Even as the House of Representatives was poised to vote Friday on a $3 trillion coronavirus relief bill termed the HEROS Act, which would be the fifth such bill, dairy prices got another shot in the arm Mother’s Day week due in large part to Uncle Sam’s surprise buying spree announced the Friday before.
    FC Stone dairy broker Dave Kurzawski wrote: “Initially the USDA had signaled they would be buying $100 million per month, so we were only expecting $150 million of dairy purchases in round 1 instead of the $317 that was announced.”
    “The program can only award new contracts as long as the national emergency declaration remains in effect,” Kurzawski said. “When the Trump administration declares that the emergency is over, USDA won’t be able to run any further rounds of this program so USDA appears to be front-loading the program.”
    The Dairy and Food Market Analyst reported that, with the USDA’s Blue Apron-style Coronavirus Relief program, “In total, the government bought $1.2 billion worth of food products. Included in that is $317 million of dairy products for delivery between May 15 and June 30,” but the Analyst warned if this purchase rate is sustained, USDA will deplete the $3 billion in coronavirus funds by September.
    “USDA allocated approximately 31% of the announced food purchases to dairy products, including about 749 million pounds for fluid milk, 31 million pounds for cheese and 7.4 million pounds for butter.”
    Analyst and Editor Matt Gould estimates that “Uncle Sam is buying dairy products equal to approximately 5% of U.S. milk production between May 15 and June 30, one in 20 loads, for four and a half months.”
    He added, “The government must have money burning a hole in its pocket because USDA also announced a $120 million Section 32 purchase for cheese and butter to take place in July and August.”
        Gould estimates that Section 32 purchase will total about 23 million pounds of cheese and 3.6 million pounds of butter per month. Combining those two programs (Blue Apron-style and Section 32), USDA could end up procuring as much as 4.0% of the cheese produced per month and 6.5% of the butter.
    A down side concern is cannibalization of retail sales, warns Kurzawski. “When USDA was only handing out 2-5 million pounds of cheese per month the reduction in retail sales because of the free cheese was pretty small. But if the government is handing out 50 million pounds of free cheese every month, how much will that reduce retail sales? 10 million pounds? 20 million pounds? There is going to be an impact there. Same for fluid milk and butter.”
    Foodservice sales improved by 2 percentage points in the most recent week of data, according to FC Stone, but they were still down 45% from year ago. Dine-in restaurants in Texas saw an 11-point improvement in sales as their stay-at-home order was lifted but quick service restaurants only saw a 3.4-point improvement.
    Meanwhile, HighGround Dairy’s Director of Dairy Market Intelligence, Lucas Fuess, questioned USDA’s increased estimate on 2020 milk production in this week’s World Agricultural Supply and Demand Estimates report.
    Speaking on the May 18 Dairy Radio Now broadcast, Fuess said milk output was reduced 5-10% the last few weeks. In many cases those reductions were mandated by milk handlers due to concern over rising spring flush output.
    Fuess credited the recovering dairy prices to restaurant and food service increases, along with government dairy purchases, but warned that he’s not sure if those prices will hold after the USDA steps out of the market in June and July. The key factor then, he said, will be restaurants reopening and or customers being comfortable enough to return to them.
    Cash cheese prices soared Mother’s Day week, pulling Class III futures higher. The Cheddar blocks closed Friday at $1.78 per pound, up 47.5 cents on the week, highest since March 25, and 10.75 cents above a year ago.
    The barrels finished at $1.72, 45 cents higher on the week and 9.5 cents above a year ago. 5 carloads of block exchanged hands on the week at the CME and 15 of barrel.
    Cheese market tones were “resolutely more positive this week,” according to Dairy Market News. Midwest cheese manufacturing is busy and plant managers have increased output as food service orders have shifted much higher in recent weeks. Retail orders remain steady to stronger. Milk availability has begun to reflect upward production trends and spot milk Class plus price overages have been reported for only the second time this year but are expected to continue, says DMN, while contacts say “discounts may be nowhere to be found.”
    Western cheese sales were a bit more active this week. U.S. prices have indeed strengthened but are below usual levels and competitive, when compared to the rest of the world, so that has motivated international purchases. The market continues to recuperate from the effect of COVID-19. Cheese intakes from restaurants and food services were more active this week as a few of them reopened after being closed for a couple of months. Retail demand was steady compared to the previous week but higher than normal. Cheese supplies are plentiful and storage continues to tight up. Production was unchanged to lower.
    Butter also shot higher this week with a Friday close at $1.6450 per pound, up 35.5 cents on the week but 69.5 cents below a year ago, with 39 cars sold.
    Butter market tones are strengthening, according to DMN, but butter producers report more changes are afoot. Cream availability has tightened, notably. Cream prices currently remain within reach for churning but that’s changing. Retail butter demand is strong and while food service demand is lighter when compared to previous years, it has definitely grown, in some cases multiplied, when compared to previous weeks. Butter plant managers are concerned about fourth quarter supplies, says DMN, and are preparing to manage production and inventories.
    Grade A Nonfat dry milk closed Friday at 93.50 cents per pound, up 11 cents on the week but 11.25 cents below a year ago, on 27 sales.
    Whey inched up to 40.25 cents per pound Monday, highest since January 2019, but closed Friday at 39 cents, down 0.75 cents on the week but 5 cents above a year ago on 11 sales for the week.
    As mentioned earlier, the Agriculture Department raised its 2020 milk production estimate in its latest World Agricultural Supply and Demand Estimates (WASDE) report, based primarily on higher-than expected cow numbers. The report also gave us our first look at what the Department sees in 2021.
    2020 production and marketings were estimated at 222.4 and 221.3 billion pounds respectively, up 200 million pounds on production and 100 million pounds on marketings. If realized, 2020 production would be up 4 billion pounds or 1.8% from 2019.
