Mielke Market Weekly

Forecast calls for healthy cheese prices and production

This column was written for the market- This strength is expected to carry into ing week ending Nov. 13. 2021 supporting a higher 2021 fat basis The big news this week was the media and some politicians pronouncing Joe Biden as the new U.S. president. The Trump Administration filed numerous legal challenges to the vote totals and import forecast. The fat basis export forecast for 2020 was raised on higher expected exports of cheese and butterfat; no change was made to the 2021 fat basis export forecast. that may delay the final determination The skim-solids basis import forecast for 2020 was reduced on lower imports of lowfat milk powders while the 2021 import forecast was reduced on lower imports of a number of dairy products. The 2020 and 2021 skim-solids basis export forecasts were raised on stronger expected sales of skim milk powder. for several weeks. It was 37 days in the Bush-Gore race. Perhaps the bigger news was that Pfizer has a viable Covid vaccine. Preliminary results showed over 90 percent prevention in the thousands of test volunteers. MARKETING MIELKE MARKET WEEKLY By Lee Mielke

StoneX Dairy says, “It will be important to watch n how any vaccine will be distributed and whether it Looking at the feed side of things, the USDA can be distributed fast enough to allow some new again cut its estimate on the size of this year’s corn restrictions to be rolled back. For now, Pfizer is and soybean crops. The corn outlook is for lower expecting to see the bulk of vaccine distribution production, reduced feed and residual use, larger occur in 2021. Approximately 50 million doses could exports, and smaller ending stocks. Corn production be available by the end of 2020, vaccinating around was forecast at 14.507 billion bushels, down 215 25 million people.” million or 1 percent from last month’s forecast; but The U.S. Department of Agriculture raised its 2020 milk production forecast for the third consecutive month in the latest World Agricultural Supply and Demand Estimates report —citing stronger growth in milk per cow and higher expected dairy cow inventory. The 2021 estimate was raised on up 7 percent from 2019. Yields are expected to average 175.8 bushels per acre, down 2.6 bushels from the previous forecast but 8.3 bushels above a year ago. Area harvested for grain was forecast at 82.5 million acres, unchanged from the previous forecast, but up 1 percent from a year ago. higher forecast prices for cheese and whey. Corn exports were raised 325 million bushels to 2020 production and marketings were estimated at 222.5 and 221.5 billion pounds respectively, up 200 million pounds on both from their October estimate. If realized, 2020 production would be up 4.1 billion pounds or 1.9 percent from 2019. 2.65 billion, which if realized would be record high. Projected feed and residual use was lowered 75 million bushels based on a smaller crop and higher expected prices. With supply falling and use increasing, corn ending stocks are down 465 million bushels to 1.7 billion, which would be the lowest since 2021 production and marketings were estimated 2013-14. The corn price was raised 40 cents to $4.00 at 225.9 and 224.9 billion pounds respectively, up per bushel. 400 million pounds on both. If realized, 2021 production would be up 3.4 billion pounds or 1.5 percent from 2020. Soybean production was forecast at 4.17 billion bushels, down 98 million or 2 percent from a month ago, but up 17 percent from last year. Yields are

Cheese, nonfat dry milk and whey price forecasts expected to average 50.7 bushels per acre, down 1.2 for 2020 were raised from last month on strength in bushels from the last forecast but 3.3 bushels above demand. The butter price forecast was reduced on 2019. Area harvested was forecast at 82.3 million current and expected continued weakness in prices. acres, unchanged from last month’s forecast but up

The 2020 Class III milk price forecast was raised on 10 percent from a year ago. higher prices for cheese and whey. It is now projected Lower yields were reported for Illinois, Iowa, to average $18.55 per cwt., up 55 cents from last Indiana, Ohio and Nebraska. With reduced producmonth’s estimate, and compares to $16.96 in 2019 tion, ending stocks were projected at 190 million and $14.61 in 2018. The 2021 average was projected bushels, down 100 million from last month. If realat $17.25, up 25 cents from last month’s estimate. ized, soybean ending stocks would be at the lowest

