The Agriculture Department announced the February Federal order Class III benchmark milk price at $17.00 per hundredweight, down 5 cents from January, $3.11 above February 2019, and the highest February Class III since 2014.  
    Late Friday morning Class III futures portended a March price at $16.36; April, $16.02; May, $16.29; and June at $16.51; with a peak at $17.13 in October.
     The February Class IV price is $16.20, down 45 cents from January, 34 cents above a year ago, and the highest February Class IV price since 2014.
    You’ll recall that January US milk output hit 18.8 billion pounds, up 0.9% from January 2019. The latest Dairy Products report shows where the milk went.
    Cheese output totaled 1.103 billion pounds, down 2.3% from December but 0.4% above January 2019. That’s a record high for January, according to the Daily Dairy Report.
    Wisconsin produced just under 274 million pounds of the total, down 1.6% from December and 0.9% below a year ago. California output fell to 212.0 million pounds, down 2.4% from December and 0.9% below a year ago. Idaho cheese came in at 85.2 million pounds, down 4.1% from December and 1.7% below a year ago. Minnesota output totaled 61.9 million pounds, down 2.3% from December and 5.2% below a year ago, while New Mexico output climbed to 83.9 million pounds, up 1.6% from December and 4.65 above a year ago.
     Italian type cheese totaled 482.2 million pounds, down 0.2% from December but 0.4% above a year ago.
    American cheese totaled 436.3 million pounds, down 4.9% from December and 0.7% below a year ago. Mozzarella, at 380.2 million pounds, was up 0.1%.
    Cheddar output, the cheese traded at the CME, fell to 317.4 million pounds, down 15.9 million pounds or 4.8% from December and was 5.8 million or 1.8% below January 2019, and helps explain the strong prices.
    Butter production climbed hit 190.7 million pounds, up 13.9 million pounds or 7.9% from December and 1.1 million pounds or 0.6% above a year ago, the eighth consecutive month butter output topped that of a year ago and was also a record high for the month of January.
    Dry whey totaled 84.8 million pounds, up 6.3% from December and 4.4% above a year ago. Stocks fell to 66.7 million pounds, down 7.7% from December and 16.0% below a year ago.
    Nonfat dry milk production hit 173.2 million pounds, up 8.5 million pounds or 5.2% from December and 500,000 pounds or 0.3% above a year ago. Stocks climbed to 279.2 million pounds, up 31.7 million or 12.8% from December but were 7.2 million pounds or 2.5% below the 2019 level.
    Skim milk powder output slipped to 51.5 million pounds, down 2 million pounds or 3.7% from December but was 11.7 million pounds or 29.4% above a year ago.
    Tuesday’s Global Dairy Trade (GDT) auction saw its weighted average of products offered slip 1.2%, following the 2.9% drop on February 18 and 4.7% plunge on February 4. A year ago, the first GDT’s weighted average for March was up 3.3% and was the seventh consecutive month of gain.
    Buttermilk powder led the declines Tuesday, down 4.8%, followed by GDT Cheddar, down 4.7%, after gaining 5.3% in the last event. Skim milk powder was down 3.2%, after a 2.6% drop, and anhydrous milkfat was down 1.7%, following a 5.5% dive. Whole milk powder was off 0.5%, after a 2.6% drop last time.
    Lactose was up 5.7%. Butter was up 1.0%, after a 3.9% decline, and rennet casein inched 0.5% higher.
    FC Stone equated the GDT 80 percent butterfat butter price to $1.8282 per pound US, up 1.8 cents from the last event. CME butter closed Friday at $1.8550. GDT Cheddar cheese equated to $1.9437 per pound, down 10.9 cents, and compares to Friday’s CME block Cheddar at a bargain $1.75. GDT skim milk powder averaged $1.2460 per pound and compares to $1.2882 last time. Whole milk powder averaged $1.3389, down from $1.3455. CME Grade A nonfat dry milk closed Friday at $1.1150 per pound.
    Meanwhile, US exports of nonfat dry milk and skim milk powder surged higher to a record January volume and remained on track with the strong shipments seen monthly since September, according to HighGround Dairy (HGD). Product moving to Mexico was down 10% for the fourth consecutive month, says HGD, but continued shipments into Southeast Asia kept demand strong in the month.
    “Total cheese exports eked out a gain versus prior year and were supported by shipments moving south to Mexico,” says HGD, up 21% from a year ago but South Korea and Japan imported less US cheese to kick off the year.
    “January marked the 17th consecutive month of losses for US dry whey exports and against steep prior year losses,” says HGD. Exports to China were down 13% year over year and “the weakest for January in four years.”
    Cheddar block cheese started March by ending three weeks of loss. It shot up to $1.7675 per pound Monday but closed Friday at $1.75, up 2.75 cents on the week and 21.5 cents above a year ago. The barrels dropped to $1.4775 by Friday, down 11.25 cents on the week, 11.25 cents above a year ago, but at an unsustainable 27.25 cents below the blocks. 7 cars of block sold and 17 of barrel.
    A number of cheese producers are foregoing the spot milk markets for internally supplied milk, according to reports to Dairy Market News. Spot milk prices were similar to the previous week. Milk is and has been available and maintenance issues at some cheese plants had milk handlers struggling to find destinations.
    Cheese sales remain steady to slow, depending on the variety. Barrel producers are limiting production to meet contractual obligations while other traditional-style cheesemakers are running seven-day workweeks. Market tones are quiet to bearish, says DMN, and “Contacts have begun to accept, but not embrace, the large block to barrel CME price gap.”
     Western cheese production remains active as low-cost milk continues to flow to the vats. Domestic cheese sales are stable to increasing, especially for blocks. Some processors are sending export shipments without incident while others were having logistic issues in moving cheese to the final destination. Current affordable prices are attracting international buyers. Cheese stocks are readily available but the coronavirus outbreak “continues to bring more uncertainty into the market,” says DMN.
