July 26, 2021 at 3:39 p.m.
USDA projects 2021 Class III average at $16.80
The 2022 production estimate was raised however, based on higher expected cow numbers. The WASDE stated that USDA’s Cattle report, to be released on July 23rd, will provide a mid-year estimate of the cow inventory and producer intentions regarding retention of heifers for dairy cow replacement.
2021 production and marketings were estimated at 228.2 and 227.2 billion pounds respectively, down 300 million pounds on production from last month’s estimates and 200 million pounds less on marketings. If realized, 2021 production would still be up 5 billion pounds or 2.2% from 2020.
2022 production and marketings were estimated at 231.6 and 230.5 billion pounds respectively, up 500 million pounds on both. If realized, 2022 production would be up 3.4 billion pounds or 1.5% from 2021.
Cheese, butter, nonfat dry milk (NDM), and whey price forecasts for 2021 were lowered from last month on relatively high stocks and weaker-than-previously-expected demand. As a result, Class III and Class IV prices were lowered.
USDA analysts project a 2021 Class III average of $16.80 per hundredweight (cwt.), down 65 cents from last month’s projection, and compares to $18.16 in 2020 and $16.96 in 2019. Thursday’s futures settlements, added to the already announced Class III prices, would portend a $17.23 average for 2021. The 2022 average was estimated at $16.75, down 40 cents from last month’s estimate.
The 2021 Class IV average was estimated at $15.40, down 45 cents from last month, and compares to $13.49 in 2020 and $16.30 in 2019. The 2022 Class IV average was projected at $15.75, down 20 cents from a month ago.
Price forecasts for cheese and butter in 2022 were lowered on larger expected stocks and higher production, but forecasts for NDM and whey were unchanged.
The U.S. corn outlook was for larger supplies, greater feed and residual use, increased exports, and higher ending stocks. Beginning stocks were lowered 25 million bushels, based on greater feed and residual use as indicated in the June 30 Grain Stocks report. Corn production was forecast 175 million bushels higher, based on greater planted and harvested area from the Acreage report.
The national average corn yield was unchanged at 179.5 bushels per acre. High temperatures and draught may change that. Total corn use was forecast 75 million bushels higher, with increases for feed and residual use and exports. Feed and residual use was raised reflecting a larger crop. Exports were raised 50 million bushels, with sharply lower exports expected for Brazil. With supply rising more than use, ending stocks were up 75 million bushels. The season-average farm price received by producers was lowered 10 cents to $5.60 per bushel.
Soybean production was projected at 4.4 billion bushels, unchanged from last month, despite widespread drought. Harvested area, forecast at 86.7 million acres, was unchanged from last month, but up 4.4 million from last year. The soybean yield forecast was unchanged at 50.8 bushels per acre.
Soybean supply and use forecasts were also unchanged. Ending stocks were unchanged at 135 million bushels. The season-average soybean price was forecast at $11.05 per bushel, down 20 cents, and soybean meal was projected at $395.00 per short ton, down $10.00.
Dairy economist and principal Bill Brooks, of Missouri-based Stoneheart Consulting, reported in the July 19 Dairy Radio Now broadcast that dairy farm profitability this year will be about $1.81 per cwt. below that of a year ago, based on July 12 futures prices, and $1.17 below the five year average. On a brighter note, he said profitability looks a little more promising next year.
This week’s Crop Progress report showed 26% of the U.S. corn crop is silking, as of the week ending July 11, mirroring that of a year ago, but 4% behind the five year average. 65% of the corn crop was rated good to excellent, up 1% from the previous week, but 4% below a year ago.
Looking to soybeans, 46% were blooming, up from 29% the previous week, dead even with a year ago, and 6% ahead of the five year average. 59% were rated good to excellent, unchanged from the previous week but 9% below a year ago.
In the week ending July 3, 52,900 dairy cows were sent to slaughter, down 2,900 from the previous week but 6,500 or 14.0% above that week a year ago.
