U.S. milk prices are coming down. The Agriculture Department announced the March Federal order Class III price at $16.25 per hundredweight, down 75 cents from February but still $1.21 above March 2019 and the highest March Class III since 2014. The three month average stands at $16.77, up from $14.30 a year ago, and compares to $13.87 in 2018 but that average will be falling as well.
    The COVID-19 outbreak has resulted in Class III futures being pulled sharply lower and late Friday morning the April price was at $14.05; May, $12.22; June at $13.11, with a peak in October of $15.01, a price that weeks ago topped $17.00
    The March Class IV price is $14.87, down $1.33 from February and 84 cents below a year ago and the lowest Class IV price since September 2018. Its three month average is at $15.91, up from $15.68 a year ago and $13.01 in 2018.
    Using futures market expectations as of March 31, HighGround Dairy says “the Class III and Class IV are estimated to decline at rates similar to the 2008-09 dairy market selloff. While current futures market projections do not predict sub- $10 per cwt Class III prices like those seen in 2009, Class III could drop below $13 for the first time since 2016. However, it has been more than a decade since Class IV dropped below $12, with prices likely to hit levels not seen since 2009.”
    There is help available for farmers in the $2 trillion stimulus package dubbed the Coronavirus Aid, Relief, and Economic Security Act (CARES). The bill includes $9.5 billion to assist agriculture producers impacted by the coronavirus, including specialty crop producers; producers who support local food systems such as farmers markets, schools, and restaurants; and livestock and dairy producers. The National Milk Producers Federation is developing recommendations for the USDA on how to best help dairy producers and have called for reopening signup in the Dairy Margin Coverage program for calendar year 2020.
    Hemorrhaging continued in the dairy markets in the “April Fool’s Day”Week, due to the COVID-19 epidemic. The Cheddar blocks saw nine consecutive days of decline and closed the first Friday of April at $1.15 per pound, down 44 cents on the week, lowest price in 11 years (July 2009) and 51 cents below a year ago.
    The barrels saw a close at $1.1375, 20.25 cents lower on the week and the lowest since July 2009, 43.75 cents below a year ago, and 1.25 cents below the blocks. Only 2 cars of block exchanged hands on the week, 19 for the month of March, down from 31 in February. There were 34 cars of barrel that found new homes on the week, 79 in March, down from 80 in February.
    Cheese contacts are hopeful for a quick turnaround to the COVID-19 situation, says Dairy Market News, as retail accounts have slowed along with ailing food service orders. Milk is plentiful in the Midwest and, at mid-week, only discounted prices were reported. Cheesemakers say milk handlers are calling regularly as plentiful milk is equating to a growing cheese supply. Cheese markets are “resolutely bearish due to precipitous drops on the CME,” says DMN. Managers are in limbo when it comes to taking on extra milk and scheduling production.
    Retail cheese sales in the west continue to be strong but are down from the previous week. Orders from food service and international buyers are stable to lower. Cheese outputs are steady but milk is abundant. Several cheese makers took additional milk if they had the space for its processing. Cheese inventories were less tight than the previous week but are “sufficient to fill all needs.”
    Butter’s meltdown also continued, closing the week at $1.28 per pound, down 20.75 cents on the week, 99 cents below a year ago, and the lowest it has been at since October 2009. 22 cars were sold on the week, 38 on the month, down from a whopping 231 in February.
    Like many in the dairy industry, butter plant managers are facing a growing number of challenges due to COVID-19. Food service demand is bleak. Retail ordering is still firm, but with lighter restaurant and little to zero orders into educational institutions, butter inventories are growing. National contacts say Midwestern butter plants are taking more cream than their coastal counterparts. DMN says “While ice cream manufacturers and other plants that normally take on cream are running skeleton crews or even closed, the onus of current cream inventories falls on butter makers. Butter market prices are precipitously declining at disquieting levels and markets are resolutely bearish.”
