12 minute read
Mielke Market Weekly
Robust milk prices have producers increasing herds
This column was written for the market- tinues to move strongly through retail ing week ending Nov. 6. channels as well as drawing support from The October Federal order Class III benchmark milk price vaulted $5.18 to $21.61 per hundredweight this week. This is the highest October price since 2014 with a little more to come — thanks in large part to Uncle Sam’s Farmers to Families Food Box program. The November futures contract was trading late morning Nov. 6 at $23.21; but MIELKE MARKET WEEKLY government purchase programs. September butter stocks of 343.9 million pounds dropped by 7.4 percent from August and represented the largest August to September inventory decline in three years. September butter stocks remain 18.3 percent higher than last year.” n December was at $18.63, with January 2021 at $17.18 per cwt. By Lee Mielke You’ll recall September milk production totaled 18 billion pounds, up 2.3 perThe 2020 Class III average is at $17.89, up from $16.37 a year ago. MARKETING cent from September 2019. The latest Dairy Products report shows
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The October Class IV price is $13.47 per cwt., up where that milk went. 72 cents from September, but $2.92 below a year Total cheese output crept to 1.1 billion pounds, up ago. The Class IV average now stands at $13.52, 0.6 percent from August, but a bearish 1.1 percent down from $16.23 a year ago and $14.06 in 2018. above September 2019. Year-to-date total cheese Dairy margins were again mixed over the second half of October, continuing a recent trend of output stands at 9.8 billion pounds, up 0.5 percent from a year ago. strengthening in nearby marketing periods while Wisconsin produced 276.4 million pounds of the weakening slightly further out the curve in second September total, up 0.7 percent from August but 1.4 and third quarter, according to the latest Margin percent below a year ago. California output, at 192.8 Watch from Chicago-based Commodity & Ingredient million pounds, was up 0.7 percent from August, but Hedging LLC. 5.4 percent below a year ago. Idaho contributed 87.1 The Margin Watch stated, “Strength in nearby marketing periods continues to be paced higher million pounds, up 7 percent from August and 4.1 percent above a year ago. trade in cheese, despite what was generally con- Italian-type cheese totaled 462.8 million pounds, strued as a bearish monthly production report. The up 4.4 percent from August, but 1.7 percent below a U.S. Department of Agriculture reported September year ago. Year-to-date, Italian output is at 4.2 billion milk production at 18 billion pounds, up 400 million pounds, down 1 percent. or 2.35 percent from 2019 and much higher than anticipated. In addition, USDA reported the milking cow herd at 9.366 million head, up 5,000 from August and 33,000 higher than last year. Moreover, dairy cow slaughter has averaged 9.3 percent less American-type cheese totaled 432.5 million pounds, down 3.3 percent from August, but 4 percent above a year ago. Year-to-date, American was at 3.97 billion pounds, up 1.8 percent. than last year and 5.2 percent lower than the his- Mozzarella output climbed to 365.8 million torical average over the past 12 weeks, suggesting pounds, down 2.6 percent from a year ago, with that dairy producers have been expanding their year-to-date at 3.3 billion pounds, down 1 percent herds to increase milk output.” from 2019.
The Margin Watch said Cold Storage data provided Cheddar, which is traded at the Chicago some context for the strong cheese market as “Total Mercantile Exchange, fell to 306.1 million pounds, cheese stocks contracted 1.3 percent in September to down 17.9 million pounds or 5.6 percent from 1.36 billion pounds, falling below prior-year levels August; but was 22 million or a whopping 7.7 perfor the first time since March. The decline was espe- cent above September 2019. Year-to-date, cheddar is cially pronounced for American cheese which fell 2.2 at 2.85 billion pounds, up 2.3 percent. percent to 772.6 million pounds. Despite the contin- Churns produced 152.1 million pounds of butter, ued challenges for foodservice demand, cheese con- up 500,000 pounds or 0.3 percent from August; but was 7.8 million pounds or 5.4 percent above a year
For more news briefs, ago. Year-to-date, butter is at 1.6 billion pounds, up a hefty 6.5 percent from 2019. visit the “Nuts and Bolts” Dry whey totaled 74.9 million pounds, down 4.9 percent from August and 17.3 percent below a year ago, with year-to-date at 730.6 million pounds, down section at 0.2 percent. Stocks totaled 74.9 million pounds, down 4.9 percent from August and 17.3 percent www.TheLandOnline.com below a year ago. Nonfat dry milk output fell to 124.3 million pounds, down 19.9 million pounds or 13.8 percent from August, but 6.5 million or 5.5 percent above a year ago. Year-to-date, powder sits at 1.4 billion pounds, up 1.8 percent from 2019. Stocks fell to 233.2 million pounds, down 37.4 million or 13.8 percent from August, and 17.6 million or 7 percent below a year ago.
