More milk is on the way. The Agriculture Department raised its 2020 milk production forecast for the fourth consecutive month in the latest World Agricultural Supply and Demand Estimates report, citing higher projected cow numbers. Ditto for the 2021 estimate.
2020 production and marketings were estimated at 222.7 billion and 221.7 billion pounds respectively, up 200 million pounds on both from the November estimate. If realized, 2020 production would be up 4.3 billion pounds, or 2.0% from 2019.
2021 production and marketings were estimated at 226.3 billion and 225.3 billion pounds, respectively, up 400 million pounds on both. If realized, 2021 production would be up 3.6 billion pounds, or 1.6% from 2020.
Based on recent price movements, 2020 cheese and butter price forecasts were lowered, but the whey price was raised. Nonfat dry milk was unchanged.
Cheese and butter price forecasts for 2021 were reduced on weaker expected demand and larger supplies, but NDM and whey prices were raised.
The 2020 Class III milk price forecast was lowered, due to the weaker cheese price more than offsetting higher whey price projections. The 2020 Class III average was projected at $18.20, down 35 cents from last month’s estimate, and compares to $16.96 in 2019 and $14.61 in 2018. The 2021 average was projected at $15.60, down $1.65 from what was anticipated a month ago.
The Class IV price was also lowered on the lower butter price. Look for the 2020 Class IV to average $13.45, down a nickel from last month’s estimate, and compares to $16.30 in 2019 and $14.23 in 2018. The 2021 average was projected at $13.60, down 40 cents from last month’s estimate.
Government aid
The thinking is changing on Capitol Hill despite the political logjam, according to StoneX Dairy Group broker Dave Kurzawski. Speaking in the Dec. 14 “Dairy Radio Now” broadcast, Kurzawski said there are increasing expectations that more government aid will be forthcoming, including renewed food box programs in 2021 because a lot of people are unemployed.
“The U.S. government is going to look at this much the same way they looked at it back in March and April,” he said, “and they’re going to say, we have to pull out the stops here and do something.”
That will surely be needed for dairy, according to Kurzawski, because we already have spring flush-like milk production in December in certain parts of the country.
He pointed out in Monday’s “Early Morning Update” that “foodservice sales numbers released by Black Box Intelligence showed sales in the last week of November down 16% from a peak of about negative 6.5% in early October. It was the third consecutive week of negative growth and all 11 regions it collected data from saw negative growth. It’s clear that the winter weather is taking its toll on foodservice on top of many cities banning indoor dining.”
This week will likely be the last chance to pass a stimulus bill as lawmakers leave town for the Christmas holiday break next week.
Meanwhile, the USDA announced that it will purchase $110 million worth of butter and fluid milk in 2021, using Section 32 funds; $50 million will be spent on butter and $60 million for fluid milk.
The Dairy and Food Market Analyst says, “This purchase could remove nearly half of the butter stock overhang and, at $2.00 per pound, the purchase works out to 25 million pounds of butter or about 4.5 days worth of U.S. consumption.”
Cheese climbs
CME Cheddar block cheese climbed to $1.6425 per pound last Tuesday but closed Friday at $1.6175, up 3.25 cents on the week and 18 cents below a year ago when it fell 17 cents.
The barrels saw a $1.4425 per pound close, 4.25 cents higher on the week and 25.25 cents below a year ago when they plunged 53 cents; 26 cars of block were sold on the week and 25 of barrel.
The blocks were up 1.25 cents Monday and traders added 2.25 cents Tuesday, hitting $1.6525, after absorbing the morning’s GDT and anticipating Thursday’s November Milk Production report.
The barrels lost 0.75 cents Monday but were also up 2.25 cents Tuesday, climbing to $1.4575, highest since Nov. 13, but still an unsustainable 19.50 cents below the blocks.
Milk availability is nearing the overwhelming mark in the Midwest, according to Dairy Market News. Cheese demand is mixed. Barrel producers say broker interest is intermittent. Curd makers are seeing notable slowdowns with more COVID restaurant and bar restrictions. Pizza cheese and specialty cheesemakers have seen steady to returning sales. Plant COVID staffing concerns remain.
Western cheese output remains active, as there are no issues getting milk, but processors are closely watching inventory. Demand from the pizza sector is strong. Retail and some international buyers are engaging more as prices have relaxed. Both are good signs for cheese but food service demand is still a concern. With many sit-down restaurants restricted in capacity and schools in a mixture of in person and virtual learning, institutional use is “less than normal.” Fast food and carryout service are using healthy amounts of cheese, says DMN, but that does not make up the difference.
After jumping 12 cents the previous week, cash butter climbed to $1.5350 last Tuesday, highest since Sept. 22, but fell 3.50 cents Friday to close at $1.48, unchanged on the week and 48 cents below a year ago; 49 cars traded hands on the week.
The butter duplicated Friday’s loss on Monday but, sparked by the GDT, reversed course and gained 3 cents Tuesday, hitting $1.4750.
Central butter makers say cream is widely available and many warn that cream stocks could become overwhelming in upcoming weeks. COVID-19 is still affecting plant workers and staff but absences were subsiding. Retail butter sales remain robust but food service continues to remain under a “bearish raincloud, with more questions than answers regarding upcoming food service demand.”
The abundance of milk is causing moderate bumps in western cream for butter making, according to DMN. Ice cream demand has narrowed and is expected to coast through the remainder of the year, likely increasing surplus cream. Retail print butter sales are strong as stores restock but sources note there is a generous amount of butter in inventory. Export demand is stable and the butter market undertone is “conditionally bullish in the near term,” according to DMN.
Grade A nonfat dry milk closed Friday at $1.1275 per pound, down 2.25 cents on the week and 13.75 cents below a year ago, with 8 sales reported.
The powder gained a penny Monday and added a half-cent Tuesday, reaching $1.1425.
Dry whey hit 47 cents per pound last Thursday, highest since Jan. 18, 2019, but closed Friday at 46.75 cents per pound, a half-cent higher on the week and 13 cents above a year ago, on 2 sales for the week.
Monday’s and Tuesday’s whey was unchanged.
GDT up 1.3%
The world still loves butter and butter led the gains in the last Global Dairy Trade auction of 2020. The overall weighted average moved up 1.3%, following a 4.3% jump on Dec. 1, and 1.8% on Nov. 17.
Butter was up for the sixth consecutive session, jumping 6.0%, following a 3.8% rise on Dec. 1. Anhydrous milkfat was up 1.9%, after gaining 2.6% last time.
Cheddar was up 4.2%, after gaining 2.4%, and lactose was up 1.5%, after leading the gains last time with a 13.5% jump. Skim milk powder was up 1.2% following a 3.6% rise, and whole milk powder inched 0.5% higher, after a 5.0% gain last time.
StoneX equated the GDT 80% butterfat butter price to $1.8680 per pound U.S., up 10.4 cents from the last event. CME butter closed Tuesday at a bargain basement $1.4750. GDT Cheddar cheese equated to $1.7659 per pound, up 7.2 cents, and compares to Tuesday’s CME block Cheddar at $1.6525.
GDT skim milk powder averaged $1.3290 per pound, up from $1.3103, and whole milk powder averaged $1.4560, up from $1.4435. CME Grade A nonfat dry milk closed Friday at $1.1425 per pound.
