The latest extension of a U.S. food aid program is lifting dairy prices and raising prospects of a boost in milk production in the coming months.
Benchmark Class III futures for milk used to make cheese jumped 4.9% on Tuesday in Chicago in their biggest gain since April after the U.S. Department of Agriculture expanded its Farmers to Families Food Box Program. The USDA will buy $1.5 billion worth of food including produce, beef, pork, seafood, milk and cheese to distribute across the country, U.S. Secretary of Agriculture Sonny Perdue said Monday in a statement.
The funding for a fifth round of purchases was included in the Covid-19 aid package passed in December and comes after USDA distributed more than 132 million boxes of food.
The program extension is the latest news to jolt the U.S. dairy market, which has been volatile throughout the pandemic. The closures of schools, offices and restaurants initially curbed demand for milk and cheese, prompting farmers to dump supplies before food-box buying sent dairy prices surging.
As many as 40 million food boxes could be bought with the latest funding, with as much as $500 million spent to procure dairy products, according to Lucas Fuess, director of dairy market intelligence at HighGround Dairy in Chicago. That could translate to milk-production growth of 3% in the first part of this year, Fuess said in a report.
“Milk needed to fulfill demand stemming from food-box purchases will exceed anticipated year-over-year production gains” in the first quarter, he said.