It was a week of contrasts as we entered June Dairy Month. Cash block cheese set a new record high and yet the Agriculture Department announced the May Federal order Class III benchmark milk price at its lowest level in 11 years.
    The COVID-19-incited plunge in milk prices fell to $12.14 per hundredweight, down 93 cents from April, $4.24 below May 2019, and the lowest it has been since September 2009. The 2020 Class III average stands at $15.10, up from $15.05 a year ago and $14.25 in 2018.
    Late Friday morning Class III futures prices portended a rebound in June to $19.90, with July at $18.77; August, $17.47; September, $16.97; October, $16.87; November, $16.61; and December at $16.31.
    The May Class IV price is $10.67, down 73 cents from April, $5.62 below a year ago, and the lowest since August 2009. The Class IV average stands at $13.96, down from $15.81 a year ago and compares to $13.42 in 2018.
    Cheddar block cheese set a record $2.5050 per pound on Tuesday but pushed even higher, closing Friday at $2.5525, up 32.25 cents on the week, seventh week of gain, 80 cents above a year ago, and surpassed the previous high of $2.45 on Sept. 19, 2014.
    The barrels climbed to $2.37 Thursday but closed Friday at $2.36, up 33.75 cents and 82.5 cents above a year ago but a whopping 19.25 cents below the blocks. Six cars of block were sold and 10 of barrel.
    FC Stone dairy broker Dave Kurzawski says there is concern this rally will end as quickly as it started. He pointed out that, “The wave of buying that began with export orders in April and gave way to pipeline refilling and new orders as states opened up in May, was given rocket fuel by government buying. In particular, the U.S. Food Box Program, which likely gets the most press because it’s the most unusual government program involving dairy in recent memory.”
    “Food Box Program participants bid a price for all rounds up front,” Kurzawski explained, “But Round quantities have yet to be determined. In the next couple of weeks we’re going to get some details as to Round 2 of the program and what those volumes may or may not look like. In other words, now that ‘Stranger Things’ is a dairy market headline, not just a Netflix series, we have to ask how many dairy boxes can be filled at higher levels. Will participants back out, unable to make the economics work? Will the USDA permit a price rebid?”
    Meanwhile, Midwest cheesemakers are busy, according to Dairy Market News. Milk was still at somewhat affordable rates on the spot market, $1 to $3 over Class III at mid-week. Cheesemakers who had been selling milk are now using it and most are running 6 to 7 day weeks. Pizza establishments in the Midwest and East are busy after areas reopened from COVID-19 closures. Retail cheese sales remain busy and newly produced cheese is very tight. DMN says, “Calling cheese markets bullish would be understated,” as some expect $3 block prices ahead.
    Block cheese is tight in the West, says DMN, and when food service demand dried up due to COVID-19, many manufacturers pivoted to selling the orphaned cheese into export markets. With the easing of shelter at home restrictions, there has now been a surge in food service buying, but loads of cheese are hard to find as a lot of cheese is tied up in short-term contracts with export buyers.
    Government purchases and food box programs have also tightened stocks. Some of the companies with the food box awards are reportedly trying to buy cheese off of the national exchanges but are struggling to find the product they need in the time allotted, plus the run up in prices isn’t making things easy.
    Butter jumped 29 cents Thursday and hit $2.0150 per pound but relapsed Friday, losing 9 cents, and fell back to a $1.9250 close, still 26.5 cents higher on the week but a long 47.25 cents below a year ago. 42 cars were sold on the week.
    Kurzawski credited restaurants re-opening and seasonal ice cream pull, but says a lack of available cream is the big issue. “Cheese plants may also play a role,” he said, “as they hold onto more cream to mix with skim. That may reveal an overall snugness on the available supply of fresh milk. Demand has been the key driver, but perhaps supply of fresh milk, or lack thereof, is playing a larger role.”
    Butter makers have a growing concern of shortages in the fall, says DMN. Interest for bulk butter has increased significantly and spot cream prices have “pushed past the point of financial feasibility.” Retail ordering remains busy and food service orders have grown to replenish nearly depleted pipelines although the numbers still lack in comparison to previous years, but so does cream.
    Western cream supplies are tightening. Some butter makers are taking advantage of higher prices by selling cream instead of producing butter. Butter inventories are still plentiful. Bulk butter interest has been flat and retail sales backed off slightly this week, but remain good. Restaurants and food services are reopening but butter requests remain below expectations, according to DMN.