Dairy demand remains good, according to USDA’s latest data. May total cheese demand was down 4.7% from the record set in April, but was 1.7% above May 2020, the fifth consecutive month to top a year ago, and up 6.1% year to date
Butter disappearance was up 4.5% from April but 1.0% below a year ago, though year to date is up 4.4%.
There was lots of red ink on the powder. Nonfat dry milk and skim milk powder was down 15.4% from April and 21.4% below a year ago. HighGround Dairy points out that while nonfat dry milk exports jumped to another record high into May, it was not enough to overcome a steep decline in domestic disappearance.
Dry whey was down 11.5% from April, weakest May volume on record due to weak domestic demand, according to HGD, and was 4.6% below a year ago.
Fluid milk sales continue to falter. May sales totaled 3.6 billion pounds of packaged fluid products, down 4.3% from May 2020. Conventional product sales totaled 3.4 billion pounds, down 3.9% from a year ago. Organic products, at 225 million, were down 10.6%, and represented 6.2% of total sales for May.
Whole milk sales totaled 1.2 billion pounds, down 9.7% from a year ago, with year to date consumption down 8.3% from a year ago. Whole milk represented 32.4% of total milk sales for the five month period.
May skim milk sales, at 203 million pounds, were down 15.3% from a year ago and down 14.7% year to date.
Total packaged fluid milk sales for the five months amounted to 18.7 billion pounds, down 4.8% from 2020. Conventional product sales totaled 17.5 billion pounds, down 5.1%. Organic products, at 1.2 billion pounds, were down 0.4%, and represented 6.4% 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.
Checking CME dairy prices; the 40 pound Cheddar blocks climbed to $1.7525 per pound Tuesday, highest since May 13, but then came Wednesday and prices retreated from there. They closed the third Friday of the month at $1.6150, down 11 cents on the week and $1.0450 below a year ago when they plunged 25.50 cents, after setting a new record high of $3.00 per pound on July 13.
The 500 pound barrels got to $1.6475 Tuesday, highest since June 15, but saw their Friday close at $1.44, down 14 cents, 99 cents below a year ago, and 17.50 cents below the blocks. 7 cars of block were sold on the week and 27 of barrel.
Spot milk remains widely available in the Midwest, according to Dairy Market News. Cheese production is busy, but a growing number of cheesemakers are staying clear of the spot milk market as they already have plenty. Staffing and labor shortages are becoming more problematic. Cheese demand is steady to busy. Food service orders from the Eastern region, namely pizza cheese buyers, are keeping Midwestern producers busy, says DMN.
Western retail and food service cheese demand held steady this week and export demand was strong due to competitive prices. Limited available vessel space and port congestion continues to cause delays to exports and domestic transportation is not faring much better as contacts report delays and rising prices due to a shortage of truck drivers and difficulties obtaining shipping supplies. That’s also limiting warehouse space. Milk continues to be available in the region though output has passed its peak. Cheese output remains busy.
The continuing shortage of containers for 640-pound cheese is raising concern on the effect on prices. StoneX speculates; “It would seem if we have an issue with 640’s, production will flip to 40’s and that would mean more lots available to come to spot but it also likely means that the blocks will remain a bit tighter. That could shift some production to the barrels as well, leaving them a bit over supplied, and could result in a wider block/barrel spread for a period of time.”
StoneX adds that; “One area we believe may be underestimated by the trade is schools opening up this August and September. And not just schools, but the expected bump in food service as people cover their grills and eat out more. In fact the con?uence of both of these factors is normally known and priced in. But this year it’s worth asking if the supply chains have what they need.”
CME butter jumped the first two days of the week and hit $1.71 per pound but then reversed gears. It closed Friday at $1.6775, up 0.25 cents on the week and 1.25 cents below a year ago, with 15 sales reported on the week.
