,000 pounds of cream cheese. The product is going to customers in Asia, Central America, Middle East-North Africa and Oceania through May 2023 and brings 2022 exports to 92.1 million pounds of American type cheeses, 657,000 pounds of butter, 30.7 million pounds of whole milk powder and 8.8 million pounds of cream cheese. The products are going to 21 countries and the equivalent of 1.16 billion pounds of milk on a milkfat basis.Cash dairy prices were mostly weaker the first full week of December. The cheddar blocks closed Friday at $2.0950 per pound, down a half cent on the week but 23 cents above a year ago.The barrels finished at $1.95, up 5.25 cents on the week, 27 cents above a year ago and 14.5 cents below the blocks. There were only two sales of block on the week at the CME and 19 of barrel.Cheese sales are “seasonally steady,” according to Midwest cheesemakers, says Dairy Market News, though there was hesitancy from spot buyers due to the large block-barrel price spread. Buyers know this could pressure block prices lower. Retail needs for the holiday have generally been filled. Barrel producers report some extra inventory but nothing above seasonal norms. Downtime at plants for maintenance continues as do reports of labor shortages. Cheese processing is relatively steady at most plants as some are running seven days a week. Milk remains available, some at class, most within $1 and $2 under class.Western retail cheese demand is steady as grocers purchase loads to meet upcoming holiday demand. Food service demand is unchanged, but exports are softening, as competitor country prices are decreasing. Barrel inventories are in greater supply than blocks and maybe contributing to the price spread. Plants are running busy schedules amid strong regional milk output though some plants continue to deal with labor shortages and delayed deliveries of supplies.The crash you heard Thursday was butter plunging 20.25 cents to $2.685 per pound, lowest since November 3. It was the biggest single day drop since the 24.5 cent plunge on November 1, though far from the record 49 cents on December 10, 2015. It rallied 12.75 cents Friday to close at $2.8125, down 8.75 cents on the week but 69 cents above a year ago, with 18 sales reported on the week. European 82% fat butter prices have fallen to the $2.30s, according to the Dairy and Food Market Analyst.Cream is widely available, says Dairy Market News and expected to remain so the rest of the year. Holiday orders have been filled but demand remains intact. Most contacts suggest near-term butter availability is tight or steady. Churning is as active as current employee capacities/schedules allow, according to Dairy Market News.Cream volumes are available in the West and demand is steady to lighter. Butter makers are actively churning, but tanker and labor shortages are preventing operation at capacity. Demand is steady in food service and at retail.Grade A nonfat dry milk climbed to $1.3825 per pound Wednesday but finished Friday $1.365, a half cent higher but 26 cents below a year ago, with no sales.Dry whey closed Friday at 43.5 cents per pound, down 1.5 cents and 27.75 cents below a year ago, with eight sales reported on the week at the CME.In politics, Congress is working to finish several key measures before adjourning for the year. Republicans will take control of the House in January as a result of the November elections but failed to gain seats in the Senate to take control.The National Milk Producers Federation stated that shifts in the upcoming 118th Congress will be “potentially less dramatic than some analysts anticipated.”The United States Department of Agriculture announced that it has extended the enrollment and coverage election period for its dairy margin coverage program to January 31, 2023.Lee Mielke is a graduate of Brown Institute in Minneapolis, Minnesota. 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.