The Agriculture Department named the approved contractors for Round 5 of the Farmers to Families Food Box program, which was announced on January 4. The USDA will purchase up to $1.5 billion worth of food for delivery through the end of April however, HighGround Dairy (HGD) says the total spend is vastly below the $1.5 billion committed, though reports indicate that this announcement is only for the first four weeks of the program and vendors will reportedly receive additional awards for March and April delivery.
“The USDA announced changes to foods allowed in The Emergency Food Assistance Program (TEFAP),” says HGD. “The COVID-19 stimulus bill allocated $322.5 million for food purchases via this program throughout 2021, but initially, dairy products were not included in the allowed foods list. Via the Federal Register, milk (UHT and refrigerated) and cheese (American and Cheddar) will now be available for distribution using this funding,” says HGD.
“By not announcing the approved contractors for the entirety of the round, USDA took a different approach than in the past,” says HGD. “This small announcement was overwhelmingly bearish. A key question will be how President Biden and Secretary-elect Vilsack choose to spend the remaining money budgeted for this round, and HGD warned; The uncertainty created will create vendor hesitation when procuring dairy products. This hesitation, and the lower than expected purchases early in the program, will pressure dairy prices in the near term.”
Meanwhile, the global dairy economy appears strong, if the second Global Dairy Trade auction of 2021 is any indication. Tuesday’s overall weighted average was up for the fifth consecutive event, jumping 4.8%, biggest gain since August 7, 2020, and followed the 3.9% jump on January 5.
Gains were led by anhydrous milkfat, up 17.2%, following a 5.5% rise last time. Skim milk powder followed, up 7.0%, after a 4.1% boost. Butter was up 4.6%, after jumping 7.2%, and whole milk powder was up 2.2%, following a 3.1% rise.
GDT Cheddar was down 0.3%, after a 5.0% gain on January 5.
StoneX Dairy Group equated the GDT 80% butterfat butter price to $2.0952 per pound U.S., up 9.2 cents from the last event, which saw a 13.5 cent gain. CME butter closed Friday at a bargain basement $1.4025. GDT Cheddar cheese equated to $1.8518 per pound and compares to Friday’s CME block Cheddar at $1.61. GDT skim milk powder averaged $1.4709 per pound, up from $1.3805, a 9 cent jump.
Whole milk powder averaged $1.5333, up from $1.4996. CME Grade A nonfat dry milk closed Friday at $1.1725 per pound.
China’s December dairy import data showed combined whole milk and skim milk powder imports at 169.5 million pounds, down 17.6% from December 2019.
Whey imports, at 128.4 million, were up 33.8%, and the 11th consecutive month they topped a year ago, as China continues to rebuild its hog population. The U.S. again was the biggest supplier.
Butter imports totaled 14.4 million pounds, up 58.0%, and cheese hit 25.6 million pounds, up 23.7% from a year ago. HGD reported that December marked the strongest month for fluid milk and cream imports on record.
Of the top ten suppliers of key dairy commodities to China, the U.S. was the only country to report losses from a year ago, according to HGD, primarily in the form of lactose and skim milk powder. China looked to Turkey and Australia instead for additional skim milk powder and to the EU for lactose, says HGD.
U.S. exports continue under the Cooperatives Working Together program. Member cooperatives accepted 11 offers of assistance on sales of 608,476 pounds of cheese, 1.144 million pounds of butter, 123,459 pounds of whole milk powder and 74,957 pounds of cream cheese. The product will go to customers in Asia, Europe, the Middle East, and North Africa through April.
Unfortunately, a shortage of shipping containers is wreaking havoc on U.S. exports of agricultural products, including dairy, according to the January 20 Daily Dairy Report. The issue has been top of mind for exporters for months, says the DDR, “but the situation intensified in the weeks leading up to the holidays and still persists today.”
The February Federal order Class I base milk price was announced this week at $15.54 per hundredweight, up 40 cents from January, $2.01 below February 2020, and equates to about $1.34 per gallon, down from $1.51 a year ago.
Speaking of Class I milk; November fluid sales took a dive, according to USDA’s latest data. The report shows 3.8 billion pounds of packaged fluid products were sold, down 4.4% from November 2019, largest drop since August.
Conventional product sales totaled 3.6 billion pounds, down 5.0% from a year ago. Organic products, at 235 million pounds, were up 6.1%, and represented 6.1% of total sales for the month.
Whole milk sales totaled 1.25 billion pounds, down 4.4% from a year ago. Sales for the 11 month period totaled 14.2 billion pounds, up 2.8% from 2019, and made up 32.7% of total milk sales for November and 33.6% thus far for the year.
Skim milk sales, at 224 million pounds, were down 17.8% from a year ago and down 14.9% year to date.
Total packaged fluid milk sales, January through November, amounted to 42.2 billion pounds, down 0.3% from 2019. Conventional product sales so far, totaled 39.6 billion pounds, down 0.9%. Organic products, at 2.6 billion pounds, were up 10.6% and represented 6.2% of total fluid milk sales so far for the year.
The figures represent consumption in Federal milk marketing order areas, which account for approximately 92% of total fluid milk sales in the U.S.
Dairy farm margins were largely flat over the first half of January, although significant volatility has been noted recently in milk prices, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.
“Initial excitement over the announcement of a fifth round of the Farmers to Families Food Box Program has since dissipated with further clarity on what contents will qualify for the new boxes,” according to the MW. “USDA has emphasized that a variety of hard, semi-firm, or semi-soft cheese is acceptable in addition to Cheddar and other cheeses in the solicitation, which likely will not lead to the same level of support for block and barrel prices as compared to previous rounds,” the MW charged.
