Russia was blasting major Ukraine cities with missiles
Dairy product prices at the Chicago Mercantile Exchange saw little change in the holiday shortened week between Christmas and New Year’s, but StoneX pointed out in its December 30 Early Morning Update “Class III milk prices took a dip going into the end of the year. Demand in the dairy complex has been impacted in both international and domestic markets. Supply has been growing slightly, leading to no concerns in product availability, but plenty of issues moving that volume. The price outlook has shifted lower, mostly due to demand,” says StoneX.After jumping 14.50 cents the previous week, the 40-pound cheddar blocks climbed to $2.16 per pound Thursday, highest since November 22, but closed the last Friday of 2022 at $2.135, up 1.25 cents on the week, 3.50 cents above where they were on December 1 and 15.50 cents above that week one year ago.The 500-pound cheddar barrels climbed to $1.8675 Thursday, highest since December 12, but finished the week, the month and the year at $1.8575, 6.25 cents higher on the week, but four cents below their December 1 standing, 14.75 cents above a year ago and an unsustainable 27.75 cents below the blocks.There were nine sales of block on the short week and 24 for the month of December, up from 8 in November. Barrel sales totaled eight for the week and 57 for the month, up from 28 in November.Milk is widely available for Midwest cheesemakers, according to Dairy Market News. Plant managers report they were taking loads at discounts as low as $10 under class for the second week in a row. Plants offered employees downtime last week and more were expected to take time off this week, as well. Cheese demand was softening the final week of the year. Plants in areas affected by winter storms were slowly getting things back in order, as in some cases, employees were unable to get to the plant or it was shut down as a precaution.Western cheese demand was steady to softer at both retail and food service as the New Year approached. Export demand was unchanged, with continued sales to international purchasers seeking delivery in second quarter 2023. Milk was being sold for below class prices and cheesemakers are making use of the available volumes, though delayed deliveries of supplies, labor shortages and unplanned downtime continue to keep production schedules reduced.Butter, which plunged 46 cents the previous week, closed the week and the year at $2.38 per pound, down 1.50 cents on the week, 50 cents lower than its December 1 perch and 7.25 cents below a year ago for the first time in a long time.There were only five sales reported this week and 57 for December, down from 63 in November. A year ago the butter was climbing, jumping 20.25 cents the week following Christmas, after gaining 15.75 cents the week before that.Dairy Market News says Midwest butter producers were met with trying conditions this week, from extreme winter weather to holiday effect cream availability. Butter makers say the winter weather “put operations in flux” and they are still working through a number of problems from employee shorthandedness to hauling snags. They expect cream availability to remain ample into the New Year. Butter demand has quieted significantly, says Dairy Market News, but butter producers are “setting sights on spring holiday demand.”Cream availability continues to outpace demand in the west, according to Dairy Market News. Butter producers are using available cream for production as opposed to selling it at the current prices. Transportation issues and unfavorable weather caused delays of cream deliveries for some. Butter producers were running busy schedules and butter availability continues to build ahead of softening demand. Some anticipate the bearish market trends to continue into first quarter and there is hesitation to book loads beyond that, waiting to see if prices move lower.grade A nonfat dry milk closed Friday at $1.335 per pound, up a half cent on the week, 1.25 cents below its December 1 trading price and 32 cents below a year ago. There were 13 sales reported on the week and 40 for the month, down from 41 in November.CME dry whey finished the week and the year at 40.50 cents per pound, three cents higher on the week, but 3.50 cents below where it was on December 1 and 33.50 cents below a year ago. There were no sales for the week and 31 for the month, up from 16 in November.The year 2022 is behind us and we’re now into 2023. Speaking in the January 2 Dairy Radio Now broadcast, StoneX broker Dave Kurzawski said 2022 was a “wild year” with several noteworthy events.The record high $3.2675 per pound butter price was one of them, he said, but “the big take away is the historical high prices which, characteristically bring on more milk and more cows, though we saw very slow growth in 2022.”“We added 52,000 head between January and May,” he explained, “And since May, we only added 1000. $19 milk is just not what it used to be. Costs of everything have gone up and that dove tales into what I see in 2023, which is continued inflation. We don’t know how long it will last, but inflationary cycles can last longer than you would expect.”“Typically there’s six to eight months between what the Fed does and some stabilization, although we may be seeing a little of that now,” he admitted. “The thought process is to see it get down to around 5% some time in second quarter.”“Based on the Fed’s monetary policy, problem is,” says Kurzawski, “The Fed still has an expansionary fiscal policy so it’s like we’re putting our foot on the gas and the brake at the same time and this says nothing of the interplay with the labor market tightness and some lingering supply chain bottlenecks underscored entirely by this on-going war and conflict in Ukraine.”