Mielke Market Weekly

MIELKE MARKET WEEKLY By Lee Mielke MARKETING

This column was written for the mar- Butter, cheese, nonfat dry milk and keting week ending Aug. 13. whey price forecasts for 2021 were lowThe second week of August began with a lot of uncertainty. Soaring temperatures returned to much of the country, especially the west, and over 100 wildered on relatively weak demand. Prices were also reduced for 2022 reflecting continued relatively soft domestic demand and higher forecast beginning stocks. fires were consuming hundreds of acres The 2021 and 2022 Class III and Class of woodland in several states. IV milk price forecasts were reduced The Daily Dairy Report says, “The U.S. Drought Monitor shows 98.5 percent of the West was experiencing some type of drought as of Aug. 3, with nearly twothirds of the area qualifying as under extreme or exceptional drought. Area reservoirs have been from last month. Look for a 2021 Class III average of $16.55 per hundredweight, down 25 cents from last month’s estimate, and compares to $18.16 in 2020 and $16.96 in 2019. The 2022 average is $16.16, down 60 cents from a month ago. drained to historic lows with serious The 2021 Class IV average is now ramifications for the agricultural producers who pegged at $15.15 per cwt., down 25 cents from a depend on this water.” month ago, and compares to $13.49 in 2020 and Increasing reports of Covid and/or the Delta variant cast a shadow on the markets even as the non$16.30 in 2019. The 2021 average will be $15.30, down 45 cents from the July estimate. existent southern border is flooded with would-be This month’s 2021-22 U.S. corn outlook is for residents. State and federal authorities are weigh- lower supplies, reduced feed and residual use, ing a return to masking and mandatory vaccines increased food, seed, and industrial use, lower declared necessary by medical authorities who don’t exports, and smaller ending stocks. Projected beginseem to have many more answers now than they ning stocks are 35 million bushels higher based on a did when the pandemic began. lower use forecast for 2020-21. Reduced exports n were partially offset by greater corn for ethanol and other uses. The U.S. Department of Agriculture lowered its estimate for 2021 milk production in the latest World Agricultural Supply and Demand Estimates report, second month in a row, and lowered its 2022 Corn production was forecast at 14.8 billion bushels, down 415 million from the July projection but up 4 percent from 2020. estimate, citing lower dairy cow numbers. Area harvested was forecast at 84.5 million acres, 2021 production and marketings were estimated at 228.1 and 227.1 billion pounds respectively, down 100 million pounds on both from last month’s estimates. If realized, 2021 production would still be up 4.9 billion pounds or 2.2 percent from 2020. unchanged from the June forecast, but up 2 percent from 2020. Record yields are expected in Illinois, Indiana, and Ohio, while yields in Minnesota and South Dakota were forecast below a year ago. Total U.S. corn use is down 190 million bushels to 14.7 billion. Feed and residual use is down 100 million 2022 production and marketings were estimated bushels based on a smaller crop and higher expectat 231.2 and 230.2 billion pounds respectively, down ed prices. StoneX says, “The reduction in demand 400 million pounds on production and down 300 looks to be all that’s keeping us from really lighting million on marketings. If realized, 2022 production a fire to this market.” would be up 3.1 billion pounds or 1.4 percent from 2021. U.S. soybean supply and use changes included higher beginning stocks and lower production,

Soybeans take a jump at week’s end

NYSTROM, from pg. 19

petitive September forward with Brazil, and we’ll have to watch how Argentina works through the low water problems. There’s a lot of volatility left in the market, so don’t fall asleep at the wheel. We aren’t out of the woods on solving the tight carryout situation, but if weather cooperates, we may take a step closer. We’ll continue to look for wide daily ranges with November soybeans in a $13-$14 range.

November soybeans jumped 28.25 cents higher for the week at $13.65, January soybeans were up 28 cents at $13.69.25, and the November 2022 contract was 1.5 cents lower at $12.56.75 per bushel.

