NEWS

Dairy Market News says the emerging New Zealand season is starting off strong

Lee Mielke

The Agriculture Department lowered its estimate for 2021 milk production in its latest World Agricultural Supply and Demand Estimates report, third month in a row, and lowered the 2022 estimate, citing lower dairy cow numbers and output per cow for both years.

2021 production and marketings were estimated at 227.8 and 226.7 billion pounds respectively, down 300 million pounds on production from last month’s estimates and 400 million lower on marketings. If realized, 2021 production would still be up 4.6 billion pounds or 2.1% from 2020. 

2022 production and marketings were estimated at 230.6 and 229.5 billion pounds respectively, down 600 million pounds on production and down 700 million on marketings. If realized, 2022 production would be up 2.8 billion pounds or 1.2% from 2021. 

Butter, cheese, nonfat dry milk (NDM) price forecasts for both years were raised on improving demand and lower production. Whey prices were unchanged for both years. Class III and Class IV milk price forecasts were raised.

Look for the 2021 Class III price to average around $16.65 per hundredweight, up a dime from last month’s projection and compares to $18.16 in 2020 and $16.96 in 2019. The 2022 Average was estimated at $16.45, up 30 cents.

The 2021 Class IV average was pegged at $15.55, up 40 cents from a month ago and compares to $13.49 in 2020 and $16.30 in 2019. The 2022 average was projected to hit $16.05, up 75 cents from last month’s estimate.

This month’s 2021/22 U.S. corn outlook is for larger supplies, increased feed and residual use, greater exports, and higher ending stocks. Projected beginning stocks were 70 million bushels higher based on a lower use forecast, with reductions in corn used for ethanol and exports, according to the USDA.

Corn production was forecast at 15.0 billion bushels, up 246 million or 2% from last month and up 6% from 2020. Yields are expected to average 176.3 bushels per acre, up 1.7 bushels from the previous forecast and up 4.3 from last year.

Exports were up 75 million bushels to 2.5 billion. With supply rising more than use, ending stocks were increased 166 million bushels to 1.4 billion. The season-average corn price received by producers was lowered 30 cents to $5.45 per bushel.

U.S. soybean supply and use changes included higher beginning stocks, production, exports, ending stocks, and lower crush. Higher beginning stocks reflect a lower crush forecast. Soybean production was projected at 4.37 billion bushels, up 35 million or 1% from last month’s forecast and up 6% from 2020. Yields are expected to average 50.6 bushels per acre, up 0.6 bushel from the previous forecast and up 0.4 bushel from 2020. Total planted area, at 87.2 million acres, is down less than 1% from the previous estimate but up 5% from the previous year. Area harvested for beans was forecast at 86.4 million acres, down less than 1% from the previous forecast but up 5% from 2020. 

The U.S. season-average soybean price was forecast at $12.90 per bushel, down 80 cents. The soybean meal price was forecast at $360 per short ton, down $25. The soybean oil price forecast was unchanged at 65 cents per pound.

Meanwhile, USDA’s latest Crop Progress report shows that 59% of U.S. corn was rated good to excellent, as of the week ending Sept. 5, down 1% from the previous week, and 2% below a year ago. 57% of the soybeans had a good to excellent rating, up 1% from the previous week but 8% below a year ago.

In the week ending Aug. 28, 62,400 dairy cows were sent to slaughter, up 3,400 from the previous week, and 8,300 or 15.3% above that week a year ago. 

The 4-week rolling total continues to gain premium on year ago levels, says StoneX, up to 12% above year-ago levels this week. “This high slaughter level reiterates the theme that the dairy herd is continuing to contract.” 

USDA data showed July milk production at 19.1 billion pounds, up 2.0% from July 2020. The latest Dairy Products report shows July cheese output totaled 1.15 billion pounds, up 2.4% from June and 3.5% above July 2020. Year to date (YTD) output stood at 7.9 billion pounds, up 3.3% from the same period in 2020. 

Wisconsin produced 292.2 million pounds of the U.S. total, up 0.1% from June and 3.5% above a year ago. California output, at 203.0 million pounds, was up 5.1% from June and 0.2% above a year ago. Idaho produced 86.1 million pounds, down 0.1% from June and 3.8% below a year ago. 

