Monday’s Class III futures settlements portend a March price at $16.35; April, $17.75; May, $18.27; June, $18.27; July, $18.30; August, $18.30; September, $18.35; October, $18.40; November, $18.19; and December at $17.89.
The February Class IV price is $13.19, down 56 cents from January, $3.01 below a year ago, and the lowest Class IV price since September 2020.
Milk estimate lowered
The Agriculture Department lowered its estimate slightly on 2021 milk production in its World Agricultural Supply and Demand Estimates report issued this morning, “as a higher expected cow inventory was more than offset by slower growth in milk per cow.”
2021 production and marketings were estimated at 227.3 billion and 226.3 billion pounds, respectively, down 100 million pounds on production. If realized, 2021 production would still be up 4.1 billion pounds or 1.8% from 2020.
The 2021 Class III milk price average was projected at $16.75 per cwt., up 15 cents from the February estimate, and compares to $18.16 in 2020 and $16.96 in 2019.
The Class IV price average was pegged at $14.45, up 75 cents from last month’s estimate, and compares to a $13.49 average in 2020 and $16.30 in 2019.
Thank you, China
Shock waves hit the dairy industry last week upon word the Biden administration will not renew the existing Food Box program. Speaking in the March 8 “Dairy Radio Now” broadcast, Dairy and Food Market Analyst editor, Matt Gould, reported that the administration says food security is still a priority but will go about it in a different way. Funding to food banks will be increased instead so they can purchase the foods they desire. Food welfare programs will also be increased, according to Gould.
The hit on dairy, says Gould, is that the Food Box program has purchased about 2% of total U.S. milk production and that will surely drop with the new program and have a negative price effect on dairy.
On a brighter note, the surge at last week’s Global Dairy Trade auction had New Zealand whole milk powder prices up 22%, primarily driven by the purchases by China, he said. “The last time that we saw China be the aggressor in dairy markets, you’d have to go back to the 2013-2014 period, the period of all-time record high milk prices to U.S. dairy farmers and, near to, or the most profitable years ever for dairy farmers.” He said it remains to be seen if China will keep this up and thus put us into an inflationary milk price period, but “All eyes are on China right now.”
Senate passes stimulus
Senate Democrats passed the administration’s stimulus bill with no Republican votes. However, the legislation differs from the House version so the House must agree to it before it can move to the president for his signature.
The bill includes direct payments of up to $1,400 for hundreds of millions of Americans, jobless aid of $300 a week to last through the summer, money for distributing coronavirus vaccines, and relief for states, cities, schools, and small businesses suffering from the pandemic.
HighGround Dairy says, “The nutrition aid is positive for retail dairy sales as significant volumes of fluid milk and cheese are purchased with SNAP benefits.”
Plenty of product
U.S. January cheese output totaled 1.12 billion pounds, down 1.2% from December but 0.5% above January 2020 and the strongest January on record, according to USDA’s latest Dairy Products report.
Wisconsin produced 278 million pounds of that total, down 0.8% from December but 0.3% above a year ago. California output, at 211.1 million pounds, was up 1.2% from December but 0.9% below a year ago. Idaho, with 87.8 million pounds, was up 2.7% from December and 2.9% above a year ago.
Italian type cheese totaled 481.5 million pounds, down 0.7% from December and 0.8% below a year ago.
American type cheese totaled 459.3 million pounds, down 0.8% from December but 5% above a year ago. Mozzarella output, at 374.6 million pounds, was down 1.9% from a year ago.
Cheddar, the cheese traded daily at the CME, crept up to 337.6 million pounds, up 0.1% from December and 18.4 million pounds or a bearish 5.7% above a year ago.
Churns produced 206.9 million pounds of butter, a record for January, up 0.3% from December and a bearish 13.5 million pounds or 7.0% above a year ago.
Yogurt production totaled 384.2 million pounds, up 10.5% from a year ago.
Dry whey totaled 83.9 million pounds, up 2.2 million or 2.8% from December but 400,000 pounds or 0.4% below a year ago.