“There’s a lot of uncertainty,” he concluded, though he says he’s not bearish on commodities going into 2023. “We will continue to see higher than normal prices at least well into first quarter,” he predicted.Woes continue in fluid milk sales. The United States Department of Agriculture’s latest data reports October sales of U.S. packaged fluid products totaled 3.68 billion pounds, down 2.3% from October 2021.Conventional product sales totaled 3.4 billion pounds, down 2.5% from a year ago. Organic products, at 237 million pounds, were up 2% and represented a typical 6.4% of total sales for the month.Whole milk sales totaled 1.3 billion pounds, up 4.2% from a year ago, up 1.4% year to date and represented 34.1% of total milk sales year to date.Skim milk sales, at 188 million pounds, were down 8.3% from a year ago and down 8.5% year to date.Total packaged fluid sales for the 10 months amounted to 35.8 billion pounds, down 2.2% from 2021.Conventional product sales totaled 33.4 billion pounds, down 2.3%. Organic products, at 2.4 billion, were down 0.9%, and represented 6.7% of total milk sales for the period.The figures represent consumption in federal milk marketing order areas, which account for approximately 92% of total fluid milk sales in the U.S.The last Global Dairy Trade Pulse of 2022 saw 2.06 million pounds of Fonterra whole milk powder find new owners, at $3,205 per metric ton, down $10 from the previous week’s Global Dairy Trade.HighGround Dairy said “Lackluster demand and the holiday season kept the market quiet in the short-term,” adding “The average winning price marked the lowest contract two regular whole milk powder price since event 274 on December 15, 2020.”Meanwhile, the Global Dairy Trade’s biggest customer, China, announced that it will end its quarantine on travelers starting January 8, as it continues to pull away from its zero coronavirus policies.The country has seen a huge coronavirus resurgence, especially among the elderly, and reports say hospitals are overwhelmed. Death tolls are no longer being announced. Beijing had stated that some 4,000 new cases a day were being seen though analysts are skeptical and believe the number is greater.Back on the home front, milk production is steady to higher in all regions, according to the USDA’s weekly update“Overall, class I sales are stable in the East though orders have been mixed from bottling operations, with some contacts reporting cuts while others report additional orders. Western contacts report lighter class I orders as educational institutions are closed for the winter holidays. Extreme winter weather in the Midwest was proving to be a challenge for processors, who were working to put the plentiful milk supplies to use. In some cases, Midwestern spot milk prices were reported from $10 under to class III. Processors expect most of the milk will be put to use, while some loads may have to be discarded because of delays.”Looking across the pond, Dairy Market News reports that “Seasonal milk production in Western Europe has turned upwards from the typical low point of the year in November. The consensus from market observers is that milk production is exceeding expectations, even as annual comparisons indicate a weak milk production year to date. Industry sources report the milk pay prices received by farmers are staying near record high levels through the end of the year. However, market observers do not see this as sustainable given falling commodity dairy prices. Faltering demand for dairy ingredients has diminished manufacturers' needs for loads of milk. Spot milk prices have fallen dramatically,” says Dairy Market News.“Aside from areas directly impacted by the ongoing conflict between Ukraine and Russia, milk production has grown through much of the year in eastern Europe,” says DMN. Russia was blasting major Ukraine cities with missiles this week.“Poland has been a leading milk producing country in Eastern Europe,” says Dairy Market News and “In spite of damage and power outages caused by Russian missile strikes, grain exports resumed in the Black Sea ports opened by a deal reached by Moscow and Kyiv. Turkish officials recently met with leaders of Russia and Ukraine to negotiate provisions helping expand trade through the Black Sea.”Looking down under, “Warm temperatures in New Zealand prompted a late peak in pasture conditions as the summer closes in,” says Dairy Market News. “Although reports suggest the current quality of feed may be somewhat tarnished, sources speculate that plenty of feed is available, as North Island milk producers struggle with lots of rain, amongst concerns of vulnerable maize growth in the area. Notably, in the South Island, milk production is looking promising and suggests that New Zealand's milk production could recover in December.”“The eastern portion of Australia is again experiencing surplus precipitation,” says Dairy Market News. “Damaging rainfall and flooding have been an enormous challenge for Australia's dairy industry during the months of October and November. While Australia's dairy industry anticipated a drop in seasonal milk production ahead of the flooding, due to the impact of smaller milk producers exiting the industry at a very high rate, market representatives now project lower than anticipated milk production for the 2022-2013 season. Input costs and limited grain availability, with high prices, grouped with labor issues, remain factors.”StoneX says “Stronger than expected EU production is oﬀsetting weaker than expected Southern Hemisphere production. But the first quarter production forecast is higher than it was six months ago, due mostly to Europe. Improved weather is giving us more conﬁdence in year over year gains for New Zealand in coming months, but both Australia and Argentina production was weaker than expected for November. Overall, the supply outlook looks decent, but falling dairy commodity prices will drag farm gate milk prices lower in the ﬁrst half of 2023 which will slow milk production growth in late 2023 and early 2024,” StoneX concludes.Last but not least, I wish my readers a blessed, joy filled and prosperous 2023. We have seen some tough times the last two to three years. Let’s seek His blessing through the trials in this New Year!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 firstname.lastname@example.org.