Italian style cheese totaled 484.4 million pounds, down 2.9% from June but 6.5% above a year ago. YTD Italian hit 3.3 billion pounds, up 1.6%.

American type cheese, at 463.6 million pounds, was up 2.3% from June and 2.3% above a year ago. YTD American was at 3.2 billion pounds, up 5.5%.

Mozzarella output totaled 377.7 million pounds, up 3.5% from a year ago, with YTD mozzarella at 2.6 billion pounds, up 0.1% from 2020.

Cheddar, the cheese traded at the CME, totaled 321.8 million pounds, down 5.1 million pounds or 1.6% from June, and 1 million pounds or 0.3% below a year ago. YTD Cheddar climbed to 2.3 billion pounds, up 4.7% from 2020.

Churns produced 151.7 million pounds of butter, down 8.6 million pounds or 5.4% from June, and 1.2 million pounds or 0.8% below a year ago. YTD butter output was at 1.28 billion pounds, down 2.0% from 2020. 

Yogurt output totaled 394.2 million pounds, up 7.9% from a year ago, with YTD at 2.8 billion pounds, up 4.4%.

Dry whey amounted to 80.8 million pounds, up 9.4 million pounds or 13.2% from June, but 1.8 million or 2.3% below a year ago. YTD dry whey output hit 543.5 million pounds, down 4.7% from a year ago. Stocks climbed to 66.8 million pounds, up 5.2 million or 8.4% from June but were 20.6 million pounds or 23.6% below those a year ago.

Nonfat dry milk production fell to 157.3 million pounds, down 29.7 million pounds or 15.9% from June and down 8.8 million or 5.3% below a year ago. Powder production YTD totaled 1.3 billion pounds, up 9.3% from 2020. Stocks fell to 322.3 million pounds, down 27.1 million pounds or 7.8% from June, but were up 8.5 million pounds or 2.7% above those a year ago.

Skim milk powder totaled 51.1 million pounds, up 7.6 million pounds or 17.5% from June but 10.3 million pounds or 16.8% below a year ago. YTD skim milk powder, at 284.4 million pounds, was down 22.3% from 2020.

Global dairy trade strengthened this week as evidenced in the Global Dairy Trade auction. The weighted average jump 4.0%, following the Aug. 17 0.3% increase, and was the biggest gain since March 2. Traders brought 55.3 million pounds of product to market, up from 49.7 million on Aug. 17, and the most since April 20. Prices averaged $3,927, up $100 from the last event.

Skim milk powder led the gains, up 7.3%, after a 1.1% uptick on Aug. 17. Butter was up 3.7%, following a 4.0% advance, and anhydrous milkfat was up 3.1%, after climbing 1.5%. Whole milk powder was up 3.3%, after falling 1.5%, and Cheddar was up 3.6%, following a 2.8% advance. Buttermilk powder was up 3%.

StoneX says the GDT 80% butterfat butter price equates to $2.1896 per pound U.S., up 7.9 cents, and compares to CME butter which closed Friday at $1.7850. GDT Cheddar, at $1.9630, was up 6.5 cents, and compares to Friday’s CME block Cheddar at $1.79. GDT skim milk powder averaged $1.4850 per pound, up from $1.3845. Whole milk powder averaged $1.6740 per pound, up from $1.6112. CME Grade A nonfat dry milk closed Friday at $1.3575 per pound.

Slowing milk supplies in Europe, and to some degree in the US, meeting good dairy demand was GDT’s message, according to StoneX. Broker Dave Kurzawski, in the Sept. 13 Dairy Radio Now broadcast, said “Milk tightness is the key underpinning for all of the markets, both here in the U.S. and globally,” although it’s not a “terrible tightness.” The trend has been fewer cows in the U.S. and New Zealand, he said, and hotter weather, which took a toll in Europe this summer, and while milk output is still growing, it’s at a “diminished rate.”

I asked about the increased costs of production and Class III futures not promising much in the way of breaking even let alone making a profit, and he agreed. He said that was felt more acutely this summer in Europe but U.S. farmers will be feeling it in coming months. The 2022 average, which was at $17.60, would normally be considered a good price, he concluded, but not so much now. “There are things farmers can do to protect themselves as we enter a bigger demand period with schools reopening and the holidays upon us.”

