U.S. butter stocks fell again in November but were still well above those of a year ago.
The Agriculture Department’s latest Cold Storage report shows the Nov. 30 inventory at 251.8 million pounds, down 47.9 million pounds or 16% from October, but a whopping 71.2 million pounds or 39.4% above November 2019, the 17th consecutive month they topped the year-ago level.
HighGround Dairy said this was the steepest butter drawdown of the year, as is usual in the month, but was less than the five-year average.
American type cheese climbed to 760.2 million pounds, up 4 million pounds or 0.5% from October and 19.8 million pounds or 2.7% above a year ago.
The “other” cheese inventory slipped to 564.5 million pounds, down 600,000 pounds or 0.1% from October, but 6.9 million pounds or 1.2% above a year ago.
The total cheese inventory inched up to 1.34 billion pounds, up 3.4 million pounds or 0.3% from October and 22.3 million pounds or 1.7% above a year ago.
COVID relief coming
Just as a Brexit deal came together on Christmas Eve, U.S. lawmakers had cobbled together another COVID relief package that promised much for the dairy industry. Unfortunately, it was combined with a monstrous omnibus appropriations bill that became a very expensive Christmas tree laden with insane spending, both home and abroad, with very little in the way of COVID relief for the American people.
The measure prompted harsh criticism from President Trump, who vetoed a $740.5 billion annual defense spending bill last Wednesday and led lawmakers to believe he might not sign the joint package. He did sign it, critical of its many expenditures, but called on lawmakers to increase the $600 per person stimulus to $2,000. The House agreed to the increase but it remains doubtful in the Republican-controlled Senate.
Lists appeared everywhere of what the two combined bills funded, with many terming the legislation “wasteful spending.” The COVID-relief and government funding bills carry a total price tag of $2.3 trillion.
The Daily Dairy Report says the bill allocates $400 million for dairy donations and directs USDA to purchase “not less than” $1.5 billion in seafood, produce, meat and dairy products for those in need.
“The bill includes $473 million for small dairy farms to increase coverage levels in the Dairy Margin Coverage program,” says the DDR, and “directs the secretary to ‘make additional payments to ensure that’ Coronavirus Food Assistance Program aid ‘more closely aligns with the calculated gross payment or revenue losses of any person or entity.’"
That, says the DDR, “suggests more aid could be forthcoming for producers with medium and large herds who received far less in aid intended to cover 80% of pandemic-related losses due to the $250,000 payment cap.”
Confused prices
Cash dairy prices looked confused in the Christmas holiday-shortened week. Cheddar block cheese started the week losing 4 cents, then jumped 9.75 cents Tuesday on news that a COVID-relief bill had been agreed upon. The possible veto talk likely turned thinking around and the blocks closed Thursday at $1.5975 per pound, down 2 cents on the week, and 23.25 cents below a year ago.
The barrels pole vaulted 15.25 cents last Tuesday, to $1.6250, highest since Nov. 12 and just 5 cents below the blocks, only to give back 7 cents Wednesday and 9 cents Thursday. They closed at $1.4650, a penny lower on the week, 13.5 cents below a year a year ago, and 13.25 cents below the blocks; 27 cars of block and 7 of barrel exchanged hands in the four days at the CME.
Monday’s trading took the blocks up 1.75 cents on 10 trades. Traders added 2 cents Tuesday, on 12 more trades, and blocks hit $1.6350.
The barrels inched up a half-cent Monday, also on 10 trades, and added 2.25 cents Tuesday, on 4 sales, hitting $1.4925, 14.25 cents below the blocks.
Spot milk was widely available in the Midwest Christmas week at even bigger discounts than recent weeks, according to Dairy Market News, and cheesemakers were shifting production to aging-friendly varieties. “They foresee the writing on the wall with foodservice demand, which has taken the brunt of the COVID-19 impact,” says DMN. “On the other hand, some pizza cheese producers have reported strong remaining sales. Some producers are granting more days off than usual to staff in light of COVID-19 issues, while others were using the ample milk to run steadily through the weekend."
Western cheese makers are running at capacity. Milk collections are adequate and there are discounted loads of milk floating around the region, according to DMN, but industry contacts are “studying the lessons learned from the 2020 cheese markets.”
In general, retail demand is stable and stronger than previous years, says DMN, but snack cheese items are not selling as well.
Cheese demand for institutional and sit-down dining is still weak, but pizza, fast food and other take-out options have helped move cheese. Manufacturers and end users are watching inventories closely. Some expect cheese stocks to grow in the near term as market participants sort out strategies for the coming year.
CME butter saw a Christmas Eve close at $1.5250 per pound, 7 cents higher on the week but 51 cents below a year ago, with 20 cars trading places last week.
The butter backed down 3.25 cents Monday, on an uncovered offer, and stayed there Tuesday, at $1.4925, with no activity.
The price uptick last week was a bit surprising in view of the Cold Storage data showing a buildup of inventory at the wrong time of the year. DMN reported that butter plants were closed anywhere from one to four days for the Christmas weekend, which perplexed cream suppliers trying to find homes for loads that were heavily discounted. Foodservice butter demand continues to find low points and, with long cream supplies, plant managers are producing butter at growing rates, though they are concerned about inventories coming into the new year.
Western butter output is gradually climbing and manufacturers are challenged to find room for the extra cream. Pre-holiday week sales of butter were better than anticipated but sources indicated that orders dropped off considerably Christmas Week.
Restaurant closings continue to occur and remain a stumbling block for foodservice, says DMN. Frozen butter stocks are “fully adequate,” but demand for first quarter bulk butter is “heavy,” says DMN.
Grade A nonfat dry milk finished last week at $1.1475 per pound, down 0.25 cents and 8.50 cents below a year ago, with 4 sales reported on the week.
The powder was down 0.50 cents Monday and lost 0.75 cents Tuesday, dipping to $1.1350, as 10 cars were unloaded.
Dry whey climbed to 46.75 cents per pound last Tuesday and that’s where it stayed, up 1.25 cents on the week and 15.25 cents above a year ago, with no sales.
The whey was unchanged Monday and Tuesday.
First 2021 milk price
The Agriculture Department announced the first Federal order milk price of 2021. The January Class I base price is $15.14 per hundredweight, down $4.73 from December and $3.87 below January 2020. It is the lowest Class I price since June’s $11.42.
Culling below 2019
Dairy cow culling fell in November, according to the latest Livestock Slaughter report, and well below a year ago. An estimated 229,400 head were sent to slaughter under federal inspection, down 29,600 head or 11.4% from October and 26,700 or 10.4% below November 2019.
A total of 2.79 million head were culled in the first 11 months of 2020, down 168,800 head or 5.7% from the same period in 2019.
In the week ending Dec. 12, 62,100 dairy cows were sent to slaughter, down 3,800 from the previous week, and 3,400 or 5.2% below a year ago.