“Export demand is also starting to cool as November dairy product shipments fell below prior-year levels for the first time since mid-2019. November exports dropped 5.5% in value from 2019 to $500.6 million, reflecting lower shipments across the complex, excepting whey which continues to experience strong demand from China.”
“November cheese exports fell 15.8% year-over-year to 52.8 million pounds, led by a sharp drop in shipments to South Korea. November shipments were also virtually unchanged from October on a daily average basis as the sharp rise in cheese prices during October likely discouraged forward buying,” the MW stated.
“Feed prices meanwhile continue to soar following a surprisingly bullish January WASDE report from USDA which made significant cuts to corn and soybean ending stocks by 250 and 35 million bushels, respectively.
Despite fundamental support for the market though, excessive speculative length is building according to Commodity Futures Trading Commission Commitments of Traders data, particularly for corn with a record fund position that has grown significantly over the past month, the MW concludes.
The Agriculture Department’s latest Livestock, Dairy, and Poultry Outlook, issued January 19, mirrored milk price and production projections in the January 12 World Agricultural Supply and Demand Estimates report, detailed here last week.
The Outlook reported that “The 2020/21 corn price forecast is $4.20 per bushel, up 20 cents from last month’s forecast. The soybean meal forecast was raised to $390 per short ton, up $20. The alfalfa hay price in November was $167 per short ton, $4 lower than October and $2 lower than November 2019. The 5-State weighted-average price for premium alfalfa hay in November was $200 per short ton, $6 higher than October but $9 lower than November 2019.”
Milk cow numbers for 2021 are projected to average 9.41 million head, 15,000 higher than last month’s forecast. Milk per cow was projected to average 24,095 per head, 5 pounds more than the previous forecast, according to the USDA.
Dairy cow culling jumped in December, according to the latest Livestock Slaughter report, and topped a year ago. An estimated 273,500 head were sent to slaughter under federal inspection, up 44,100 head or 19.2% from November and 8,100 or 3.1% above December 2019. A total of 3.06 million head were culled in 2020, down 160,700 head or 5.0% from the same period in 2019.
In the week ending January 9, 2021, 67,500 dairy cows were sent to slaughter, up 15,400 from the previous week but 3,500 head or 4.9% below a year ago.
Dairy prices were mixed in the Martin Luther King Day holiday shortened week, as traders awaited the January 25 release of the December Milk Production and Cold Storage reports, both of which will likely bring downward pressure on prices.
The Cheddar blocks tumbled daily as disappointment over Food Box program particulars were considered. They closed Friday at $1.61 per pound, down 22 cents on the week, lowest since December 24, and 38.50 cents below a year ago
The barrels rolled to $1.39 per pound Thursday but closed Friday at $1.3925, 18 cents lower on the week, 21.75 cents below a year ago, and 21.75 cents below the blocks. 13 cars of block exchanged hands on the week and 28 of barrel.
Foodservice cheese sales improved dramatically in the first half of January with growth hitting the highest level since the start of the pandemic, according to StoneX January 21 Early Morning Update.
“This is pretty amazing given the tight lock-down in California and the Northeast,” the Update added; “The big growth component has been take-out from full service restaurants and the spike in sales has come as the latest stimulus payments were sent out. It looks like we all decided to treat ourselves to a mid-winter meal from fancier restaurant using stimulus money.” But, StoneX warned; Quick-service has been doing well. If the increase is from consumers switching from quick-service to sit-down, is demand really growing?
Midwest cheesemakers tell Dairy Market News milk supplies remain readily available and spot prices had met the previous week’s lows of $8.50 under Class.
Curd producers say restaurant orders moved higher, something they haven’t seen in months. Cheddar producers are hopeful the government awards will assist in putting a dent in their growing inventories. Stocks are not overtly concerning, says DMN, but producers relay that could change day to day.
The plentiful milk supply in the west has resulted in plenty of cheese and DMN says “an unsettled feeling persists within the market.” The announcement of more government food box program purchases created an initial push upwards on cheese prices but the momentum seemed to wane. Forecasting market direction has been difficult and neither buyers, nor sellers, want to overextend themselves, says DMN.
Cheese inventories are abundant and contacts confirm that food service and institutional demand has remained weak. Retail demand is better than last year but not able to offset the reduction in cheese sales to other channels and, “Until sit-down dining returns, contacts expect the cheese market may be challenging,” concluded DMN.
Cash butter was buoyed by Tuesday’s GDT and marched to $1.4550 per pound by Wednesday, highest since December 29, but headed south from there to a Friday finish of $1.4025, still up 11.25 cents on the week but 45.75 cents below a year ago. There were 8 carloads that found new homes on the week.
Midwest churning is busy, as cream remains readily available regionally and from the West. Retail butter demand remains steady, as holiday pipelines have been refilled, but food service demand has “seen better days,” says DMN. Contacts expect the food box programs to assist the markets but they still have concerns about inventories, which are growing along with milk-butterfat yields.
Western butter output is generally heavy and includes unsalted product for export. Domestic butter interest typically declines after the holidays and plants experience increases in inventory. Cream is highly sufficient. Bulk butter production is active and stocks continue to build. Retail sales are fair and expected to increase as some outlets are already discussing orders for the upcoming holiday. Export trading continues to be good, according to DMN.
Grade A nonfat dry milk finished the week 2.75 cents lower, closing at $1.1725 per pound, 11.50 cents below a year ago, with 33 sales reported for the week.
CME dry whey inched up a half-cent both Tuesday and Thursday and closed Friday at 54 cents per pound, highest since October 19, 2018, and 17.50 cents above a year ago, with only 2 cars sold on the week at the CME.