November 14, 2020 at 6:57 p.m.
Food Box program drives Class III milk to $21.61
The 2020 Class III average is at $17.89, up from $16.37 a year ago.
The October Class IV price is $13.47 per cwt., up 72 cents from September but $2.92 below a year ago. The Class IV average now stands at $13.52, down from $16.23 a year ago and $14.06 in 2018.
Dairy margins were again mixed over the second half of October, continuing a recent trend of strengthening in nearby marketing periods while weakening slightly further out the curve in second and third quarter, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.
The MW stated that “Strength in nearby marketing periods continues to be paced higher trade in cheese, despite what was generally construed as a bearish monthly production report. USDA reported September milk production at 18 billion pounds, up 400 million or 2.35% from 2019 and much higher than anticipated. In addition, USDA reported the milking cow herd at 9.366 million head, up 5,000 from August and 33,000 higher than last year. Moreover, dairy cow slaughter has averaged 9.3% less than last year and 5.2% lower than the historical average over the past 12 weeks, suggesting that dairy producers have been expanding their herds to increase milk output.”
The MW said Cold Storage data provided some context for the strong cheese market as “Total cheese stocks contracted 1.3% in September to 1.36 billion pounds, falling below prior-year levels for the first time since March. The decline was especially pronounced for American cheese which fell 2.2% to 772.6 million pounds. Despite the continued challenges for foodservice demand, cheese continues to move strongly through retail channels as well as drawing support from government purchase programs. September butter stocks of 343.9 million pounds dropped by 7.4% from August and represented the largest August to September inventory decline in three years. September butter stocks remain 18.3% higher than last year,” the MW concluded.
You’ll recall September milk production totaled 18.0 billion pounds, up 2.3% from September 2019. The latest Dairy Products report shows where that milk went.
Total cheese output crept to 1.1 billion pounds, up 0.6% from August, but a bearish 1.1% above September 2019. Year to date total cheese output stands at 9.8 billion pounds, up 0.5% from a year ago.
Wisconsin produced 276.4 million pounds of the September total, up 0.7% from August but 1.4% below a year ago. California output, at 192.8 million pounds, was up 0.7% from August but 5.4% below a year ago. Idaho contributed 87.1 million pounds, up 7.0% from August and 4.1% above a year ago.
Italian type cheese totaled 462.8 million pounds, up 4.4% from August but 1.7% below a year ago. YTD Italian output is at 4.2 billion pounds, down 1.0%.
American type cheese totaled 432.5 million pounds, down 3.3% from August but 4.0% above a year ago. YTD American was at 3.97 billion pounds, up 1.8%.
Mozzarella output climbed to 365.8 million pounds, down 2.6% from a year ago, with YTD at 3.3 billion pounds, down 1.0% from 2019.
Cheddar, which is traded at the CME, fell to 306.1 million pounds, down 17.9 million pounds or 5.6% from August but was 22 million or a whopping 7.7% above September 2019. Year to date Cheddar is at 2.85 billion pounds, up 2.3%.
Churns produced 152.1 million pounds of butter, up 500,000 pounds or 0.3% from August, but was 7.8 million pounds or 5.4% above a year ago. YTD butter is at 1.6 billion pounds, up a hefty 6.5% from 2019.
Dry whey totaled 74.9 million pounds, down 4.9% from August and 17.3% below a year ago, with YTD at 730.6 million pounds, down 0.2%. Stocks totaled 74.9 million pounds, down 4.9% from August and 17.3% below a year ago.
Nonfat dry milk output fell to 124.3 million pounds, down 19.9 million pounds or 13.8% from August but 6.5 million or 5.5% above a year ago. YTD powder sits at 1.4 billion pounds, up 1.8% from 2019. Stocks fell to 233.2 million pounds, down 37.4 million or 13.8% from August, and 17.6 million or 7.0% below a year ago.
