Cream is plentiful to ample for production needs throughout the country
The last week of March did not have a lot for the markets to feed on with respect to USDA reports regularly monitored. One such report issued Friday morning was Prospective Plantings.Corn planted area for all purposes in 2023 was estimated at 92.0 million acres, up 4% or 3.42 million acres from 2022. Compared with last year, planted acreage is expected to be up or unchanged in 40 of the 48 estimating states.Soybean plantings was estimated at 87.5 million acres, up slightly from last year. Planted acreage is up or unchanged in 15 of the 29 estimating States.Checking dairy product prices cheese is dropping. After hitting $2.10 per pound on March 24, the 40-pound cheddar blocks closed the week and the month at $1.85, down 25 cents on the week, lowest CME price since March 13, five cents lower on the month and 44.50 cents below this week a year ago.The 500-pound cheddar barrels, after peaking at $1.9625 on March 24, finished the following Friday at $1.8075, down 15.50 cents on the week, also the lowest CME price since March 13, but is up 25.50 cents on the month, 44.50 cents below a year ago and 4.25 cents below the blocks.Sales for the week totaled three loads of block and 41 for the month of March, up from 26 in February. Barrel sales totaled eight for the week and 138 for the month, up from 127 in February.Cheese demand ranges across the spectrum, according to Dairy Market News. Some cheesemakers say ordering is active. Ohers are processing with expectations to store it, while some say orders are meeting weekly expectations. Milk remains readily accessible and spot prices ticked higher on the top end of the range, but mid-week reported prices remained below class III. Milk availability depends on location. Cheese production is steadily active with a number of cheesemakers saying production is six to seven days per week.Retail and food service demand in the West for varietal cheeses is steady. Inventories remain reportedly close to sold out by some. Barrel inventories remain ahead of blocks. Strong to steady demand from Asian markets continued this week, though export demand elsewhere is moderate to light as domestic prices stayed uncompetitive with European and Oceania prices. Cheese output is strong with ample milk available, says Dairy Market News (DMN).CME butter closed Friday at $2.3975 per pound, 5.25 cents higher on the week, 1.75 cents higher on the month, but 31.25 cents below a year ago. There were 18 sales on the week and 42 for the month, up one from February’s count.Processors tell DMN that demand has softened following a more active run in late February early March due to spring holiday ordering. Butter supply continues to tick up as active churning continues due to steadily available cream. There were expectations of ice cream and cream cheese processing taking more cream and pushing multiples higher, but plant managers say cream remains in a similar price point to previous weeks. Butter market tones are holding steady despite some bearish indicators such as increasing national stores, says DMN.Cream is reported to be heavy to ample in the West, compared to demand which is steady to light. Some cream cheese producers have cut back on demand, while some ice cream producers have increased demand. Butter production is strong to steady, with some reports of maxed out schedules while others have decreased capacity due to uncompleted equipment repairs. Retail butter demand is strong to steady, though some say demand for the upcoming spring holiday has plateaued and they are seeing less active food service sales. Export demand is more active for Asian markets compared to European markets with more competitive prices.Speaking in the April 3 Dairy Radio Now broadcast, StoneX broker, Dave Kurzawski, said there’s a lot of milk out there, even though the last Milk Production report showed a lot of states with output below that of a year ago. That’s indicative of the economics on the farm, he said, and “will provide that undercurrent to the market.”“Typically, we average $1.65 to $1.70 in March,” he said, “So cheese in the $1.90s is reflective of the inflationary forces at play as demand appears to be strong and export demand has been strong in the three months of 2023.”Butter has seen a “stable sideways market that eventually will change and choose a direction,” he said. It came down from $3 in October to the $2.30s, because “Buyers in board rooms in the U.S. do not want to pay $3. That is a one-way ticket out the door. You have people who have set budgets at around $2.30, $2.40, even $2.50, the market has adjusted down to that price and everyone says we’re not going to outguess this. They’re doing what they should do. That’s what hedging is about,” he said. “You hedge, not because you know where the price is going, but because you don’t know where the price is going.” He concluded saying that butter “probably should be priced lower than it is right now, but as long as the buyers are there at the $2.30, that’s where we’re at.”The March 30 StoneX Early Morning Update adds, “With California under water and a lot of snowmelt yet to come, there is a concern over how much butter will be available to come to market later in the year. California represents between 18% to 19% of US milk production and there is a lot of butter and powder made there.”Grade A nonfat dry milk fell to $1.1475 per pound Wednesday, lowest CME price since March 22, 2021, but closed Friday at $1.16, up a penny on the week,1.75 cents below its March 1 level and 69 cents below a year ago. CME sales totaled four for the week and 28 for the month, down from 42 in February.CME dry whey closed the week and month at 44.75 cents per pound, up 0.25 cents on the week, dead even with its March 1 perch, but 16.25 cents below that week a year ago. Only one load was traded on the week and 20 for the month of March, up from nine in February.Things are not improving much in California. HighGround Dairy reported in its Monday Morning Huddle that “Tulare County’s sheriff ordered evacuation notices to dairies in Alpaugh due to breaches in levees. Tens of thousands of acres in California’s Central Valley are underwater and the flooding will remain a concern for some time as the snowpack from the Sierra Nevada’s melts.”The week ending March 18 saw 65,100 head of dairy cattle go to slaughter, down 2,200 from the previous week but 1,000 more than a year ago. Year to date, 738,500 cows have been culled, up 25,000 head or 3.5%, from the same period in 2022.Prices globally remain depressed. Tuesday’s Global Dairy Trade Pulse saw 2.2 million pounds of Fonterra whole milk powder sold, up 100,000 pounds from the March 14 Pulse, but at $3,135 per metric ton, down $60 from the March 21 GDT.HighGround Dairy stated, “Global demand remains stunted resulting in a further decline in whole milk powder price to record the lowest GDT Pulse settlement since the auction began August 9, 2022.”The March 24 Daily Dairy report drove home the importance of U.S. dairy exports stating, “In a mere 20 years, the U.S. dairy industry has gone from exporting less than 3% of its milk production, all subsidized through the now defunct Dairy Export Incentive program to commercially shipping the equivalent of 18% of its milk production to foreign markets.”