More money is on the way. President Trump, speaking in Wisconsin Thursday announced an additional $14 billion dollars for agricultural producers facing market disruptions and associated costs because of COVID-19. The package includes up to $1 billion for the Farmers to Families Food Box program, which has benefited the dairy industry and likely propelled Friday’s block cheese and butter skyward (details ahead). The aid will likely keep cheese prices strong and in turn milk prices, but will no doubt result in an oversupplied milk market.
    Strong prices have already incentivized U.S. dairy farmers to fill their bulk tanks. Preliminary data in the August Milk Production report showed output at 18.6 billion pounds, up a bearish 1.8% from August 2019. Output in the top 24 producing states totaled 17.8 billion pounds, up 1.9% from 2019. Revisions added 90 million pounds to the original July 50 state total, now put at 18.735 billion, up 2.0% from July 2019, instead of the originally reported 1.5% increase.
    August cow numbers totaled 9.36 million head in the 50 states, unchanged from July but 42,000 above a year ago. The July herd was revised up 8,000 head. Output per cow averaged 1,987 pounds, up 27 pounds from a year ago or 1.4%.
    Heat, fires and smoke did not appear to affect California’s August output, which was up 1.8% from a year ago, thanks to a 40 pound gain per cow offsetting 4,000 fewer cows milked. Revisions added 60 million pounds to the July total, up 2.3% from July 2019, instead of the originally reported 0.5% increase.
    Wisconsin was off 0.3%, on 10,000 fewer cows, although output per cow was up 10 pounds. Revisions subtracted 13 million pounds from the Badger State’s July output, still 0.1% above July 2019, instead of the originally reported 0.6% gain.
    Idaho was up 3.4% in August, on 17,000 more cows and 15 pounds more per cow. Michigan was up 1.6%, on a 30 pound gain per cow and 1,000 more cows. Minnesota was up 2.2%, thanks to a 65 pound gain per cow offsetting 5,000 fewer cows. New Mexico was down 1.5%, on a 30 pound drop per cow but cow numbers were unchanged.
    New York was up 0.6%, thanks to a 15 pound gain per cow but had 1,000 fewer cows. Oregon was down 0.9% on 1,000 fewer cows but output per cow was unchanged. Pennsylvania was up 1.4%, thanks to a 35 pound gain per cow. Cow numbers were down 3,000 from a year ago.
    South Dakota again had the biggest increase, up 10.8%, thanks to 13,000 more cows milked and 10 pounds more per cow. Texas was next, up 7.1% on 23,000 more cows and a 60 pound gain per cow. Vermont was down 5.3% on a 40 pound drop per cow and 4,000 fewer cows. Washington State was unchanged. Output per cow was up 5 pounds. Cow numbers were down 1,000.
    Dairy cow slaughter totaled 55,200 head in the week ending Sept. 5, up 1,100 from the previous week, but 2,100 head or 3.7% below a year ago.
    Dairy farm margins were flat to slightly weaker over the first half of September, as rising feed costs weakened projected profitability with milk prices trending Sideways, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC. The MW stated, “Milk prices continue stabilizing with nearby Class III futures at elevated levels with expectations that the extension of the Farmers to Families Food Box program will maintain domestic demand through year-end.”
    The MW warned that, with block Cheddar prices back above $2.00 per pound, “The U.S. is no longer competitive on the global export market at a time when milk production looks to increase heading into autumn. Demand for and strength in cheese continues to support Class III values relative to Class IV, which will likely maintain negative PPD’s for domestic producers in the months ahead.”
    “The Big Ten’s decision to join other NCAA conferences in resuming their college football schedule this fall will be supportive for demand, although the market remains compromised by demand from foodservice outlets,” the MW stated.
