The Agriculture Department announced the June Dairy Month Federal order Class III benchmark milk price at $21.04 per hundredweight (cwt.), up a record month to month increase of $8.90 from May and $4.77 above June 2019. It is the highest Class III price since November 2014 and boosts the 2020 Class III average to $16.09, up from $15.25 at this time a year ago and $14.41 in 2018.
    Thursday’s Class III futures settlements portended a July Class III at $22.97; August, $20.95; September, $18.81; October, $17.74; November, $17.16, and December was at $16.36.
    The June Class IV price is $12.90, up $2.23 from May but $3.93 below a year ago. Its six month average sits at $13.78, down from $15.98 a year ago and compares to $13.67 in 2018.
    Strong milk prices are indeed good news for farmers however the University of Wisconsin’s Dr. Mark Stephenson and Cornel’s Dr. Andrew Novakovic warn that “For the next few months, producers will very likely be frustrated by seeing that Class III prices have rebounded dramatically from the pandemic induced lows but that their milk check doesn’t reflect all of the optimism from dairy headlines.”
    They give a detailed explanation in a paper entitled “Making Sense of Your Milk Price in the Pandemic Economy: Negative PPDs, Depooling, and Reblending.”You can find it at
    Clouds on the horizon include the fact that high cheese prices caused some retailers to cancel cheese orders last week, according to the June 26 Dairy and Food Market Analyst (DFMA). The Analyst stated “With Coronavirus cases spiking, two states, with 15% of the USA population (Florida and Texas), announced initiatives to roll-back re-opening steps. Nine other states have paused re-openings (12% of the USA) for a total of 27% of the country.”
    There was good news in the Agriculture Department’s approval of up to $1.27 billion in extended contracts and up to $202 million in new contracts to support American producers and communities through the USDA’s Famers to Families Food Box program. This second round means $512 million in fresh fruits and vegetables will be purchased, $288 million in dairy products, $233 million in meat products and $444 million in a combination box of fresh produce, dairy or meat.
    HighGround Dairy’s (HGD) Lucas Fuess reported in the July 6 Dairy Radio Now broadcast that the announcement is in addition to other government programs.
    HGD points out that while the latest announcement of $288 million for dairy is about 32.5% less in total dollars than Round 1, “The market cares less about the dollars and more about the total volume being consumed by the program.”
    Fuess stated that vendors had to submit prices for all four potential rounds when the initial bids were due May 1 but product prices were at a much lower level. He said that vendors likely planned on higher prices ahead but the highest price for CME cash-settled cheese futures on May 1 was $1.67 (Oct).  As of July 1, CME block Cheddar was $2.64, up 58% from the highest May 1 futures board price.
    This will create challenges for vendors procuring product, he said, but will most likely provide continued support under cheese markets through summer and prevent a price crash. He cautioned however that the Coronavirus continues to spread in the south and west and, if restaurants start closing again, “That may be a warning sign on the horizon.”
    In other dairy news of the week; the May Dairy Products report pegged total cheese output at 1.1 billion pounds, up 3.2% from April but 0.7% below May 2019. The year to date total hit 5.4 billion pounds, down 0.1% from 2019.
    Italian type cheese totaled 481.7 million pounds, up 6.8% from April and 1.5% above a year ago. YTD output was at 2.35 billion pounds, down 0.6%.
    American type cheese totaled 442.6 million pounds, down 1.0% from April and 0.2% below a year ago. YTD American was at 2.2 billion pounds, up 1.3%.
Mozzarella output climbed to 378.2 million pounds, up 0.9% from a year ago, with YTD at 1.85 billion pounds, down 0.7%.
    Cheddar, the cheese traded at the CME, slipped to 319.4 million pounds, down 11.5 million pounds or 3.5% from April and 1.7 million or 0.5% below May 2019. Year to date Cheddar stood at 1.6 billion pounds, up 1.4% from a year ago.
    Butter output fell to 178.3 million pounds, down 39.2 million pounds or 18.0% from April but was 8.3 million pounds or 4.9% above a year ago, the tenth consecutive month it topped a year ago. YTD butter output was at 973.2 million pounds, up 8.8% from a year ago.