Skim milk powder output jumped to 72.5 million pounds, up 11.3 million pounds or 18.3% from August and 13.7 million pounds or 23.3% above a year ago. YTD skim milk powder is at 453.0 million pounds, up 10.6% from a year ago.
The loud crash you heard the first week of November was Cheddar block cheese plunging 44 cents, to a Friday close of $2.3425 per pound, ending five consecutive weeks of gain, but were still 32.75 cents above a year ago.
The barrels rolled from their new record high $2.53 per pound, to a $2.3175 close, down 21.25 cents on the week, ending seven weeks of gains, 1.25 cents below a year ago, but at a more typical 2.50 cents below the blocks. There were only 2 cars of block traded on the week at the CME and 14 of barrel.
Midwest cheese producers reported changes in production levels this week to Dairy Market News, as some were seeking less milk and limiting production. Customers were buying hand-to-mouth and, with prices where they were, no one wants to be holding extra stocks, anticipating the price declines. Spot milk was available at prices still around or just under Class III.
Western retail cheese demand has remained strong, but while government purchases and fast food outlets are moving good volumes of cheese, total food service is underperforming. Export sales have receded, due to the higher prices, and in some cases, manufacturers had to discount cheese to move it overseas. Contacts say domestic market prices and freight costs are making it harder to compete in international markets. Parts of the nation face increasing COVID cases so marketers are concerned about further restrictions that could hamper recovery of the food service sector. Manufacturers and buyers are cautious in cheese production and storage that could lose value. Stocks are moderate.
Butter climbed to $1.4375 per pound Wednesday, but closed Friday at $1.43, up 4 cents on the week but 60.75 cents below a year ago, on 26 sales on the week.
Plant managers relay that cream availability is opening up from local and Western regions and that cream suppliers are setting Thanksgiving week deals. Butter makers say inventory is moving and churning remains busy. Retail demand has increased seasonally, but food service is doubtful to return to “normal” anytime soon. Market tones remain quiet and some believe they may remain somewhat mum into first quarter 2021.
The western butter supply is more than adequate and reflects a somewhat unstable market undertone. Sources tell DMN “The market is capable of seeing a domestic price surge, encouraged by strong retail demand that neutralizes the butter supply situation.” Stocks are in good shape and churning thrives at expected yearend holiday levels. Customers are inquiring about first quarter 2021 purchases. Food service is fairly steady, but below seasonal standards. Competitive U.S. butter in the global market, “could potentially be the mechanism for a stronger domestic butter price,” says DMN.
Grade A nonfat dry milk finished the week 4.25 cents lower, closing at $1.0650 per pound, 14 cents below a year ago, with 13 cars finding new homes. Poor exports and a weak GDT were the likely culprits for the powder downfall.
Dry whey climbed to a 42.25 cents per pound finish, highest since January 22, 2019, and 14.75 cents above a year ago, with 3 sales reported on the week.
The first Global Dairy Trade (GDT) auction of November reversed direction, after three consecutive gains, and saw its weighted average drop 2.0%. Powder and anhydrous milkfat were responsible. Sellers brought 78.1 million pounds of product to the auction block, up from 76.4 million on October 20.
Skim milk powder led the losses, falling 4.4%, after inching 0.2% lower on October 20. Whole milk powder was down 2.0%, after inching up 0.3%. Anhydrous milkfat was down 2.6%, following a 0.5% slippage. Cheddar was off 0.8%, after gaining 3.0% last time.
Butter led the two gains, up 3.9%, after a 3.3% rise last time, and buttermilk powder was up 1.2%, after not trading in the last event.
StoneX equated the GDT 80% butterfat butter price to $1.6913 per pound U.S., up 6.4 cents from the last event. CME butter closed Friday at a bargain $1.43. GDT Cheddar equated to $1.7172 per pound, down 0.8 cent, and compares to Friday’s CME block Cheddar at $2.3425. GDT skim milk powder averaged $1.2348 per pound, down from $1.2933, and whole milk powder averaged $1.3539, down from $1.3776. CME Grade A powder closed at $1.0650.