    Western butter makers say offers for cream are abundant but they cannot take on more risk. Churning is active and producers are making more butter than can be sold in the near term so stocks are growing. Demand from food service is virtually non-existent, and while retail demand is higher than usual, it is slowing. Pricing for bulk butter has become challenging. A price set one day could lose a sizable portion of its value the next trading day, according to DMN.
    Grade A nonfat dry milk saw its close at 86.25 cents per pound Friday, down 5.75 cents on the week, 12.5 cents below a year ago, and the lowest it has been since November 2018. 43 sales were reported on the week, 195 for the month of March, up from 105 in February.
    CME dry whey was the one exception in the falling markets, and held at 33 cents per pound for 11 consecutive sessions, 1.5 cents below a year ago. Nothing was sold on the week, but 23 loads for the month up from 8 in February.
    The National Restaurant Association stated on its website that “Since March 1, the industry has lost more than 3 million jobs and $25 billion in sales, and roughly 50% of restaurant operators anticipate having to lay off more people in April,” due to the COVID-19 pandemic. Many restaurants will sadly close permanently.
    How low prices will go is anybody’s guess. FC Stone’s Dave Kurzawski reminded us in his March 31 Early Morning Update that “The US did away with the price support system in the 2014 Farm Bill and switched to a system where the government would buy dairy commodities and donate them to people in need when farm gate margins fell to low levels. However, that program was dropped in the 2018 Farm Bill. The $2 trillion aid package passed by Congress does allocate $450 million for purchases of commodities to be donated to food shelves and you can be sure dairy will be part of that, but we do not have a hard floor directly under US prices,” Kurzawski warned.
    Speaking in the April 6 Dairy Radio Now broadcast, Kurzawski admitted there isn’t much in the way of a silver lining to look for right now. “We’re in a state of flux in terms of understanding what demand really looks like. On one hand we have seen tremendous retail sales, even on fluid milk, but foodservice declines are huge.” Processors are hard pressed to make more product they can’t sell.
    He adds that “dumping of milk is happening around the United States,” and while that’s very disheartening to producers, he warned of the longer term consequences. “This is the time of year we normally make a lot of milk and dairy products and put them in coolers,” he said, and not doing that will have ramifications later in the year.
    “If the U.S. economy gets humming again, and that is a wild card, but two, three, or four months down the road, we.re going to walk into a shortfall of inventory if we’re dumping milk today,” he concluded.
    National Milk’s senior vice president for membership services initiatives, Chris Galen, said in a podcast this week “Dairy farmers need effective policy advocacy in Washington as the economic effects of coronavirus are dealt with for months, in both anticipated and unanticipated ways. This is a really challenging time because the COVID-19 outbreak is affecting every aspect of our society. In dairy, we saw prices finally begin to rise at the end of last year after a prolonged trough. There’s a lot of economic stress on the farm, and then this seems like it’s adding insult to injury.”
    “It’s doubly important we advocate for the economic interests of our members because the typical dairy farmer, he’s really, she’s really at the end of their rope at the end of the last few years. And now we have to deal with the great unknown of how long the recession that’s caused by the virus is going to continue.”    
    You’ll recall that February US milk output, adjusted for the extra “Leap Day,” was up 1.5% from February 2019. The USDA’s February Dairy Products report shows where the milk ended up.
    February cheese output totaled 1.03 billion pounds, down 1.0% from January, when adjusting for the leap day, but 0.1% above February 2019. That put the two month output up 0.6% from a year ago.
    American cheese totaled 415.0 million pounds, up 1.4% from January and 2.5% above a year ago, with YTD up 1.0%.
    Mozzarella, at 353.6 million pounds, was down 1.0% from January, 1.7% below year ago, with YTD off 0.5%
    Cheddar output, the cheese traded at the CME, was up 1.0% from January, up 3.7% from a year ago, with YTD up 1.2%
    Butter production came in at 179.2 million pounds, down 0.9% from January but 5.2% above a year ago, the ninth consecutive month butter output topped that of a year ago. YTD butter is up 3.6%. Revisions added 2.7 million pounds to January’s total.