Skim milk powder output jumped to 72.5 million pounds, up 11.3 million pounds or 18.3 percent from August and 13.7 million pounds or 23.3 percent above a year ago. Year-to-date, skim milk powder is at 453 million pounds, up 10.6 percent from a year ago.
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The loud crash you heard the first week of November was cheddar block cheese plunging 44 cents to a Nov. 6 close of $2.3425 per pound. This ends five consecutive weeks of gain, but were still 32.75 cents above a year ago.
The barrels rolled from their new record high $2.53 per pound to a $2.3175 close. This is down 21.25 cents on the week, ending seven weeks of gains, 1.25 cents below a year ago, but at a more typical 2.50 cents below the blocks. There were only two cars of block traded on the week at the CME and 14 of barrel.
Midwest cheese producers reported changes in production levels this week to Dairy Market News as some were seeking less milk and limiting production. Customers were buying hand-to-mouth and, with prices where they were, no one wants to be holding extra stocks anticipating the price declines. Spot milk was available at prices still around or just under Class III.
Western retail cheese demand has remained strong, but while government purchases and fast food outlets are moving good volumes of cheese, total food service is underperforming. Export sales have receded, due to the higher prices and, in some cases, manufacturers had to discount cheese to move it overseas. Contacts say domestic market prices and freight costs are making it harder to compete in international markets. Parts of the nation face increasing Covid-19 cases so marketers are concerned about further restrictions which could hamper recovery of the food service sector. Manufacturers and buyers are cautious in cheese production and storage that could lose value. Stocks are moderate.
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Butter climbed to $1.4375 per pound on Nov. 4, but closed two days later at $1.43. This is up 4 cents on the week, but 60.75 cents below a year ago on 26 sales on the week.
Plant managers relay that cream availability is opening up from local and western regions and cream suppliers are setting Thanksgiving week deals. Butter makers say inventory is moving and
See MIELKE, pg. 23
Global Dairy Trade auction sees first decline in months
MIELKE, from pg. 22
churning remains busy. Retail demand has increased seasonally, but food service is doubtful to return to “normal” anytime soon. Market tones remain quiet and some believe they may remain somewhat mum into first quarter 2021.
The western butter supply is more than adequate and reflects a somewhat unstable market undertone. Sources tell Dairy Market News, “The market is capable of seeing a domestic price surge, encouraged by strong retail demand that neutralizes the butter supply situation.”
Stocks are in good shape and churning thrives at expected year-end holiday levels. Customers are inquiring about first quarter 2021 purchases. Food service is fairly steady, but below seasonal standards. Competitive U.S. butter in the global market “could potentially be the mechanism for a stronger domestic butter price,” says Dairy Market News.
Grade A nonfat dry milk finished the week 4.25 cents lower, closing at $1.0650 per pound, 14 cents below a year ago, with 13 cars finding new homes. Poor exports and a weak GDT were the likely culprits for the powder downfall.
Dry whey climbed to a 42.25 cents per pound finish (the highest since January 22, 2019) and 14.75 cents above a year ago, with three sales reported on the week.
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The first Global Dairy Trade auction of November reversed direction after three consecutive gains, and saw its weighted average drop 2 percent. Powder and anhydrous milkfat were responsible. Sellers brought 78.1 million pounds of product to the auction block, up from 76.4 million on Oct. 20.
Skim milk powder led the losses, falling 4.4 percent after inching 0.2 percent lower on Oct. 20. Whole milk powder was down 2 percent after inching up 0.3 percent. Anhydrous milkfat was down 2.6 percent, following a 0.5 percent slippage. Cheddar was off 0.8 percent after gaining 3 percent last time.
Butter led the two gains, up 3.9 percent, after a 3.3 percent rise last time. Buttermilk powder was up 1.2 percent after not trading in the last event.
