County fairs are being canceled across the country because of the COVID-19 outbreak but the dairy industry is riding a COVID-19 rollercoaster daily. The block Cheddar price in particular  spiraled down to $1 per pound April 15, skyrocketed to a record high $3 on July13, and then road to a July 17 close of $2.66 per pound, down 25.5 cents on the week, lowest since July 1, but still a hefty 88 cents above a year ago
    The barrels fared better, closing Friday at $2.43 per pound, up 9 cents on the week, 72.5 cents above a year ago, but a still too high 23 cents below the blocks. 16 cars of block traded hands on the week at the CME and 17 of barrel.
    The July 10 Dairy and Food Market Analyst (DFMA) reports that “The growth rate in retail natural cheese sales has declined in six out of the last seven weeks, according to IRI data ending June 28. Most recently, sales were up 13%, approximately half the growth rate from a month earlier. Retail sales of processed cheese were barely above year-ago levels in the week-ending June 28, up just 1.9%. If these growth rates hold for all of July, it will make available an additional 19 million pounds of cheese compared to June.”
    Friday’s StoneX “Early Morning Update” stated “Government purchases continue to greatly affect the cheese market and are expected to linger into mid-August.  Cold storage next week will be very closely watched. We would expect to see a major draw down in stocks to justify $3.00, $2.80, and $2.71 block prices.”
    USDA’s May dairy product commercial disappearance data was somewhat mixed, according to Nate Donnay, Director of Dairy Market Insight for StoneX.
    Speaking in the July 20 “Dairy Radio Now” broadcast, Donnay reported that, while total while cheese disappearance was down about 10% from a year ago in April, it was only down about 1% from a year ago in May.
    “That’s a big improvement, driven primarily by the improvement in food service sales, as some states started to loosen their restrictions,” he said, “but it was still below year ago levels.” He added that American cheese disappearance was up from a year ago in May but Mozzarella was down about 1%.
    The brightest spot was butter, according to Donnay, where sales went from about 2% above year ago levels in April to a 17% increase in May.
    But uncertainty abounds as we see restaurants reclosing and many going out of business because they can’t survive on the mandated lower capacities. Donnay said “It’s difficult to translate directly between the headlined sales numbers, like food sales numbers being down 20% from a year ago to what that means for the amount of dairy that’s moving through foodservice.”
    “We think that since the lockdowns started, foodservice meals have shifted to more dairy heavy items,” Donnay reasoned. “Pizza sales at the major chains have been fantastic,” he said, “the drive-thus at quick service restaurants are still running strong and there’s a lot of cheese on those burgers and tacos so even though the headline numbers around foodservice sales are still running well below year ago, it’s very possible that the amount of cheese that’s moving through foodservice is doing much better, maybe only down something like 5% while total foodservice sales are down 20%.”
    Midwestern cheese producers continue to report strong demand, according to Dairy Market News, but the rising prices has many buyers only taking “necessary loads.” Cheese output is strong as milk is available however high temperatures in the region have some expecting lower milk supplies for Class III production. Mid-week spot milk prices were still under Class but not as much as previous weeks.
    Spurred on by government purchases and the ongoing refill of food service pipelines, western cheese output is active, says DMN, with some manufacturers still running above design capacity. Processors seem eager to fill demand, especially at record high prices for block cheese however, higher prices may be cooling retail sales. DMN also warned that renewed social distancing requirements in parts of the West may dampen food service demand.
    Some buyers even reported getting offers from international cheese sellers, looking to bring cheese to US markets. But without major discounting, the buyers are hesitant to take on the risk, says DMN. “There is too much uncertainty within the market to make a purchase that may take 30 to 60 days to complete.”
    Cash butter appeared to be caught in the upward pull of the cheese market Monday and Tuesday and advanced 5.5 cents but it was short-lived, reversing gears Wednesday, and closed Friday at $1.69 per pound, unchanged on the week, pausing five consecutive weeks of decline, and 70.75 cents below a year ago. 20 cars traded hands on the week.
    Butter fundamentals are weakening fast, according to the DFMA. “Retail sales growth is plummeting at that same time that sales at full-service restaurants are contracting, again. Butter prices are likely to continue declining,” the DFMA warned. It added that “Retail sales of butter posted the lowest growth rate in several months, up just 17% during the week-ending June 28. This is below the 24% growth rate for all of June and much smaller than the average growth rate of 50% in May.”
    It was primarily the drop in restaurant sales that plunged dairy product prices in April and restaurant reopening that helped bring them back up but the DFMA, citing data from Blackbox Intelligence which tracks sales at chain restaurants, showed that “Limited-service brands are experiencing sales growth. The fastest growing segments are chicken, pizza (cheese-friendly), and burgers (also cheese-friendly),” according to the DFMA. “Sales have been above prior-year levels for nine consecutive weeks,” the DFMA says, just when block cheese rose from $1.2075 per pound to $2.6750.”
    But, many full-service restaurants are not reopening and data from Open Table shows that through the end of June, 12% of all chain restaurants were still closed, the DFMA reported.
    Midwest butter plant managers reported that spot loads of cream were more available this week, according to DMN. Market analysts say butter prices are still somewhat range bound but expect $1.90 to $1.95 to be the high end of said range moving into fourth quarter.
    Western butter production is active despite many loads of cream going to ice cream production. In some parts of the West, cream sellers are offering a bit more loads in the spot market at affordable prices, which some butter makers are taking. Butter inventories are plentiful and retail sales are unchanged. While the rises in coronavirus cases is impacting restaurants, take-out orders are still high.
    Grade A nonfat dry milk close Friday at $1.00 per pound, down 1.5 cents on the week and 0.75 cents below a year ago, with 19 cars finding new homes.
