Mielke Market Weekly

Covid-related incentives have milk production booming

This column was written for the marketHeat, fires and smoke didn’t appear to ing week ending Sept. 18. affect California’s August output, which More money is on the way. President Trump, speaking in Wisconsin on Sept. 17, announced an additional $14 billion for was up 1.8 percent from a year ago, thanks to a 40-pound gain per cow offset ting 4,000 fewer cows milked. “agricultural producers facing market disWisconsin was off 0.3 percent on 10,000 ruptions and associated costs because of fewer cows, although output per cow was Covid-19.” up 10 pounds. Minnesota was up 2.2 perThe package includes up to $1 billion for the Farmers to Families Food Box proMIELKE MARKET WEEKLY cent thanks to a 65-pound gain per cow offsetting 5,000 fewer cows. gram. The Food Box program has benefited the dairy industry and likely propelled By Lee Mielke Dairy cow slaughter totaled 55,200 head in the week ending Sept. 5. This is block cheese and butter markets skyup 1,100 from the previous week, but ward (details ahead). The aid will likely keep cheese prices strong (and MARKETING 2,100 head or 3.7 percent below a year ago. in turn milk prices), but will no doubt result in an oversupplied milk market. n 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 percent from August 2019. Output in the top 24 producing states totaled 17.8 billion pounds, up 1.9 percent from 2019. Revisions added 90 million pounds to the original July 50-state total, now put at 18.735 billion — up 2 percent from July 2019 instead of the originally-reported 1.5 percent increase. 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 from Chicago-based Commodity and Ingredient Hedging LLC. The Margin Watch 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.” 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 percent. The Margin Watch warned with block cheddar prices back above $2.00 per pound, “The United States is no longer competitive on the global export market at a time when milk production looks to increase heading into autumn. Demand for and

Trade will influence planted acres in 2021

KVENO, from pg. 12

er seed choices. Here in southern Minnesota we too often see corn tipping over because of overly aggressive winds. And that happens more easily if you have rootless corn because of corn rootworms.

The Land: So should I even question purchasing trait-free hybrids and low cost seed?

Kveno: Every situation needs to be evaluated separately. Today, many of our customers now perform at high management levels which might include soil-applied insecticides and close monitoring of the corn fields for corn borer infestations. In that situation, gambling on a non-treated corn might be a financial advantage. If their fields don’t have a corn borer history, they may gamble and win. However, in my travels across southern Minnesota the past couple of years, I’m seeing a ramping-up of corn rootworm beetle activity. I firmly believe we should be protecting that investment — especially with the today’s seed costs.

The Land: This spring, virtually all corn was April planted; lots of soybeans too. So you see the same thing next year if weather permits?

Kveno: It seems my answer should be, ‘why not?’ But it really boils down to each operation having the right investment in equipment, field drainage and appropriate genetics. Seedling vigor and early emergence are always part of our vetting processes. However, increased performance in other areas is critical too. However, as we’ve all witnessed, today’s hybrids can better handle a few days of colder, wet soil conditions too.

The Land: So with a more favorable outlook brewing, should growers increase corn acres for 2021?

Kveno: This depends upon geography. Looking at southern Minnesota counties such as Renville, Sibley and Blue Earth — which are blessed with good soils — market outlooks into this 2021 crop year will pretty much dictate crop acres of both corn and soybeans. But how the political landscape looks after November elections may also influence famers’ thinking. I’m talking specifically foreign trade actions. If farmers see some positives in this unpredictable future, I could see some shifting back towards a twothirds corn, one-third soybean schedule for 2021. v 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 10’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 Margin Watch 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 percent 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 Margin Watch concluded.

n

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, Fuess 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, Fuess 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.

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Looking globally, skim milk powder led (with cheese right behind) in driving this week’s Global Dairy Trade auction’s weighted average up 3.6 percent, ending four consecutive sessions of decline.

Skim milk powder was up 8.4 percent following a 1.8 percent gain on Sept. 1. GDT cheddar was up 7.2 percent after slipping 0.4 percent, and whole milk powder was up 3.2 percent after losing 2 percent. Anhydrous milkfat was up 2 percent after slipping 0.5 percent last time.

See MIELKE, pg. 17

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