    Grade A nonfat dry milk weakened and finished at 97.75 cents per pound, down 5.25 cents on the week and 7.75 cents below a year ago, on 24 sales reported.
    CME dry whey, after slipping 5.75 cents the previous week, closed Friday at 34.50 cents per pound, up 4 cents on the week but 2 cents below a year ago, with 26 sales reported.
    Buttermilk and whole milk powder nudged the Global Dairy Trade’s (GDT) weighted average 0.1% higher Tuesday, following a 1.0% gain on May 19. Sellers brought 48.4 million pounds of product to market, highest since March 17.
    Buttermilk powder was up 9.4%, with whole milk powder up 2.1%, after it slipped 0.5% in the last event.
    Cheddar led the decline, down 5.3%, after dipping 6% last time. Butter was down 4.4%, after a 1.9% decline, and anhydrous milkfat was down 2.9%, after rising 2.7%. Skim milk powder was off 0.5%, after jumping 6.7% on May 19.
    FC Stone equated the GDT 80 percent butterfat butter price to $1.6069 per pound US, down 7.6 cents from the last event. CME butter closed Friday at $1.9250. GDT Cheddar cheese equated to $1.5969 per pound, down 15.6 cents, and compares to Friday’s CME block Cheddar at a world high $2.5525. GDT skim milk powder averaged $1.1477 per pound and whole milk powder averaged $1.2522. CME Grade A nonfat dry milk closed Friday at 97.75 cents per pound.
    U.S. dairy exports were mixed in April. The USDA’s latest data shows total cheese exports at 58.9 million pounds, down 17.6% from April 2019 and the third month in a row they were below year ago levels. Butter fell to 2.5 million pounds, down 7.7%. Combined nonfat dry milk/skim milk powder totaled 149.8 million pounds, up 19.9%, and whole milk powder was up 17%. Dry whey exports, at 37.3 million pounds, were up 20.4% from a year ago.
    HighGround Dairy points out that total dairy exports to Mexico were the weakest since July 2017 and the lowest for the month of April since 2014. The most notable losses were on nonfat dry milk and cheese.
    U.S. dairy exports continue via the Cooperatives Working Together program. CWT member cooperatives accepted six offers of export assistance the first week of June on sales of 1.26 million pounds of Cheddar going to customers in Asia.
    You’ll recall that April milk output was reported at 18.7 billion pounds, up 1.4% from April 2019, but that included milk that was dumped which amounted to an estimated 187 million pounds, according to the Dairy and Food Market Analyst. The Dairy Products report shows where the milk that wasn’t dumped ended up.
    April total cheese output slipped to 1.07 billion pounds, down 5.1% from March and 1.7% below April 2019. The year to date total stood at 4.3 billion pounds, up 0.1% from a year ago.
    Wisconsin produced 266.9 million pounds of the April total, down 6.6% from March and 4.6% below a year ago. California output, at 200.8 million pounds, was down 4.8% from March and 5.4% below a year ago. Idaho contributed 85.5 million pounds, down 4.2% from March but 2.0% above a year ago.
Italian type cheese totaled 451.7 million pounds, down 7.2% from March and 5.0% below a year ago. YTD output came to 1.87 billion pounds, down 1.1%.
    American type cheese totaled 446.0 million pounds, down 0.9% from March and 3.6% below a year ago. YTD American was at 1.75 billion pounds, up 1.6%.
    Mozzarella output fell to 352.5 million pounds, down 5.4% from a year ago, with YTD at 1.48 billion pounds, down 1.0%.
    Cheddar, the cheese traded at the CME, jumped to 330.4 million pounds, up 12.1 million pounds or 3.8% from March and 23.9 million or 7.8% above April 2019. Year to date Cheddar stood at 1.3 billion pounds, up 1.8% from a year ago.
    Butter production climbed to a record high 215.7 million pounds, up 19.8 million pounds or 10.1% from March and a whopping 43.3 million pounds or 25.1% above a year ago, the ninth consecutive month it topped a year ago. YTD butter output stood at 793.1 million pounds, up a hefty 9.5% from 2019.
    Dry whey totaled 77.8 million pounds, down 5.2% from March but 3.8% above a year ago, with YTD at 320.7 million pounds, up 3.0%. Dry whey stocks totaled 75.4 million pounds, up 3.7% from March and 0.5% below a year ago.