The Class IV forecast was unchanged from last level in seven years. Soybean and product prices month as the expected higher nonfat dry milk price were all higher. The U.S. season-average soybean offsets the lower butter price. It remained at $13.50, price was forecast at $10.40 per bushel, up 60 cents. down from $16.30 in 2019 and $14.23 in 2018. The The soybean meal price was forecast at $355 per 2021 Class IV price average was put at $14.00, short ton, up $20. down a dime from last month’s projection. Cotton estimates were virtually unchanged. The

The 2020 fat basis import forecast was raised on production forecast is marginally higher, at 17.1 recent trade data and higher expected imports of million bales, up less than 1 percent from a month cheese and butterfat products in fourth quarter. ago but down 14 percent from a year ago. Yields are expected to average 911 pounds per acre, up 2 pounds from the previous forecast and 88 pounds above the 2019 level.

StoneX dairy broker Dave Kurzawski stated in the Nov. 16 “Dairy Radio Now” broadcast that we’re seeing record corn exports but smaller crops. China has been “buying like crazy,” he said, but he fears dairy and livestock producers may be less covered on feed than they should be as prices are poised to rise.

Cheese prices are heading down, “probably part of a normal ebb and flow.” However, “we’re not out of this pandemic yet.” He believes government support and retail demand will be there and, if there is a President Biden, there will mostly likely be continued government assistance ahead.

The Daily Dairy Report’s Sarina Sharp echoed the export sentiment, writing in the Nov. 6 Milk Producers Council newsletter, that the first week of November was “another strong week of corn and soybean exports. The weak dollar gave commodity markets a boost and made U.S. grains even more attractive to foreign buyers. And South America is in the throes of a dry spell, leading to speculation that the United States will remain the best market for a bit longer.”

Meanwhile, the USDA’s latest Crop Progress report shows that the U.S. corn harvest was 91 percent complete as of the week ending Nov. 8. This is up from 62 percent at that time a year ago and 11 percent ahead of the five-year average.

Soybeans were 92 percent harvested, up from 82 percent a year ago and 2 percent ahead of the fiveyear average.

The cotton harvest was 61 percent completed. n

Hemorrhaging continues in the cash cheese market. The cheddar blocks closed Friday the 13th at $1.9175 per pound, down 42.5 cents on the week, adding to the 44 cent drop the previous week, and the lowest since Sept. 2, but were still 27.5 cents above a year ago.

The barrels plunged to $1.61 per pound Nov. 13 following significant drops almost daily — including a record single-day loss of 29 cents on Nov. 13. They dropped 70.75 cents on the week to the lowest price since Sept. 15, 58.75 cents below a year ago, and 30.75 cents below the blocks. Fourteen cars of block sold on the week and 32 of barrel.

Orders for cheese for the Food Box program are slowing and there’s no word of the program being extended into 2021. StoneX says, “Round 4 food boxes have started to be delivered, 61,964 thus far. Deliveries of Round 3 boxes have slowed, 16 out of 19.1 million have been delivered for Round 3, Sept. 22 to Oct. 31. Questions remain as to whether the target will be reached, but only time will tell.”

Midwestern cheese producers reported a notable

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China and Australia’s trade problems have worsened

MIELKE, from pg. 20

slowdown in orders again this week, the impetus being the drops in price, according to Dairy Market News.

Customers were waiting for the bottom to begin purchasing anything more than necessary, says Dairy Market News. Covid-related staffing shortages continue to be reported, but plants continue to operate. Limiting manufacturing is keeping stocks in check in the region. Spot milk was readily available and at a discount.

Western cheese supplies are loosening as the hesitancy to hold cheese at elevated prices continued. Strong retail demand and government purchases continued to pull large volumes. End users say cheese supply pipelines are filled and starting to back up. Cheese output is active due to the heavy milk supply. n

Butter climbed to $1.4375 per pound on Nov. 11, but finished two days later at $1.40. This is down 3 cents on the week and 66.75 cents below a year ago, on 25 sales.

Cream appears to remain plentiful in the Midwest and offers have increased in recent weeks. Churning remains busy; but more contacts reported Covid testing and quarantines are leading to employee shortages, putting a crimp on scheduling and churn rates. Butter is moving strongly in holiday orders, particularly into retail grocers, but supplies are far from short, says Dairy Market News.