    Dry whey shot up 3 cents Monday and closed Friday at 33.50 cents per pound, 4.75 cents higher on the week but a half-cent below a year ago, on 2 sales.
    The recent dip in whey prices was a result of plenty of product. The July 10 Daily Dairy Report points out that “High Class III prices continue to encourage cheese production, and the resulting whey stream will be directed to production of dry whey versus higher-value products.” It adds that “When gyms were closed and supplement stores were shuttered during Covid-19 lockdowns, sales of high-protein whey products, popular with the fitness industry, declined precipitously.”     
    As I reported last week, the Agriculture Department lowered its milk production forecast for 2020 from last month, in its latest World Agriculture Supply and Demand Estimates (WASDE) report, blaming slower growth in milk per cow. The 2021 milk production forecast was raised on expectations of dairy herd rebuilding and a recovery in growth in milk per cow.
    Class III and Class IV milk price forecasts were raised for 2020 and USDA projected the 2020 Class III average at $18 per hundredweight. Adding the current average to July 16 settlements portended a 2020 average of $17.99.
    The 2021 Class III average was projected at $16.20, up $1.10 from last month’s estimate, and would be $1.80 below the projected 2020 average.
    This month’s 2020/21 US corn outlook is for sharply lower supplies, reduced feed and residual use, increased food, seed, and industrial use, and lower ending stocks, according to the WASDE. Corn beginning stocks were raised 145 million bushels, based on lower use forecasts for 2019/20.
    Corn production was forecast 995 million bushels lower, based on reduced acreage, but the average corn yield was unchanged at 178.5 bushels per acre. June harvested-area weighted precipitation for the major corn producing states was below normal but did not represent an extreme deviation from the 1988 to 2019 average, according to the USDA.
    With supply declining more than use, stocks were lowered 675 million bushels to 2.6 billion. The season-average corn price received by producers was raised 15 cents to $3.35 per bushel.
    Soybean production was projected at 4.14 billion bushels, up 10 million on increased acreage. The yield forecast was unchanged at 49.8 bushels per acre. With higher beginning stocks, soybean supplies were raised 45 million bushels.
    With projections for exports unchanged, 2020/21 soybean ending stocks were increased 30 million bushels to 425 million. Ending stocks were projected at 620 million bushels, up 35 million from last month. The U.S. season-average soybean price was forecast at $8.50 per bushel, up 30 cents, partly reflecting higher price expectations following the June Acreage report. The soybean meal price was projected at $300.00 per short ton, up $10.00 from last month.
    Cotton projections show lower production, exports, and stocks compared with last month. Beginning stocks were 200,000 bales lower due to higher 2019/20 exports, but expected exports in 2020/21 were reduced 1 million bales as a 2-million-bale decline in projected output reduced exportable supplies. US planted area was 1.5 million acres lower this month and ending stocks were projected at 6.8 million bales, 1.2 million lower than in June, and equivalent to 38% of use.
    USDA’s latest Crop Progress report shows the nation’s corn crop at 69% with a good to excellent rating, as of the week ending July 12, up from 58% a year ago, with 29% silking, up from 10% the previous week and 14% a year ago, but 3% behind the five year average.
    Weather forecasts were looking very good in the 6-10 day forecast on Friday, according to StoneX. “Expected rain the last 5 days reportedly left some of the drier areas lacking. Knee high by the 4th of July and then some.”
    Soybeans are at 48% blooming, up from 19% a year ago and 8% ahead of the five year average. 68% were rated good to excellent, up from 54% a year ago.
    Cotton is rated at 44% good to excellent, down from 56% at this time a year ago.
    China has stated that it will increase US corn purchases to meet demands of its Phase One trade deal with the US and made a large purchase the week of July 6, as its corn reserves are being worked down.
    It’s hoped that China will increase US whey imports as it continues to rebuild its hog population devastated by culling due to African Swine Fever, however sparing over Hong Kong with the Trump Administration is threatening that.
    The down side is the increased purchases of corn and soybeans by China may result in higher feed costs for US dairy farmers, but the Daily Dairy Report says “climbing whey sales would help support milk prices.”
    Dairy farmers are not happy with the latest Dietary Guidelines for America (DGA). The Wisconsin-based American Dairy Coalition (ADC) called on Agriculture Secretary Perdue and Health and Human Services Secretary Azar in a letter to “look into concerns farmers have with the DGA’s draft.”
    The DGA, which is updated every 5 years, sets US leading nutrition policies and directly influences WIC, SNAP, as well as school and hospital nutrition programs.
    “Despite an abundance of science that demonstrate that full-fat dairy products reduce chronic disease in children and adults and promotes learning readiness in children, the DGA continues to set caps on saturated fats, effectively banning whole milk from daycares and school nutrition programs,” the ADC charged.
    ADC’s letter encourages Azar and Perdue to delay the publication of the DGA so it can be updated to include the most recent scientific evidence on the health benefits of saturated fats. Furthermore, ADC requested the USDA and HHS review and address the process by which these dietary guidelines are written.
    The National Milk Producers Federation said it was pleased that the DGA Advisory Committee’s final report “affirms dairy’s crucial role in a nutritious diet” but also expressed concern that the committee “failed to recognize newer, broader science that shows the benefits of dairy foods at all fat levels.”
    The International Dairy Foods Association stated that the DGA “confirmed dairy products should continue to maintain a central, important role in federal nutrition recommendations for people beginning at a very early age and that most Americans should consume three servings of dairy per day,” but also said it was “disappointed that the report did not include relevant information on scientific studies which show the benefits of dairy at each fat level.”