“Without these exports, milk prices would have been dramatically lower over the past two decades and farm exits would likely have occurred at an even faster rate. Much of the dairy industry’s export success can be attributed to the efforts of the U.S. dairy industry as well as to two wildly successful and underfunded government programs,” the Daily Dairy report stated.Cooperatives Working Together (CWT) member cooperatives accepted six offers of export assistance this week that helped them capture sales contracts for 251,000 pounds of American type cheese and 168,000 pounds of butter. The product is going to customers in Asia, Central America, the Caribbean and Middle East-North Africa, and will be delivered through July.The sales bring CWT’s 2023 exports to 12.6 million pounds of American type cheeses, 550,000 pounds of butter, 17.8 million pounds of whole milk powder and 2.0 million pounds of cream cheese. The products are going to 18 countries and are the equivalent of 274.8 million pounds of milk on a milkfat basis.In politics, Uncle Sam announced that beginning in April the USDA will “provide about $123 million in additional, automatic financial assistance for qualifying farm loan program borrowers who are facing financial risk, as part of the $3.1 billion to help distressed farm loan borrowers that was provided through section 22006 of the Inflation Reduction Act (IRA). The announcement builds on financial assistance offered to borrowers through the same program in October 2022.”“The IRA directed USDA to expedite assistance to distressed borrowers of direct or guaranteed loans administered by USDA’s Farm Service Agency (FSA) whose operations face financial risk.”Agriculture Secretary Tom Vilsack admitted “In too many cases, the rules surrounding our farm loan programs may actually be detrimental to helping a borrower get back to a financially viable path. As a result, some are pushed out of farming and others stuck under a debt burden that prevents them from growing or reacting to opportunities. Loan programs for the newest and more vulnerable producers must be about providing opportunity and tailored to expect and manage stumbles and hurdles along the way. Through this assistance, USDA is focusing on generating long-term stability and success for distressed borrowers.”Last but not least, the National Milk Producers Federation (NMPF) warns of another issue confronting the dairy industry. As I have written before, the dairy industry needs to take seriously the threat of plant-based beverages and food products.NMPF stated in a press release this week, “Faced with demand that’s found its ceiling and with its sustainability and health claims coming increasingly under question, the plant-based imitation milk marketing machine is now coming for your children.”“Despite the critical importance of dairy nutrients to childhood development, nut-based beverage purveyors are pushing for their white colored sugar water to have greater access to federal nutrition programs, all in the name of ‘equity,’ an emphasis on fairness and justice that’s become an important paradigm in policy debates.”Equity in food requires a quality product and equality in access, argues NMPF. “And for that, milk, a natural product offered with both regular and lactose-free options, remains by far the best solution. Equity in food policy means making sure that everyone has access to the nutrients they need to thrive. The federal school lunch and breakfast programs, the WIC program, and other initiatives are meant to ensure nutrition for all.”Lactose intolerance is being used by dairy’s opponents to tout their inferior nutrition as a solution to the problem lactose intolerance, says NMPF and the latest ploy among the vegan, animal rights and plant-based lobbies is to suddenly paint themselves as social justice crusaders, demanding that their nutritionally inferior (which even when fortified, remain unequal to dairy’s unique nutritional package) products should now be treated as legitimate milk substitutes in federal nutrition programs, all the while conveniently forgetting that a widely available alternative already exists that circumvents lactose intolerance and delivers the exact same nutritional profile as milk. Because that’s what it is.”Checking the milk tanks at the farm gates, DMN says output is strong to steady, aside from areas of California having regionally steady to lighter milk production. “Flooding and overflowing rivers are creating differences regionally in California and industry sources report some relocating of cows to drier dairies causing decreased milkings per day.”Milk volumes are heavier to balanced across the country compared to current production needs. Class I demand is lighter in some areas as educational facilities cycle through spring break schedules.“Ice cream, cream cheese and soft serve manufacturing have increased as spring holidays approach,” says DMN, “making cream supplies regionally tighter in some parts of the country. Stakeholders expect this tightness to loosen when spring flush conditions are reached. Overall, cream is plentiful to ample for production needs throughout the country.”“Condensed skim milk volumes are regionally tighter in parts of California due to some unplanned downtime at processing facilities. Elsewhere, condensed skim milk supplies are increasing to steady. Milk is available for processing throughout the country. Contacts in the Northeast say regional dryer challenges have freed some milk volumes intended for nonfat dry milk production,” according to DMN.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 email@example.com.