StoneX equated the GDT 80 percent butterfat butter price to $1.6913 per pound U.S. This is up 6.4 cents from the last event. CME butter closed Nov. 6 at a bargain $1.43. GDT cheddar equated to $1.7172 per pound, down 0.8 percent, and compares to Nov. 6’s CME block cheddar at $2.3425. GDT skim milk powder averaged $1.2348 per pound, down from $1.2933, and whole milk powder averaged $1.3539, down from $1.3776. CME Grade A powder closed at $1.0650.
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In other trade news, U.S. dairy exports topped year-ago levels for the 13th consecutive month in September. Cheese exports hit 62.7 million pounds, up 4.2 percent from September 2019. This is the fifth month in a row they topped year ago levels, and “somewhat against expectations,” says HighGround Dairy, “as cheese prices rose to record levels in July, likely impacting export potential.”
Interestingly, considering the low U.S. butter prices, September exports only totaled 3.3 million pounds, down 10.2 percent from 2019.
Nonfat dry milk-skim milk powder exports hit 135.6 million pounds, down 5.9 percent from a year ago. This is the first time they were down from a year ago since February, and followed several months of record-high volume. Powder to Mexico was lower again, says HighGround Dairy, on trend with recent months and down 33 percent year-over-year.
Dry whey exports totaled 41.5 million pounds, up 52.3 percent, and the eighth consecutive month they topped the prior year. HighGround Dairy says the increase was led by China, who took 358 percent, or 15.3 million pounds, more than a year ago. Chinese demand was down slightly from August but higher than July.
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Dairy farm “recovery” is taking a while to get to the farmgate. Another drop in the U.S. All Milk price, plus sharply higher corn and soybean prices, pulled the September milk feed price ratio to the lowest level since May.
The latest Ag Prices report has the ratio at 2.28, down from 2.50 in August, and down from 2.34 in September 2019.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. In other words, one pound of milk purchased 2.28 pounds of dairy feed of that blend in September. The US All-Milk price averaged $17.90 per hundredweight, down 90 cents from August and $1.40 below September 2019.
California’s All Milk price fell to $18.70, down $1.30 from August, but 10 cents above a year ago. Wisconsin’s, at $17.70, was down $1.70 from August and $2.20 below a year ago.
The national average corn price averaged $3.41 per bushel, up 29 cents per bushel from August but 39 cents per bushel below September 2019. Soybeans averaged $9.24 per bushel, up 58 cents from August and were 89 cents per bushel above a year ago. Alfalfa hay averaged $171 per ton, down $1 from August and $8 per ton below a year ago.
Looking at the cow side of the ledger, the September cull price for beef and dairy combined averaged $66.60 per cwt. This is down $4.10 from August, $1 above September 2019, but $5 below the 2011 base average of $71.60 per cwt.
Milk cow replacements averaged $1,340 per head in October, up $30 per head from July and $30 above October 2019. They averaged $1,350 per head in California, unchanged from July and $50 below a year ago. Wisconsin cows averaged $1,420 per head, up $70 from July and $150 above October 2019
In the week ending Oct. 24, 58,200 dairy cows were sent to slaughter. This is up 400 from the week before, but 4,000 head — or 6.4 percent — below that week a year ago.
The U.S. corn harvest is 82 percent complete as of the week ending Nov. 1 according to the latest Crop Progress report. That’s up from 49 percent at this time a year ago and 13 percent ahead of the fiveyear average.
Soybeans were at 87 percent harvested, up from 71 percent a year ago and 4 percent ahead of the five-year average.
The cotton harvest is 52 percent completed, up 1 percent from a year ago and 3 percent ahead of the five-year average. Thirty-seven percent of the crop is rated good to excellent, down from 40 percent at this time a year ago.
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In politics, a big “Thank you” to Minnesota Democrat Collin Peterson, ranking member of the House Agriculture Committee, who was defeated in his re-election bid.
Hoards Dairyman’s Corey Geiger called Peterson a “champion for agriculture,” in the Nov. 9 “Dairy Radio Now” broadcast, saying he was among a handful of politicians who truly understand agriculture and ushered three farm bills through the House with bipartisan support.
While President Trump did not carry Minnesota, Peterson’s large rural 7th district has become more conservative over his 30 years of service, according to Geiger, and while Peterson’s replacement, former Minnesota Lieutenant Governor Michelle Fischbach, would reportedly welcome serving on that committee, she would be a junior member, said Geiger, without the experience of a Colin Peterson.
Lee Mielke is a syndicated columnist who resides in Everson, Wash. His weekly column is featured in newspapers across the country and he may be reached at lkmielke@juno.com. v
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