Speaking of “down under;” the Sept. 7 Daily Dairy Report points out that “Australia wrapped up its 2020-21 milk production season with output up just 0.6% over the previous season. The DDR said dairy producers there were feeling uncharacteristically confident about the industry’s future, according to Dairy Australia’s June 2021 Situation and Outlook report.

Dairy Market News says the emerging New Zealand season is starting off strong. Much of the calving is wrapping up on the North Island and the South Island is only a few weeks behind. Preliminary milk volume is on target, says DMN.

Back in Chicago, block Cheddar closed the Labor Day holiday shortened week at $1.79 per pound, up 5.50 cents but 37.50 cents below a year ago. The barrels climbed to $1.49 Thursday but finished Friday at $1.4775, still up 8.50 cents on the week, 11.75 cents below a year ago, and 31.25 cents below the blocks. Only 6 cars of barrel was sold on the week at the CME.

Midwest cheesemakers tell DMN that good demand remains despite continued COVID resurgences. Pizza cheese, curds, and cut-and-wrap retail varieties are moving well but “production hiccups” are regularly reported. Employee shortages have plants working with fewer employees during a strong demand season and some do not foresee a short-term remedy, says DMN. Milk availability has begun to balance out after the initial school demand rush for bottled milk.

Western cheese sales also remain steady in retail and food service and international demand remains strong, especially to Asian markets. A shortage of truck drivers and limited shipping supplies continues to cause delays as well as port congestion. Milk availability has declined seasonally in the West, though cheese producers are able to obtain sufficient supplies.

After jumping 9 cents the previous week, butter closed at $1.7850 per pound, down 1.25 cents on the week but 30.50 cents above a year ago on 24 sales.

Cream continues to tighten. Seasonal drawdowns have begun to take place due to heat and humidity. Churns were not as active over the holiday weekend but cream was available. Post-holiday, some say cream is out of their fiscal reach. Plant managers continue to report employee shortages and truck drivers are short so cream hauling issues continue. Market tones are awaiting direction. As the stronger demand season looms, some foresee strengthening prices ahead.

Cream in the West was slightly more available this week but widespread driver shortages remain a hindrance. Some butter plants are operating at capacity to grow inventories ahead of the holiday season while others are running reduced schedules. Food service demand is steady and has yet to be dampened by the Delta variant, says DMN, and retail orders are unchanged.

Grade A nonfat dry milk hit $1.36 per pound Tuesday, highest price in 7 years, but closed Friday at $1.3575, 1.75 cents higher on the week and 31.75 cents above a year ago, with 12 sales reported on the week.

Dry whey regained ground this week, closing at 53 cents per pound, up 4.50 cents on the week and 17.50 cents above a year ago, with 4 sales reported.

After 18 months of expanded unemployment benefits to millions of Americans who lost jobs during the pandemic, the increased payments expired as of Labor Day. The federal weekly supplement to state unemployment payments was $600 per week throughout summer 2020 and $300 since December 2020. HighGround Dairy says more than 11 million people are impacted by the reduction, yet “Simultaneously, there are a record 10 million job openings across the U.S. as businesses in a wide variety of sectors search desperately for workers.”

“The end of expanded unemployment benefits is not expected to quickly solve the labor shortage though,” says HGD. “In dozens of states that ended expanded benefits earlier this summer, there was not a substantial increase in job applicants in recent weeks. Many unemployed workers cite concerns about child care and the continuing pandemic in their hesitation to return to the workforce.”

Agriculture Secretary Tom Vilsack announced this week that $700 million in competitive grant funding will be available through the new Farm and Food Workers Relief (FFWR) grant program to help farmworkers and meatpacking workers with pandemic-related health and safety costs. 

Additionally, to recognize the essential role and costs borne by front-line grocery workers, $20 million of this amount has been set aside for at least one pilot program to support grocery workers and test options for reaching them in the future. The new program is funded by the Consolidated Appropriations Act of 2021 and will provide relief to farmworkers, meatpacking workers, and front-line grocery workers for expenses incurred due to the COVID-19 pandemic. 

Lee Mielke is a graduate of Brown Institute in Minneapolis, MN. He’s formerly the voice of the radio show “DairyLine,” and his column appears in agricultural papers across the U.S. Contact him at lkmielke@juno.com.