    “A survey released by the National Restaurant Association, says almost 100,000 restaurants or about one in every six have all but closed permanently since March. In addition, only 40% believe they will stay in business another six months without additional government assistance, which appears in doubt given the stalemate between Congressional negotiators to work out a bipartisan compromise between the House and Senate. The loss of foodservice purchases has weighed disproportionately on demand for butter and cream, helping to explain some of the discrepancy in class pricing and the divergence in value among dairy products,” the MW concluded.
    Speaking of demand; July cheese disappearance topped that of a year ago for the third consecutive month, according to HighGround Dairy’s Lucas Fuess. Speaking in the Sept. 21 “Dairy Radio Now” broadcast, Fuess credited consumers flocking to grocery stores, rising food service demand, and the government’s Food Box program.
    Butter disappearance was down from a year ago, he said, “contrary to butter trends since the beginning of the pandemic.”
    He blamed shifts in consumer behavior and warned there’s plenty of butter in storage and butter output remains strong so he does not see any strong upticks in price through year’s end.
    Nonfat dry milk has been range bound in price, he said, though exports have been very strong, driven primarily by sales to Southeast Asia while exports to Mexico remain subdued. He said there was a big collapse in domestic demand, driven by consumer trends and the higher availability of more reasonably priced raw milk, instead of powder, for fortifying cheese vats.
    Looking globally, skim milk powder led, with cheese right behind, in driving this week’s Global Dairy Trade auction’s (GDT) weighted average up 3.6%, ending four consecutive sessions of decline.
    Skim milk powder was up 8.4%, following a 1.8% gain on Sept. 1. GDT Cheddar was up 7.2%, after slipping 0.4%, and whole milk powder was up 3.2%, after losing 2.0%. Anhydrous milkfat was up 2.0%, after slipping 0.5% last time.
    The declines were led by lactose, down 2.7%, after inching up 0.8% in the last event, and butter was down 1.4%, after a 1.2% slide last time.
    StoneX Group equated the GDT 80% butterfat butter price to $1.4525 per pound US, down 2.3 cents from the last event. CME butter closed Friday at $1.5975. GDT Cheddar cheese equated to $1.6667 per pound, up 11.2 cents, but compares to Friday’s CME block Cheddar at $2.6275. GDT skim milk powder averaged $1.3104 per pound, up from $1.2080, and whole milk powder averaged $1.3540, up from $1.3080. CME Grade A nonfat dry milk closed Friday at $1.07.
    In other trade news; Cooperatives Working Together (CWT) member cooperatives accepted 13 offers of export assistance from CWT this week to help capture sales of 1.166 million pounds of Cheddar, Gouda, and Monterey Jack cheese, 262,350 pounds of butter, and 330,693 pounds of whole milk powder.
    Checking prices; cash CME block Cheddar gained a nickel Monday, 11.25 cents Wednesday, 7.25 cents Thursday, and pole vaulted 22.75 cents Friday on 1 trade, to close at $2.6275 per pound, up 46.25 cents on the week and 57.75 cents above a year ago. The blocks have gained 97.75 cents in four weeks.
    The barrels finished at $1.6359, up 4 cents but 2 cents below a year ago. They set a new record spread on Monday, Wednesday and Friday, expanding it to 99.25 cents below the blocks. 9 cars of block sold on the week and 11 of barrel.
    FC Stone speculated in their Sept. 15 “Early Morning Update” that a new cheese plant coming on line in late October in St. John’s, Michigan may help balance or normalize these types of spreads.
    The Sept. 14 Daily Dairy reports says the plant will produce 800,000 pounds of Cheddar per day by next spring and will be “a significant increase in the nation’s potential Cheddar supply.” It adds that “While more cheese is likely to weigh on national average Class III values, the facility will likely boost dairy producers” milk checks in the region, where there will be less discounted milk, and a greater share of producers’ milk will be based on the Class III price. The new plant will also leave less skim milk for driers and less cream for other uses, which likely will lift Class IV prices at the margins,”  according to the DDR.