Dry whey stocks inched up to 67.4 million pounds, up 2.8% from December and 7.1% above those a year ago.
Nonfat dry milk output slipped to 197 million pounds, down 9.4 million pounds or 4.6% from December but were 20.7 million or 11.7% above a year ago.
Stocks grew to 305.3 million pounds, up 22.1 million pounds or 7.8% from December and 24.8 million pounds or 8.8% above a year ago.
Skim milk powder production fell to 36.9 million pounds, down 4.3 million pounds or 10.4% from December and 3.2 million pounds or 8.0% below a year ago.
The shipping container shortage may be holding back exports of U.S. powder.
The cash dairy market is having to balance the GDT’s exuberance with January’s Dairy Products report data.
Block Cheddar closed the first Friday of March at $1.7325 per pound, up 11.50 cents on the week but 1.75 cents below a year ago.
The barrels finished at $1.5075, up 8.75 cents on the week and 3 cents above a year ago. 12 cars of block traded hands last week at the CME and 9 of barrel.
Traders left Monday’s cheese unchanged, with no activity. The blocks jumped 1.75 cents Tuesday on an unfilled bid, and hit $1.75, highest CME price since Jan. 19.
The barrels lost 0.75 cents Tuesday on a trade, rolling to $1.50, 25 cents below the blocks.
Dairy cooperatives are again leading efforts to curb milk output growth, according to the National Milk Producers Federation, by reviving base plans imposed in 2020 to deal with output that grew by nearly 3% during last year’s fourth quarter. NMPF says that action “removed some volatility from markets, with cheese and milk prices settling at relatively stable, but also relatively low levels, as domestic commercial use of milk in all products dropped to nearly flat levels and increases in exports also slowed.”
Midwestern cheesemakers tell Dairy Market News they are keeping ahead of the widely available milk which is priced $7 to $2 under class. Some block cheesemakers suggest buyers are hesitant, as the availability of blocks has grown.
Western cheesemakers also have plenty of milk to buy and cheese output is active. Inventories are building but much is already sold, according to DMN. Congestion at ports has delayed some shipments, backing them up to manufacturers’ warehouses.
International buyer interest is present due to favorable U.S. prices but they often want to forward buy several months out. The gap between cash prices and futures prices makes manufacturers hesitant to do this, says DMN.
Cheese is moving well through contracts but domestic buyers are “reticent.” Retail sales are ahead of last year and there’s been a small uptick in food service interest but overall demand is “shaky,” says DMN.
Spot butter shot up to $1.7150 per pound last Tuesday, highest since July 27, 2020, but closed Friday at $1.69, still 22 cents higher on the week but 16.50 cents below a year ago. There were 35 sales on the week.
The butter inched up 0.25 cents Monday but gave back 1.25 cents Tuesday, slipping back to $1.68.
Butter contacts expected some upside following the “new crop” butter rule on the CME, but few expected the nearly 25 cent bump in its first two days. Some question the sustainability of the markets with the amount of bulk butter available, but domestic prices continue to be a good value to export interests and there are some bullish indicators moving forward, says DMN.
Western butter makers are actively churning with plentiful cream available and heavy inventories. Demand has increased in domestic and export markets as U.S. butter is favorably priced compared to international competitors. A few contacts say export butter manufacturing lines are “maxed out.”
Cash Grade A nonfat dry milk closed Friday at $1.1775 per pound, highest since Jan. 21, up 4.50 cents on the week and 6.25 cents above a year ago, with a hefty 33 carloads finding new homes on the week.
Monday’s powder was unchanged but it eased back 0.25 cents Tuesday, to $1.1750.
Dry whey finished Friday at 58 cents per pound, up 2.25 cents on the week and 23.25 cents above a year ago. There were 5 sales reported for the week at the CME.
The whey was up 1.50 cents Monday, hitting 59.50 cents per pound, a record high for its three year lifespan, besting its Oct. 17, 2018 peak by 2 cents. It was unchanged Tuesday, with 2 bids going unfilled.