Western butter churns remain active. Thanksgiving orders are out the door and buyers are looking to supply needs for the remaining holidays. Orders are termed “good.” Feature activity continues at retail and is expected to clear large volumes of print butter in the week. Food service orders are unchanged, however. Manufacturers are keeping a close eye on production and inventory. Cream offerings are available, but producers are more cautious with purchases as they anticipate the butter price will decline, according to Dairy Market News.

Grade A nonfat dry milk climbed to $1.0975 per pound on Nov. 11, but closed Nov. 13 at $1.0875. This is 2.25 cents higher on the week, but 13 cents below a year ago, with 17 sales reported.

Dry whey finished at 43 cents per pound, up 0.75 cents on the week, highest since January 22, 2019, and 11 cents above a year ago, on one sale for the week.

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Commercial disappearance of butter and Americantype cheese surged in September, according to the Dairy and Food Market Analyst. “Usage of butter was up 13 percent and American-type cheese up 9.9 percent, according to our analysis of production, stocks and trade data. For the entire third quarter, which smooths some of the monthly ups and downs, usage of butter did not show any growth while usage of American-type cheese was up 3.6 percent.”

The Analyst also reported China and Australia’s trade problems have worsened and could benefit U.S. dairy. “Australia and China are battling over Coronavirus. China on Nov. 6 reportedly banned Chinese traders from importing Australian sugar, lobster, copper, copper concentrates and timber. Bans or heavy tariffs are already in place for beef, coal, red wine and barley. So far, dairy has avoided any hits, but if it did, it would impact the 98 million pounds of skim milk powder and 29 million pounds of infant formula imported annually by China from Australia.”

While we’re ‘down under,’ StoneX wrote in its Nov. 6 “Early Morning Update” that “New Zealand pasture growth numbers has us wondering why more people aren’t looking at this topic. Pasture growth has taken a hit from early impacts of the dry season leading to the index lagging way behind last season and the five-year average. The data leads us to expect less milk production than originally anticipated, meaning less product coming out of New Zealand onto the international market which could provide an opportunity for U.S. exports.”

Speaking of exports, Cooperatives Working Together members accepted 25 offers of export assistance this week to help capture sales of 1.5 million pounds of cheddar and Monterey Jack cheese, 1.5 million pounds of butter, 5.3 million pounds of whole milk powder and 606,271 pounds of cream cheese.

The product is going to customers in Asia, the Middle East, North Africa, Oceania, Central and South America through March 2021 and raised CWT’s 2020 exports to 27.99 million pounds of American-type cheeses, 10.92 million pounds of butter (82 percent milkfat), 1.98 million pounds of anhydrous milkfat, 6.54 million pounds of cream cheese, and 48.16 million pounds of whole milk powder. n

In politics, the National Milk Producers Federation blasted the European Union’s imposition of retaliatory tariffs on U.S. agriculture exports — escalating the dispute over World Trade Organization incompliant aircraft subsidies.

NMPF President Jim Mulhern charged, “Europe has long wielded restrictive and unjustified trade tactics to limit fair competition from U.S. agriculture, including dairy exports. While Europe may be authorized to retaliate, the United States has already taken deliberate action to address the WTO decision. Meanwhile, Europe has failed to come into compliance with their WTO obligations.”

“As the United States works to hold Europe accountable to its WTO obligations, U.S. retaliatory tariffs against EU dairy products continue to play a key role in bringing Europe to the negotiating table and compelling them to fulfill their trade commitments,” according to Mulhern.

NMPF and the U.S. Dairy Export Council also released a summary of its recent analysis of “global trade barriers hampering overseas dairy sales to better inform and guide the work of the incoming administration and other policymakers.”

The submission to the U.S. Trade Representative was created as part of the USTR’s annual call for input to inform its “National Trade Estimate Report on Foreign Trade Barriers.” It outlined nearly 40 pages of challenges and opportunities facing U.S. dairy exports in more than 30 foreign markets, according to a joint press release.

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