    Dairy Market News reports that “After weeks and even months of cheese plants running very active schedules, some are drawing down production for various reasons.” Some are scheduling days off for maintenance, others are simply cutting back to meet lighter, albeit still healthy, demand. Specialty cheesemakers are preparing for fall demand. Some barrel producers suggest they have loads in inventory they could move, but inventory levels are not a current concern.
    Cheese is in abundance in the west, according to DMN, however, supplies are manageable. Barrels are more prevalent, thus block prices are higher. Retail sales are steady but food service demand only increased slightly. Contacts say takeout orders remain strong, particularly for pizza.
    Butter closed the week at $1.5975 per pound, 11.75 cents higher but 51.75 cents below a year ago. There were 69 sales reported, a whopping 46 on Tuesday alone, beating the previous single day record of 59 on Nov. 3, 2004, but that was when butter only traded three times per week.
    DMN reports that retail butter orders are starting to bounce back, according to regional butter makers. Fall demand increases have begun, even as retail orders have remained above previous years’ figures for most weeks since the onset of COVID-19. Food service has edged up week to week, as well, but still remains light compared to previous years. Market tones remain somewhat steady but current prices are well below previous years and enticing heavier buying for fall.
    Western butter makers appear to be positioning for typical end of year demand. Butter output is steady to higher as manufacturers produce for the fall baking season and more cream is available due to the slowdown of ice cream output. DMN adds, “In a year marked by the coronavirus pandemic, social unrest, and now, severe wildfires, typical is not a normal word choice.”
    A few western butter facilities prepared for evacuation but didn’t need to however smoke and ash from the fires kept patrons away from outdoor eating at restaurants, further quelling that market outlet. Retail butter sales saw a slight slump this week due to people staying home to avoid the poor air quality.
    Air quality was expected to improve with late week rain and cooler temperatures however, DMN says, “Some rural towns are destroyed and thousands of residents displaced. Disruptions and challenges may be the new normal until conditions improve within the region.”
    Grade A nonfat dry milk climbed to a Friday close of $1.07, up 3 cents on the week but 1.25 cents below a year ago, on 21 sales reported for the week.
    Dry whey finished at 35.50 cents per pound, unchanged on the week but 4.25 cents below a year ago, with 5 sales reported at the CME.
    The latest Crop Progress report showed 89% of U.S. corn is dented, as of the week ending September 13, up from 64% a year ago and 7% ahead of the five year average. 41% is mature, up from 16% a year ago, and 9% ahead of the five year average. 60% is rated good to excellent, up from 55% a year ago.
    The report shows 37% of U.S. soybeans are dropping leaves, up from 13% a year ago and 6% ahead of the five year average. 63% were rated good to excellent, up from 54% a year ago. The cotton crop has a 45% good to excellent rating. That compares to 41% a year ago.
    U.S. row crops will fall short of their summer potential but they will still be bumper crops by any other metric, says the Daily Dairy report’s Sarina Sharp. Writing in the September 11 Milk Producers Council newsletter, Sharp says “If USDA’s projections are correct, this year’s corn crop will have the highest national average yield on record, and soybeans will match the record-high yield set in the 2016-17 crop year.”
    She adds that “The robust harvest is likely to push end-of-season corn inventories to 2.5 billion bushels, the highest total since 1988,” but “a rebound in exports is likely to trim soybean stocks relative to the previous season, but, at 460 million bushels, they will still be historically large. Nonetheless, crop prices are rising as export prospects improve.”
    The National Milk Producers Federation praised the latest disaster assistance to U.S. farmers however, NMPF’s Paul Bleiberg stated in a podcast that “Election year politics is complicating efforts to push additional agriculture aid through Congress, but already-authorized spending may allow USDA to aid dairy farmers facing unstable roller-coaster prices and shifting supply chains.”
    Bleiberg said that an announcement on what mix of disaster assistance and direct purchases farmers may receive is expected very soon. That spending was provided for in legislation passed earlier this year offering relief from coronavirus-related price and supply-chain disruptions. Lawmakers also face an Oct. 1 deadline to keep the government funded.