    Dry whey for human consumption totaled 75.0 million pounds, down 3.0% from January and 1.7% below a year ago. YTD is up 1.0%. Stocks climbed to 73.7 million pounds, up 18.6% from January and 8.0% above a year ago.
    Nonfat dry milk output totaled 156.1 million pounds, down 5.3% from January and 2.0% below a year ago, with YTD powder up 0.1%. Stocks climbed to 317.5 million pounds, up 37 million or 13.2% from January and were 7.1 million pounds or 2.3% above the 2019 level.
    Skim milk powder amounted to 40.4 million pounds, up 7.7% from January and 9.6% above a year ago, with YTD up 5.2%.
    FC Stone notes that “Nonfat dry milk and skim milk powder had a bearish tilt in February. We saw production drop by some 9 million pounds but stocks increased 37 million pounds. Butter production was 7 million pounds higher than forecast and Cheddar production had 18 million pounds more than expected.”
    A falling All Milk price pulled February’s milk feed price ratio lower for the third month in a row and the lowest since September 2019. The USDA’s latest Ag Prices report put the ratio at 2.34, down from 2.41 in January but compares to 2.07 in February 2019.
    The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk purchases 2.34 pounds of dairy feed containing that blend.
    The U.S. All-Milk price averaged $18.90 per hundredweight (cwt.), down 70 cents from January but is $2.10 above February 2019. California’s All Milk price was $18.60, down 80 cents from January but $2.10 above a year ago. Wisconsin’s, at $19.10, was down 30 cents from January but $2.80 above a year ago.
    The national average corn price averaged $3.78 per bushel, down a penny per bushel from January but 18 cents per bushel above February 2019. Soybeans averaged $8.59 per bushel, down25 cents from January but 7 cents per bushel above a year ago. Alfalfa hay averaged $171 per ton, unchanged from January but $9.00 per ton below a year ago.
    Looking at the cow side of the ledger; the February cull price for beef and dairy combined averaged $65.80 per cwt., up $4.40 from January, $6.90 above February 2019, but is $5.80 below the 2011 base average of $71.60 per cwt.
    Regarding those ever important feed prices, the Daily Dairy Report’s Sarina Sharp warned in the March 27 Milk Producers Council newsletter, that “Ethanol plants are slowing output or closing altogether, disrupting feed markets throughout the Corn Belt. The corn basis had been sky-high since the rains became problematic last spring, but now the basis is close to zero in much of the Corn Belt. Cash corn values are down hard. Dairy producers and other livestock growers who fed distillers grains will have to adjust their rations, which likely means more soybean meal purchases. Unfortunately, soybean meal is one of the few commodities that has been rising in value.”
    US farmers say that they will plant 97 million acres of corn this year, according to the USDA’s Prospective Plantings report issued this week. If realized, that would be an increase of 7.29 million acres or 8% from last year. Planted acreage is expected to be up or unchanged in 38 of the 48 estimating States, says USDA.
    Soybean planting will total 83.5 million acres, up 10% from last year, with planted acreage expected to be up or unchanged in 22 of the 29 estimating States. Cotton planting is estimated at 13.7 million acres, down less than 1% from 2019.
    Cooperatives Working Together members accepted 11 offers of export assistance this week to help capture sales of 291,010 pounds of Cheddar cheese, 299,829 pounds of cream cheese, and 1.629 million pounds of whole milk powder. The product is going to customers in Asia, Central and South America, and the Middle East and will be delivered through June.
    CWT’s 2020 exports total 8.856 million pounds of American-type cheeses, 1.276 million pounds of butter (82% milkfat), 1.84 million pounds of cream cheese, and 8.79 million pounds of whole milk powder and will go to 22 countries.