Nystrom’s notes: Contract changes for the week as of the close on Aug. 13 (September contracts): Chicago wheat was 43.25 cents higher at $7.62.24, Kansas City surged 36.5 cents higher at $7.42.25, Minneapolis was 28 cents higher at $9.44.25 and the December Minneapolis was up 26.25 cents at $9.29.5 per bushel. All three wheats set new contract highs late in the week as world production declines and demand stays strong. v crush, and exports. Beginning stocks were raised on lower 2020-21 crush and exports. Soybean production was forecast at 4.34 billion bushels, down 66 million on lower yields, but up 5 percent from 2020. Harvested area was forecast at 86.7 million acres, unchanged from July.

The soybean yield forecast of 50 bushels per acre was reduced 0.8 bushels from last month and 0.2 bushels from last year. Soybean supplies were projected at 4.5 billion bushels, down 3 percent from last year. Soybean crush was reduced 20 million bushels on a lower domestic soybean meal disappearance forecast which is reduced in line with the prior year, and lower soybean meal exports. n

USDA’s latest Crop Progress report showed 95 percent of U.S. corn was silking, as of the week ending Aug.8. Fifty-six percent was at the dough stage, up from 38 percent the previous week, even with a year ago, and 5 percent ahead of the average. The crop shows 64 percent rated good to excellent, up 2 percent from the previous week, but 7 percent below a year ago.

Looking to soybeans, 91 percent were blooming. Seventy-two percent were setting pods, up from 58 percent the previous week, 1 percent below of a year ago, but 4 percent ahead of the five-year average. Sixty percent were rated good to excellent, unchanged from the previous week, but 14 percent below a year ago.

Getting back to the heat out west, the Aug. 6 Dairy and Food Market Analyst reported, “California’s water board voted to end water diversions from the Sacramento-San Joaquin Delta watershed. The official shutoff will occur after Aug. 15. After that happens, many farmers will not be able to irrigate.”

The Analyst says the water board attempted a similar type of measure in 2015, but was ultimately blocked after a judge found the board failed to provide “some form of public hearing” to challenge its findings. The water board believes this week’s decision is “on very firm legal footing,” according to the Analyst, but “lawsuits and a judge will ultimately decide if that is in fact the case.”

The expected lawsuits have the potential to at least temporarily prevent the water shutdown, the Analyst says. “At the moment, there are many crops that are planted and need water to mature, including tomatoes and corn silage. This decision may also end up preventing a final cutting of affected hay.” Bottom line are higher feed costs for dairy farmers, the Analyst warned.

In the week ending July 31, 58,500 dairy cows were sent to slaughter, up 900 from the previous week, and 6,500 or 12.5 percent above that week a year ago.

StoneX stated in its Aug. 6 “Early Morning Update”

See MIELKE, pg. 21

MIELKE, from pg. 20

that dairy cow slaughter is continuing to pick up and hold a premium to year ago levels but is tracking with seasonal trends. Cull prices were holding above $140 per cwt.

“Contraction in the dairy herd, seasonally declining milk yields, and increasing fluid milk demand from schools returning to session shows opportunity for Class III contracts to find renewed strength in prices,” suggests StoneX.

Fluid milk sales continued to suffer in June, down 6.7 percent from June 2020, after falling 4.3 percent in May. Conventional sales were down 6.9 percent and organic sales were off 3.7 percent.

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Most Chicago Mercantile Exchange dairy prices strengthened the second week of August, but saw some gyrations. The cheddar blocks closed on Friday the 13th at $1.8125 per pound. This is up 17.75 cents on the week, the highest since May 12, but threequarter cents below a year ago.

The barrels climbed to $1.4275 on Aug. 10, backed down to $1.41 the next day, but closed Aug. 13 at $1.45. This is up 14 cents on the week, highest in three weeks, but a nickel below a year ago. The spread widened to 37 cents on Aug. 11, but fell to 36.25 cents on Aug. 13. There were nine sales of block and 17 of barrel on the week.