Midwest butter plant managers continue to say cream is available but offers are not as hearty as they were before and during the July 4th weekend. Bulk butter offers are slowing too, but demand is not viewed as robust. Retail demand remains seasonally quiet, but food service continues to keep plants busy.
Cream availability in the west is constricting to varying degrees. Northwestern contacts say cream is tight after weeks of hotter than usual weather. Fluid haulers are in short supply; when spot loads of cream can be sourced. Tanker and driver shortages can make for unpredictable delivery timelines. Some butter plants are running reduced schedules due to lighter cream supplies. Further south, cream is in better balance. Yields are decreasing seasonally but some handlers report California cream is outpacing local needs. Butter inventories are stable to heavier though much is under contract. Retail sales are seasonally softer while food service demand is stable, according to DMN.
Grade A nonfat dry milk saw some ups and downs but ended Friday at $1.2525, 0.25 cents higher on the week and 25.25 cents above a year ago, with 13 trades.
Exports are still helping to keep this market above $1.20, says StoneX, with Mexico holding a large role in keeping demand strong.
Dry whey closed at 53.75 cents per pound, up 3 cents on the week and 20.25 cents above a year ago, on 5 sales.
In politics; the Food and Drug Administration announced a final rule on the standards of identity for yogurt. The National Milk Producers Federation says the new rule defines what is and isn’t yogurt and “has much broader, and potentially very positive, implications in one of the most contested consumer issues of the day, the proper labeling of milk and dairy products.”
The new rule is modernized to fit changes in yogurt-making technology, according to NMPF, and revokes the previous individual standards of identity for low-fat and nonfat yogurt. Compliance is expected by Jan. 1, 2024.
“The new rule is rooted in a response to a citizen’s petition from the National Yogurt Association filed in February 2000,” NMPF stated. “The slow pace isn’t unusual, unfortunately, and undoubtedly there will be quibbles with some details of the 22-page document.” NMPF says “FDA’s decision is important: It defends principles that support transparent food labeling and protects consumers. And those principles matter well beyond yogurt, with the FDA promising a review of a much larger issue, the labeling of plant-based milk alternatives by next June.”
Dairy processors don’t agree however and have filed a formal objection to the rule. Dr. Joseph Scimeca, Senior Vice President of Regulatory and Scientific Affairs for the International Dairy Foods Association (IDFA), stated “After 40 years of waiting since FDA first issued standards for yogurt, the FDA dropped a new final rule on the standard of identity for yogurt in late June, underscoring a lack of transparency in the FDA rulemaking process. Because the rulemaking process has been so severely delayed and because the agency has consulted very little with yogurt makers, the final rule is already out of date before it takes effect. For the most part, FDA relied on comments submitted 12 or more years ago to formulate its final rule, as if technology has not progressed or as if the yogurt making process itself has been trapped in amber like a prehistoric fossil.”
“Although the IDFA, which represents the nation’s yogurt makers, has been offering feedback or assistance to the FDA since it released its initial proposed rule in 2009, the agency has largely ignored our comments and suggested revisions to ensure a modernized standard. The result is a yogurt standard that is woefully behind the times and doesn’t match the reality of today’s food processing environment or the expectations of consumers. Unfortunately, IDFA has been left with no reasonable options except filing a formal objection to this final rule and imploring the agency to revisit the final rule to amend and truly modernize the standard of identity for yogurt.”
Cooperatives Working Together (CWT) member cooperatives accepted 17 offers of export assistance this week from CWT that helped them capture sales contracts for 2.1 million pounds of Cheddar, Gouda, and Monterey Jack cheese. The product is going to customers in Asia, South America and Oceania, and will be delivered through December.
CWT’s 2021sales now total 27.6 million pounds of American-type cheeses, 11.2 million pounds of butter (82% milkfat), 7.3 million pounds of anhydrous milkfat, 17.2 million pounds of whole milk powder, and 7.9 million pounds of cream cheese. The products are going to 26 countries and are the equivalent of 892.2 million pounds of milk on a milkfat basis.
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