July 25, 2022 at 6:04 p.m.
Crop report shows 15% of U.S. corn is silking
2022 production and marketings were estimated at 226.0 and 224.9 billion pounds respectively, down 400 million pounds on production and down 500 million on marketings from last month’s estimates. If realized, 2022 production and marketings would both be down 300 million pounds or 0.1% from 2021.
2023 production and marketings were estimated at 228.3 and 227.3 billion pounds respectively, down 1 billion pounds on production and 900,000 pounds less on marketings. If realized, 2023 production would be up 2.3 billion pounds or 1.0% from 2022.
The 2022 butter price forecast was raised from last month on firm demand, while the cheese price forecast was lowered on continued large stocks. Forecasts for nonfat dry milk (NDM) and whey prices were unchanged.
With a lower cheese price, the 2022 Class III milk price was lowered while the Class IV price was raised due to higher butter prices. The 2022 Class III average was put at $22.80 per cwt., down a dime from last month’s projection, and compares to $17.08 in 2021 and $18.16 in 2020. The 2023 average is estimated at $20.85, up 20 cents from a month ago.
The 2022 Class IV average was estimated at $24.70, up a nickel from last month’s projection and compares to $16.09 in 2021 and $13.49 in 2020. The 2023 average is estimated at $22.30, up 40 cents from last month’s estimate.
The 2023, price forecasts for cheese, butter, and NDM were raised on expected lower production, but whey was lowered on expected weaker international prices.
The 2023 cheese price average was projected at $2.07 per pound, up 2 cents from last month’s estimate, and compares to an expected 2022 average of $2.1850. The 2021 average was $1.6755.
Butter was projected to average $2.44 per pound in 2023, up 5.50 cents from last month’s estimate, and compares to a projected $2.78 average in 2022, and a 2021 average of $1.7325.
Nonfat dry milk will average $1.6450 in 2023, according to USDA, a 2.50 cent higher price than a month ago, up from a projected $1.7550 in 2022, and the 2021 average of $1.2693.
Dry whey will only average 51.50 cents per pound in 2023, down from the projected 64 cent average in 2022, and compares to 57.44 cents in 2021.
This month’s U.S. corn outlook is for larger supplies and higher ending stocks. Beginning stocks were raised 25 million bushels, based on reduced feed and residual use as indicated in the June 30 Grain Stocks report.
Corn production was forecast at 14.5 billion bushels, up 45 million, based on greater planted and harvested area from the June 30 Acreage report. Acreage was increased 400,000 acres, while the yield forecast was unchanged at 177.0 bushels per acre. Ending stocks were up 70 million bushels. The season-average farm price was lowered 10 cents to $6.65 per bushel.
Soybean production was projected at 4.5 billion bushels, down 135 million on lower harvested area. Harvested area, forecast at 87.5 million acres in the June 30 Acreage report was down 2.6 million from last month. The soybean yield forecast was unchanged at 51.5 bushels per acre.
With lower production partly offset by higher beginning stocks, soybean supplies were reduced 125 million bushels. Soybean crush was reduced 10 million bushels reflecting a lower soybean meal export forecast. Exports were reduced 65 million bushels to 2.14 billion on lower U.S. supplies, increased South American supplies, and lower global imports. With lower supplies only partly offset by reduced use, ending stocks were projected at 230 million bushels, down 50 million from last month. The season-average soybean price was forecast at $14.40 per bushel, down 30 cents from last month, with soybean meal projected at $390.00 per short ton, down $10.00, according to the WASDE.
The latest Crop Progress report shows 15% of U.S. corn is silking, as of the week ending July 10, 9% behind a year ago and 10% behind the five year average. 64% was rated good to excellent, unchanged from the previous week, but 1% behind a year ago.
Soybean blooming is at 32%, down from 44% a year ago and 6% behind the five year average. Some 6% are setting pods, down 3% from a year ago. 62% of the crop is rated good to excellent, down 1% from the previous week and 3% behind the five year average. Ratings put the crop at 63% good to excellent, 2% behind the previous week, but 4% ahead of the five year average.
StoneX reported that Turkey announced a deal with Russia, Ukraine, and the U.N regarding Turkey ensuring the safety of Black Sea export routes for grain, and joint controls for inspections, to be signed by the parties next week.
The U.S. gave the agreement a thumbs up, stating that Russian food and fertilizer exports would not violate sanctions currently in place.
In the week ending July 2, 51,800 dairy cows were sent to slaughter, up 900 head from the previous week, but 1,100 or 2.1% below a year ago.
Lots of butter found its way to Chicago this week, pressuring prices. Block Cheddar sat at $2.11 per pound until Thursday when it dropped 5.25 cents and then lost 6.25 more cents Friday to close at $1.9950, down 11.50 cents on the week, lowest since February 28, but still 38 cents above a year ago.
The barrels closed Friday at $2.07, down 11.25 cents on the week, lowest since March 18, 63 cents above a year ago, and 7.50 cents above the blocks. There were 4 sales of block on the week at the CME and 17 of barrel.
Cheese demand remains seasonally stable, reports Dairy Market News, depending on the variety, and expectations are being met. Production is generally unchanged week to week. Spot milk availability is not necessarily tight, but a number of cheese producers in the region say milk offers have quieted, particularly after a couple weeks of $5 and $6 under Class III. Heat is playing a part on milk output but expectations regarding potential supplies are uncertain. “Inventories are meeting needs, as there is a semblance of balance, regionally.”
Milk is available for cheese makers to run busy schedules in the West and output is steady, though labor shortages are preventing some plants from running at capacity. Cheese demand is steady in food service and retail but contacts report that domestic sales are below expectations. Strong export demand remains.