Midwest cheesemakers tell Dairy Market News that spot milk has tightened notably as milk is diverted into bottling for school reopening. Loads are also moving out of the region to the Southeast. Cheese sales are strong in the region and curd producers say outdoor events, such as fairs, have locked them up at least into September. Barrel producers say customer interest remains intact despite the lower market, but availability has grown in recent months. Cheese plant managers report an uptick in nonfat dry milk fortification due to the lighter milk availability. The Covid Delta variant is also a growing concern among producers and their customers, says Dairy Market News.

Western cheese demand remains steady at both retail and food service. Export demand is also strong, with market prices favorable to international markets — especially Asian markets. The block barrels price gap is blamed on the greater availability of barrels as some producers have focused on barrel production due to a shortage of available block packaging. Producers are running busy schedules in the region, despite the seasonal decline in milk production.

CME butter hit $1.68 per pound on Aug. 8, but closed Aug. 13 at $1.67. This is up 2.25 cents on the week and 18.5 cents above a year ago, with 13 sales on the week.

The USDA announced a $10 million solicitation for butter under Section 32. That would put 2021 purchases at just over $77 million. Meanwhile, Dairy Market News reports that cream offers are becoming fewer. Multiples are near their peak regarding fiscal sensibility for making butter and extra cream is no longer as available from the West. Butter sales are generally steady.

Plant managers are beginning to compare sales with those of 2019, as last year’s figures are skewed due to the pandemic. Some relay that sales are slightly lower than 2019. Retail interest is slowly increasing but market tones are uncertain and the Covid variant has producers and their customers concerned, particularly in the food service sector.

Western cream availability is tightening though demand is lower from ice cream production. Butter output varies from steady to seasonally lower but healthy inventories are available. Retail sales are picking up and food service orders are level but, as Covid concerns climb and areas shift masking back to mandates, contacts fear it may have a deleterious effect on food service demand, says Dairy Market News.

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Grade A nonfat dry milk closed Aug. 13 at $1.27 per pound, up 1.5 cents on the week and 30.5 cents above a year ago. Eleven sales were reported on the week.

StoneX says, “Mexico is helping keep export volume alive and U.S. prices continue to offer a favorable advantage in export sales. Logistical issues continue to put a damper on domestic demand as stocks back up slightly.”

Dry whey closed the week 2.25 cents lower, at 51.75 cents per pound, 19.25 cents above a year ago, on three sales for the week at the CME.

U.S. butter prices would likely be a lot lower if it weren’t for Canada. The Aug. 10 Daily Dairy Report says, “In the first half of the year, Canada imported 25.3 million pounds of butter, 32 percent more than in 2020 and 13 percent more than 2017’s record volumes. Through June, Canada has also imported nearly 8 million pounds of cream — a sevenfold increase from last year and 31 percent more than in 2017.”

The Daily Dairy Report adds since 2019, U.S. butter and cream exports north of the border have easily eclipsed shipments to the south. So far this year, Canada has accounted for 83 percent of U.S. cream exports and nearly 30 percent of butter shipments. n

In politics, the International Dairy Foods Association reported that the European Commission will extend the implementation deadline for its new health certificate requirements to Jan. 15, 2022, “backing off threats to shut down U.S. dairy exports to EU member states as well as transshipments of U.S. dairy products through the European Union.”

Lastly, the National Milk Producers Federation and U.S. Dairy Export Council gave a thumbs up to bipartisan legislation introduced by Representatives John Garamendi (D-Calif.) and Dusty Johnson (R-S.D.), the Ocean Shipping Reform Act.

“The dairy industry, as well as other exporters, has faced substantially increased costs to ship their goods overseas, challenges obtaining containers and other equipment to deliver their goods to ports and beyond, and often incur booking cancellations or delays for vessel space,” 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

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