    2021 production and marketings were estimated at 224.1 and 223.1 billion pounds respectively. If realized, 2021 production would be up 1.7 billion pounds or 0.8% from 2019.
    Cheese and whey price forecasts were raised from the previous month resulting in a higher Class III milk price forecast. Look for a 2020 average of $13.35 per hundredweight, up 60 cents from last month’s even bleaker estimate, and compares to $16.96 in 2019 and $14.61 in 2018. The 2021 average was projected at $14.20.
    Butter and nonfat dry milk price forecasts were lowered, resulting in a lower Class IV price estimate, now put at $11.90, down 25 cents from last month’s projection, and compares to $16.30 in 2019 and $14.23 in 2018. The 2021 Class IV average was estimated at $12.20.
    The WASDE’s feed-grain outlook for 2020-21 is for record high production and domestic use, greater exports, and larger ending stocks. The corn crop is projected at a record 16.0 billion bushels, up from last year on increased area and a return to trend yield. The yield projection of 178.5 bushels per acre is based on a weather-adjusted trend assuming normal planting progress and summer growing season weather, estimated using the 1988-2019 time period.
    While beginning stocks are down slightly from a year ago, total corn supplies were forecast at a record 18.1 billion bushels. Total U.S. corn use is forecast to rise relative to a year ago with increases for domestic use and exports. Corn used for ethanol is projected to increase from the 2019-20 COVID-19 reduced levels, based on expectations of a rebound in US gasoline consumption.
    With the total U.S. corn supply rising more than use, 2020-21 U.S. ending stocks are up 1.2 billion bushels from last year and if realized would be the highest since 1987/88. Stocks relative to use at 22.4% would be the highest since 1992-93. With larger stocks relative to use, the season average farm price is projected at $3.20 per bushel, down 40 cents from 2019-20 and the lowest since 2006-07.
    The outlook for soybeans is for higher supplies, crush, exports and lower ending stocks compared to 2019-20. The soybean crop is projected at 4.125 billion bushels, up 568 million from last year on increased harvested area and trend yields. Soybean supplies are projected up 5% from 2019-20 to 4.72 billion bushels, despite lower beginning stocks. Total US oilseed production was forecast at 123.2 million tons, up 16.1 million from 2019-20 mainly on higher soybean production.
    The U.S. soybean crush is projected at 2.13 billion bushels, up slightly from the 2019-20 forecast with higher soybean meal disappearance partly offset by lower soybean meal exports. U.S. soybean exports were forecast at 2.05 billion bushels, up 375 million from the revised forecast for 2019-20. With higher global soybean import demand for 2020-21 led by expected gains for China, U.S. export share is expected to rise to 34% from the 2019-20 record low of 30%. U.S. ending stocks are projected at 405 million bushels, down 175 million from the revised 2019-20 forecast. The U.S. season-average soybean price is projected at $8.20 per bushel, down 30 cents from 2019-20. Soybean meal prices are forecast at $290 per short ton, down $10.00.
    U.S. cotton forecasts include larger beginning stocks, consumption, exports, and ending stocks compared with the year before. Production was forecast at 19.5 million bales, 400,000 less than the year before, based on 13.7 million planted acres. Planted area is expected to be virtually unchanged from 2019-20, but harvested area is projected 2% lower. The yield is projected only slightly higher.
    The USDA’s latest Crop Progress report shows 67% of the U.S. corn crop is in the ground, as of the week ending May 10, up from 51% the previous week, 39% ahead of a year ago, and 11% ahead of the five year average. 24% is emerged, up from 9% a year ago, and 2% ahead of the five year average.
    38% of the soybeans are planted, up from 23% the previous week, 30% ahead of a year ago, and 15% ahead of the five year average. 32% of U.S. cotton is planted, up from 18% the previous week, 8% ahead of a year ago, and 5% ahead of the five year average.
    Dairy farmers and dairy processors around the world took aim this week at the European Union (EU) which is poised to begin government-financed intervention purchases of skim milk powder (SMP) and butter.
    They called on the EU to “avoid the market-distorting practices that significantly harmed them and the broader global dairy market in the past,” according to a joint press release from National Milk and the International Dairy Foods Association.
    A coalition of dairy organizations from Argentina, Brazil, Chile, Costa Rica, Ecuador, Guatemala, Mexico, Paraguay, Uruguay and the U.S. warned that “exporting large quantities of government-purchased SMP and butter at below-market rates onto the world market will prolong the deeply challenging environment under which dairy sectors are operating worldwide.”
    They stated, “The EU intervention program would artificially distort prices for an extended period and displace commercial competition just as the world begins to recover from the immediate impacts of the COVID pandemic. The groups urged the EU to adopt measures to spur consumption within the EU and encourage its producers to implement appropriate production practices to survive during this difficult time.”
    Cooperatives Working Together (CWT) member cooperatives accepted 11 offers of export assistance this week from CWT to help capture sales of 1.27 million pounds of Cheddar and Monterey Jack cheese, 1.118 million pounds of butter, and 546,747 pounds of whole milk powder.
    The product is going to customers in Asia, the Middle East, and South America through September and raised CWT’s 2020 exports to 17.346 million pounds of American-type cheeses, 5.758 million pounds of butter (82% milkfat), 1.96 million pounds of anhydrous milkfat, 2.477 million pounds of cream cheese, and 18.428 million pounds of whole milk powder. The product is going to 24 countries and is the equivalent of 497 million pounds of milk on a milkfat basis, according to CWT.
    The dairy markets will plenty to feed on next week, starting with the Global Dairy Trade auction on Tuesday, April Milk Production report on Wednesday, plus the April Cold Storage and Slaughter reports on Thursday.