Butter, after revisiting $3 per pound Monday, fell to $2.90 per pound Thursday, but rallied Friday to finish at $2.93, 4 cents lower on the week, but $1.2525 above a year ago. 70 loads traded hands on the week, up from 47 the previous week.
Butter demand is seasonally slowing in retail and food service, according to DMN. Butter output is busy, as regional cream supplies remain available despite the heat and component downturns at the farm. Employee shortages continue prevent plants from keeping up despite the seasonal demand slowdown.
Cream demand is strong throughout the West as butter and ice cream makers pull on supplies. Demand for butter in retail and food service remains below some expectations and the lower July 5 GDT price for butter contributed to softening export demand. Bulk butter demand is steady as some purchasers are concerned that butter inventories are tighter than last year, according to DMN.
Grade A nonfat dry milk fell to its lowest level since January 4, closing Friday at $1.66 per pound, 8.75 cents lower on the week, but 40.75 cents above a year ago. There were 13 sales reported on the week.
CME dry whey tumbled to a 45.50 cent per pound close Friday, down 3.50 cents on the week, and 8.25 cents below a year ago, on 5 sales for the week.
Indications are that dairy product disappearance is faltering. We talked about it with StoneX broker, Dave Kurzawski in the July 18 Dairy Radio Now broadcast. He said it’s a difficult comparison because we’re lapping over last year and last year was lapping over the COVID lockdown year 2020, so the data is skewed.
May cheese disappearance was down 1.4%, he said, with American type down 6.4%, while butter was up 1.3%. “But, looking at 2021, cheese disappearance was up 4.3% from 2020,” he said, “So being down 1.4%, is that something to write home about?”
The data may reflect a slower demand period in May into June, he reasoned, in response to higher prices, but prices have come down. He believes demand is “chugging along but at a slightly slower rate.” There have been higher prices both at food service and retail, he said, and “While retail has seen the biggest price increases most recently, food service has been dealing with them all year.”
The report of June inflation hitting a 40-year high of 9.1% won’t help, though Kurzawski reminded us in closing that dairy is a pretty staple food product. “If we lose some ground in some areas, we may gain some ground in other cheaper areas,” but he believes that “demand remains somewhat intact and, in the next six to eight weeks will likely pick up as buyers gear up for the holiday season.”
StoneX called the downturn “market sentiment-driven change rather than fundamental change,” in its Friday’s update. “We have been thinking the market was a little over-priced for most products for a while now. It seems that with recession fears, in?ation impacted spending, global demand concerns, and mixed production sentiment that this week is ?nally when the dairy futures market snapped and reacted.”
“On the topic of recession, consumers looking to cut their spending might target butter to do it. Margarine is much cheaper, and it will be an easy substitution for some. And it will be hard to hide the higher butter prices by reducing the size of the package. Restaurants are another big buyer of butter, during the COVID-19 era, we experienced the decline in demand for butter at the restaurant level.”
Fluid milk sales also continue to struggle. Sales totaled just under 3.6 billion pounds in May, down 1.7% from May 2021. Conventional product sales totaled 3.3 billion pounds, down 2.1% from a year ago. Organic products, at 244 million pounds, were down 4.4%, and represented 6.8% of total sales for the month. Whole milk sales totaled 1.2 billion pounds, up 2.0% from a year ago, up 1% year to date, and represented 33.3% of total milk sales in the five months.
Skim milk sales, at 194 million pounds, were down 4.5% from a year ago and down 7.4% YTD.
Total packaged fluid sales for the first five months of 2022 amounted to 18.3 billion pounds, down 2.4% from 2021. Conventional product sales totaled 17.1 billion pounds, down 2.3%. Organic products, at 1.2 billion, were down 2.6%, and represented 6.6% of total milk sales for the period.
In politics, the National Milk Producers Federation (NMPF) gave a thumbs up to bipartisan House legislation they say would “encourage additional infant formula supply imports as a temporary way to ease short-term supply shortfalls in the U.S. market.” NMPF emphasized, however, that “boosting longer-term domestic production to ensure safe, secure infant formula supplies in the future is needed.”
A NMPF press release stated; “The Formula Act, H.R. 8351, would waive U.S. tariffs on infant formula imports through the end of 2022 to ensure that the domestic market has the supplies of formula it needs as it recovers from an acute processing capacity crisis that’s created nationwide infant-formula shortages.”
Cooperatives Working Together (CWT) members accepted three offers of export assistance this week that helped them capture sales of 571,000 pounds of American-type cheese and 110,000 pounds of butter. The product is going to customers in Asia and Middle East-North Africa through October.
U.S. milk production continues to slow in the East and Midwest, according to the USDA’s weekly update. We’ll get June data on July 21. Elsewhere; “Like much of the northern hemisphere dairy production regions, milk output is in seasonal declines across Eastern Europe,” says DMN, while some experience growth. “The conflict between Ukraine and Russia weighs heavily on the agriculture and food industries. Ukrainian grain exports, critical for regional food security and feed for livestock, are starting the 2022/23 marketing year at less than half what was shipped the previous year. In addition, the upcoming grain harvest could be nearly cut in half due to lands lost to Russian forces and decreased yields.”
Looking “down under,” Australian processors adjusted the 2022-23 milk season pay price higher as incentive to increase milk output. Demand for dairy products remains strong, says DMN, although markets are confronted with supply shortages, as adverse weather and the seasonal factor impacts milk output.
“Milk output in New Zealand has nowhere to go but up as the industry advances through the winter season lull,” according to DMN, but the industry expects lower output this new production season. Buyers are not as active, waiting for a better picture of the milk supply before committing to historically high commodity prices. A free trade agreement has been secured between New Zealand and the EU, worth $1.8 billion a year to NZ by 2035, says DMN.
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