In other trade news; U.S. dairy exports topped year ago levels for the 13th consecutive month in September. Cheese exports hit 62.7 million pounds, up 4.2% from September 2019, fifth month in a row they topped year ago levels, and “somewhat against expectations,” says HighGround Dairy (HGD), “as cheese prices rose to record levels in July, likely impacting export potential.”
Interestingly, considering the low U.S. butter prices, September exports only totaled 3.3 million pounds, down 10.2% from 2019.
Nonfat dry milk-skim milk powder exports hit 135.6 million pounds, down 5.9% from a year ago, first time they were down from a year ago since February, and followed several months of record high volume. Powder to Mexico was lower again, says HGD, on trend with recent months and down 33% year over year.
Dry whey exports totaled 41.5 million pounds, up 52.3%, and the eighth consecutive month they topped the prior year. HGD says the increase was led by China, who took 358% or 15.3 million pounds more than a year ago. Chinese demand was down slightly from August but higher than July, according to HGD.
Dairy farm “recovery” is taking a while to get to the farmgate. Another drop in the U.S. All Milk price, plus sharply higher corn and soybean prices, pulled the September milk feed price ratio to the lowest level since May.
The latest Ag Prices report has the ratio at 2.28, down from 2.50 in August, and down from 2.34 in September 2019.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk purchased 2.28 pounds of dairy feed of that blend in September.
The US All-Milk price averaged $17.90 per hundredweight (cwt.), down 90 cents from August and $1.40 below September 2019.
California’s All Milk price fell to $18.70, down $1.30 from August but 10 cents above a year ago. Wisconsin’s, at $17.70, was down $1.70 from August and $2.20 below a year ago.
The national average corn price averaged $3.41 per bushel, up 29 cents per bushel from August but 39 cents per bushel below September 2019. Soybeans averaged $9.24 per bushel, up 58 cents from August and were 89 cents per bushel above a year ago. Alfalfa hay averaged $171 per ton, down $1 from August and $8 per ton below a year ago.
Looking at the cow side of the ledger; the September cull price for beef and dairy combined averaged $66.60 per cwt., down $4.10 from August, $1.00 above September 2019, but $5 below the 2011 base average of $71.60 per cwt.
Milk cow replacements averaged $1,340 per head in October, up $30.00 per head from July and $30 above October 2019. They averaged $1350 per head in California, unchanged from July and $50 below a year ago. Wisconsin cows averaged $1,420 per head, up $70 from July and $150 above October 2019
In the week ending October 24, 58,200 dairy cows were sent to slaughter, up 400 from the week before, but 4,000 head, or 6.4%, below that week a year ago.
The U.S. corn harvest is 82% complete, as of the week ending November 1, according to the latest Crop Progress report. That’s up from 49% at this time a year ago and 13% ahead of the five year average.
Soybeans were at 87% harvested, up from 71% a year ago and 4% ahead of the five year average.
The cotton harvest is 52% completed, up 1% from a year ago and #5 ahead of the five year average. 37% of the crop is rated good to excellent, down from 40% at this time a year ago.
In politics, a big “Thank you” to Minnesota Democrat Collin Peterson, ranking member of the House Agriculture Committee, who was defeated in his re-election bid.
Hoards Dairyman’s Corey Geiger called Peterson a “champion for agriculture,” in the November 9 “Dairy Radio Now” broadcast, saying he was among a handful of politicians who truly understands agriculture and ushered three farm bills through the House with bipartisan support.
While President Trump did not carry Minnesota, Peterson’s large rural 7th district has become more conservative over his 30 years of service, according to Geiger, and while Peterson’s replacement, former Minnesota Lieutenant Governor Michelle Fischbach, would reportedly welcome serving on that committee, she would be a junior member, said Geiger, without the experience of a Collin Peterson.
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