    Butter jumped 10.5 cents Monday and climbed to $1.88 per pound by Thursday. It closed Friday at $1.8550, 13 cents higher on the week but 41.25 cents below a year ago. 8 cars found new homes on the week down from 65 the previous week.
    Butter producers continue to report plentiful cream supplies, which naturally leads to heavier churning, some at capacity. Market tones saw some benefits of the ‘new crop’ butter rule set forth every March on the CME. Contacts suggest that some of the pressure in recent weeks could have been caused by sellers clearing butter loads produced prior to December 2019, which can no longer be sold after the onset of March.
    That said, contacts report there is still plenty of butter and inventories are growing ahead of spring demand upticks. Plant managers are hopeful for Class II production to pick up and take more of the ever-present cream supplies.
    Western butter manufacturers report that ice cream production is slowly increasing and using more cream. While this is relieving some of the pressure on butter makers, there is still plenty of cream for the churns and many are running at or near capacity. Butter inventories continue to rise, albeit at a slower pace. Retail demand is steady but lower prices have spurred bulk butter demand.
    Grade A nonfat dry climbed to $1.14 per pound Tuesday but finished Friday at $1.1150, up 5 cents on the week and 14 cents above a year ago on 38 sales.
    Spot dry whey saw its Friday closing at 34.75 cents per pound, 0.75 cents higher on the week and 0.75 cents above a year ago, with 10 sales on the week.
    A lower All Milk price and higher feed costs pulled the January milk feed price ratio lower, second month in a row of decline. The Ag Prices report put the ratio at 2.41, down from 2.55 in December but compares to 2.06 in January 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. One pound of milk purchases 2.41 pounds of dairy feed containing that blend.
    The U.S. All-Milk price averaged $19.60 per hundredweight (cwt.), down $1.10 from December but is $3 above January 2019. California’s All Milk price was $19.40, down 40 cents from December but $3.15 above a year ago. Wisconsin’s, at $19.40, was down $1.90 from December but $3.20 above a year ago.
    The national average corn price averaged $3.79 per bushel, up 8 cents per bushel from December and 23 cents per bushel above January 2019. Soybeans averaged $8.84 per bushel, up 14 cents from December and 20 cents per bushel above a year ago. Alfalfa hay averaged $171 per ton, down $4 from December and $8.00 per ton below a year ago.
    Looking at the cow side of the ledger; the January cull price for beef and dairy combined averaged $61.40 per cwt., up $2.10 from December, $7.20 above January 2019, but is $10.20 below the 2011 base average of $71.60 per cwt.
    Milk cow replacements averaged $1,300 per head for the quarter in January, down $10.00 per head from October, but $160 per head above January 2019. Cows averaged $1400 per head in California, unchanged from October but $300 above a year ago. Wisconsin cows averaged $1260 per head, down $10 from October but $140 above January 2019.
    Dairy farm margins continued to weaken the second half of February as the milk market remained under pressure despite generally steady feed costs, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.
    “Although margins have retreated from very profitable levels,” the MW stated, “they remain relatively strong from a historical perspective. Ongoing headwinds from the expanding global coronavirus outbreak have pressured milk prices as rising production and stocks raise concern over near and medium-term demand. January Milk Production increased 0.9% to 18.8 billion pounds according to USDA, with greater productivity driving the gains.
    Average yields were up 20 pounds to 2,010 pounds per cow, the first time that per-cow production exceeded 2,000 pounds in January. USDA reported the January milking herd at 9.348 million cows, 6,000 head lower than last year, but up 5,000 from December and up 31,000 head from August.”
    The MW also cited swelling cheese and butter stocks in January, according to the latest Cold Storage report, which I detailed last week.
    Milk output is mostly steady to increasing in all the regions of the US, according to the USDA’s weekly update. Class I sales are generally stable, but increased a bit in Florida. Southeastern bottlers and manufacturers have enough milk to forego taking the loads they were getting from the Midwest.
    Midwest Class III milk is currently more steeply discounted compared to the previous year. In some parts of the West, it is challenging to find additional homes for milk loads. While milk constituent levels are up in the Pacific Northwest, they are low in the Midwest.
    Looking down under, January to December 2019 full year milk production in Australia decreased 4.3% from calendar year 2018, according to Dairy Australia, and officially joins New Zealand with calendar year 2019 milk output below 2018. Average milkfat was steady with 2018 and average protein was up 3.8%.
    New Zealand based dairy officials are talking about slightly lower milk production benefiting dairy producers overall by helping to maintain pay prices, says DMN. Lower production relates to health concerns and weather factors.
     “The quarantines in China have resulted in a big decline in eating out and in store food shopping in affected areas,” says DMN, although the February 28 Dairy and Food Market Analyst (DFMA) stated that “Our contacts have reported significant improvements at Chinese ports.” “Chinese buyers have started contacting suppliers of dairy products in the USA and elsewhere, looking to buy at these lower price levels,” the DFMA reported. “This is promising news and a hopeful signal. But it is still far too early to celebrate and a rebound in dairy prices is far from imminent.”
    Cooperatives Working Together members accepted 44 offers of export assistance this week to help capture sales of 2.166 million pounds of Cheddar, Gouda and Monterey Jack cheese, 782,641 pounds of butter, 562,179 pounds of cream cheese, and 661,387 pounds of whole milk powder.
    The product is going to customers in Asia, Central and South America, the Middle East and North Africa, through June and raised CWT’s 2020 exports to 4.896 million pounds of American-type cheeses, 1.19 million pounds of butter (82% milkfat), 1.39 million pounds of cream cheese and 5.291 million pounds of whole milk powder. The product is going to 19 countries.