    Dry whey totaled 86.2 million pounds, up 10.8% from April and 9.0% above a year ago, with YTD at 406.9 million pounds, up 4.2%. Dry whey stocks totaled 84.8 million pounds, up 12.4% from April and 18.9 million or 28.6% above 2019.
    Nonfat dry milk output totaled 157.7 million pounds, down 37.5 million pounds or 19.2% from April and 16 million or 9.2% above a year ago. YTD powder sits at 860.6 million pounds, up 3.2% from 2019. Stocks fell to 344.7 million pounds from a record 392.6 million in April, down 47.9 million pounds or 12.2% from April but 54.6 million or 18.8% below 2019.
    Skim milk powder output, at 47.1 million pounds, was up 6.7 million pounds or 16.5% from April and a hefty 20.5 million pounds or 76.9% above a year ago. YTD skim powder hit 206.9 million pounds, up 8.2% from a year ago.
    CME prices entered “National Ice Cream Month” stronger, except for butter and powder. The 4th of July holiday shortened week saw the Cheddar blocks close Thursday at $2.6750 per pound, up a dime on the week and 82.75 cents above a year ago. The barrels finished at $2.4150, up 1.5 cents, 63.5 cents above a year ago, but 26 cents below the blocks. 20 cars of were block sold and 6 of barrel.
    Dairy Market News says some Midwestern cheesemakers reported COVID-19 related disruptions regarding cheese production as they finished the month of June. Spot milk prices were coming in below Class and “cheesemakers are deciding to, or not to, produce more cheese to add to the spot market.” Spot milk availability was opening up early in the week and was expected to last into the weekend and possibly into the following week.
    Western cheesemakers report production is still running at or above design capacity for many. Retail demand has been the “stalwart foundation for the cheese industry over the last few months,” says DMN, and “Some speculate that with summer grilling season on hand, and the safer at home mentality still fresh in consumers’ minds, demand for single serve slices has been strong.”
    Earlier this spring, cheese processors aggressively pursued export markets, selling a lot of cheese forward overseas however, as prices increased, contacts said they were seeing fewer future bookings. Food service demand has increased and government purchases have made cheese stocks tight. Some brokers are actively looking for cheese to close out existing contracts. But with higher prices, food service demand finding a new balance, and export contracts getting filled, many market participants envision a scenario where cheese availability may increase, and cheese prices may fall, warned DMN.
    Spot butter saw its fourth consecutive week of decline, closing at $1.7375 per pound, down 2.75 cents on the week, lowest since June 3, and 66.75 cents below a year ago. Only 4 carloads were sold on the week at the CME.
    The DFMA reports that “IRI data showed retail sales growth of butter has decreased for three consecutive weeks. Sales were up 51% five weeks ago, 39% four weeks ago, 29% three weeks ago and 21% two weeks. The slowing gains is causing companies to revise their demand forecasts lower. Butter industry contacts had been celebrating ‘permanently changed consumer habits’ just a couple of weeks ago. Now, our colleagues are walking back those claims of a generational surge in baking habits.”
    Butter makers found cream prices more within reach as they started July, according to DMN, “but the longevity of churning is in question.”
    Butter demand remains strong on the retail side and food service has picked up in recent weeks, however it still lags previous years’ figures by a sizable margin.
    The Western butter market is steady to a bit weaker. Cream is still tight but not like a few weeks ago though it remains out of the reach of some butter manufacturers, making it impossible to increase their production.
    Grade A nonfat dry milk weakened, closing Thursday at $1.01 per pound, down a penny on the week and 3 cents below a year ago, with 7 cars sold on the week.
    Dry whey saw its Thursday finish at 33 cents per pound, up 1.75 cents and a quarter-cent above a year ago, with 18 sales reported on the week at the CME.
    Lower feed costs did not offset a lower All Milk price and thus the May milk feed price ratio was lower for the sixth month in a row. The latest Ag Prices report put the ratio at 1.77, down from 1.84 in April, and compares to 2.10 in May 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 could only purchase 1.77 pounds of dairy feed of that blend in May.