    Nonfat dry milk output totaled 183.3 million pounds, up 10.9 million pounds or 6.3% from March and 15.5 million or 9.3% above 2019. YTD powder is at 691.1 million pounds, up 4.7% from 2019. Stocks swelled to 392.6 million pounds, up 43.5 million or 12.5% from March and 114.3 million or 41.1% above 2019.
    Skim milk powder output, at 40.4 million pounds, was down 400,000 pounds or 1.1% from March and 5.8 million pounds or 12.6% below a year ago. YTD skim powder hit 159.8 million pounds, down 2.9% from a year ago.
    FC Stone stated “The report looks overwhelmingly bearish versus current spot and futures price levels. Of course, that was mostly as expected given that we are looking back at April data. The shift that occurred due to the Covid-19 outbreak appears to have favored higher production of class IV products and more production of Cheddar versus the other cheeses,” adding that “It appears the physical participants wanted to know there was an outlet for the cheese in that they could at least sell Cheddar on the spot exchange.”
    Back on the farm, lower feed prices could not offset a much lower All Milk price in April so the month’s milk feed price ratio fell for the fifth consecutive month. The USDA’s latest Ag Prices report put the ratio at 1.84, down from 2.23 in March and compares to 2.11 in April 2019.
    The US All-Milk price averaged $14.40 per cwt), down $3.60 from March and is $3.30 below April 2019.
    California’s All Milk price plunged to $14.20, down $3.40 from March and $3.20 below a year ago. Wisconsin’s, at $14, was down $4.10 from March and $3.90 below a year ago.
    The national average corn price averaged $3.29 per bushel, down 39 cents per bushel from March and 24 cents per bushel below April 2019. Soybeans averaged $8.35 per bushel, down 11 cents from March but 7 cents per bushel above a year ago. Alfalfa hay averaged $181 per ton, up $6 per ton from March but $17 per ton below a year ago.
    The April cull price for beef and dairy combined averaged $64 per cwt., down $3.50 from March, $2.70 above April 2019, but is $7.60 below the 2011 base average of $71.60 per cwt.
    But dairy farm margins continued to improve over the second half of May on strength in the milk market while feed costs held steady, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.
    The MW stated “Class III milk continues to advance on strength in cheese as June futures approach $20 per cwt., sending nearby margins over the 90th percentile of the past 10 years. Deferred contracts also followed this strength to a lesser degree, with margins in both fourth and first quarter at the 80th percentile, offering dairy producers renewed opportunities to secure forward profitability.”
    “The reopening of foodservice outlets is increasing demand for cheese which is behind the recent strength. Data from Open Table indicate that some markets in states which have begun to re-open their economies and allow in-dining service have recovered 40%-50% of their capacity which is encouraging. The strength comes despite growth in both milk production and stocks,” says the MW.
    Speaking of COVID, Hoards Dairyman Managing Editor Corey Geiger, reported in the June 8 Dairy Radio Now broadcast, on a repeated question in their Dairy Livestream from farmers, asking if they can get money from the Coronavirus Food Assistance Program (CFAP) if they’re already receiving payments from Dairy Margin Coverage (DMC) or Dairy Revenue Protection (DRP).
    National Milk Producers Federation CEO Jim Mulhern stated that the only restriction to the CFAP is the cap on the payment amount per owner. He said “There was a rumor early on that a producer’s participation in risk management programs was going to jeopardize or would preclude that milk from being covered by these programs but the short answer is that a producer’s participation in risk management programs ranging from the dairy margin coverage program through dairy revenue protection, livestock gross margin, hedging, and futures do not preclude one’s milk coverage.” See NMPF’s website for complete details.
    The USDA’s latest Crop Progress report shows 93% of the US corn crop is planted, as of the week ending May 31, up from 88% the previous week, 29% ahead of a year ago, and 4% ahead of the five year average. 78% is emerged, up from 64% the previous week, 36% ahead of a year ago, and 5% ahead of the five year average.
    75% of the soybeans are planted, up from 65% the previous week, 39% ahead of a year ago, and 7% ahead of the five year average. 52% are emerged, 35% ahead of a year ago and 8% ahead of the five year average.
    66% of US cotton is planted, up from 53% the previous week, 1% behind a year ago and dead even with the five year average.