    The U.S. All-Milk price averaged $13.60 per cwt., down 80 cents from April and $4.40 below May 2019, as falling milk prices resulting from the COVID pandemic find their way to the farm gate.
    The national average corn price averaged $3.20 per bushel, down 9 cents per bushel from April and 43 cents per bushel below May 2019. Soybeans averaged $8.28 per bushel, down 7 cents from April but 26 cents per bushel above a year ago. Alfalfa hay averaged $179 per ton, down $2 per ton from April and $25 per ton below a year ago.
    Looking at the cow side of the ledger, the May cull price for beef and dairy combined averaged $68.30 per cwt., up $4.30 from April, $2.70 above May 2019, but was $3.30 below the 2011 base average of $71.60 per cwt.
    Speaking of feed costs, the USDA’s latest Acreage report estimates US farmers planted 92 million acres to corn, up 2.31 million or 3% from a year ago but down from the March estimate of 97 million. Compared with last year, planted acreage is expected to be up or unchanged in 28 of the 48 estimating States.
    Soybean plantings, were estimated at 83.8 million acres, up 10% from last year and 300,000 acres more than the March estimate. Planted acreage is up or unchanged from last year in 24 of the 29 estimating States. Lots of eyes are on these crop reports as to how they will affect feed costs on the farm.
    The US and China are at loggerheads again, this time with respect to Hong Kong’s standing with China and the spat could affect the Phase One trade agreement and hurt US soybean exports to China and others like whey.
    It looks like we will have plenty to sell. The USDA’s latest Crop Progress report has the US corn crop with a 73% good to excellent rating, as of the week ending June 28, up from 72% the previous week, and up from 56% a year ago.
    The report shows 95% of US Soybeans are emerged, up from 89% the previous week, 15% ahead of a year ago, and 4% ahead of the five year average. 71% are rated good to excellent, up from 54% a year ago.
    Cotton is rated at 41% good to excellent, down from 52% at this time a year ago.
    U.S. dairy exports continue via the farmer-funded Cooperatives Working Together program. Member cooperatives accepted 10 offers of export assistance from CWT this week that helped capture sales contracts for 1.455 million pounds of whole milk powder and 632,727 pounds of cream cheese.
    Meanwhile May US dairy exports were the strongest for the month on record, amounting to a combined 225,967MT, driven by demand for milk powders, according to HGD. Total cheese exports got close to a record high, and whey products to China were up 158% from the subdued volumes last year, says HGD, but remain below 2015-2018 May volumes. More details next week.
    If you think you’re behind in your paper work, consider this. The Agriculture Department just issued its December 2019 fluid milk sales report, likely delayed due to the bankruptcy situation of Dean Foods, in the process of being acquired by Dairy Farmers of America, and Borden, now in the process of being acquired by a private investment firm, Capitol Peak Partners and KKR & Company.
    December saw a total of 3.95 billion pounds of packaged fluid sales, according to the USDA, down 2.3% from December 2018. Conventional product sales totaled 3.7 billion pounds, down 2.8% from a year ago. Organic products, at 232 million pounds, were up 5.7% and represented 5.9% of total sales for the month.
    Whole milk sales amounted to 1.3 billion pounds, up 0.8% from a year ago and sales for the year totaled 15.1 billion pounds, up 1.0% from 2018. It made up 32.7% of total milk sales for the year, up from the 31.8% share in 2018. Skim milk sales, at 262 million pounds, were down 13.3% from a year ago and down 10.4% for the year.
    Total packaged fluid milk sales, January through December, totaled 46.2 billion pounds, down 1.8% from 2018. Conventional product sales for 2019 totaled 43.7 billion pounds, down 1.9%. Organic products, at 2.6 billion pounds, were off 0.5% and represented 5.6% of total fluid milk sales for the year.
    The figures represent consumption of fluid milk products in Federal milk order marketing areas and California, which account for approximately 92% of total fluid milk sales in the U.S.