The Federal order benchmark Class III milk price ended 2020 sharply lower and well below a year ago.
The Agriculture Department announced the December Class III at $15.72 per hundredweight, down a whopping $7.62 from November, $3.65 below a year ago, and the lowest Class III price since May. That put the 2020 average at $18.16, up from $16.96 in 2019 and $14.61 in 2018.
Monday’s Class III futures settlements had the January contract at $15.42; February, $17.12; March, $17.28; April $17.23; May, $17.24; June, $17.24; July, $17.26; August, $17.32; September, $17.51; October, $17.29; November, $17.21; and December at $17.15.
That would portend a $17.11 average in 2021. The USDA’s latest prediction was for a $15.60 average. The 2020 Class III price saw a low of $12.14 in May and a high of $24.54 in July.
The December Class IV price is $13.36, up 6 cents from November, $3.34 below a year ago, and the lowest December Class IV price since 2008. Its 2020 average is $13.49, down from $16.30 in 2019 and $14.23 in 2018.
The USDA is projecting a 2021 Class IV average of $13.60. The 2020 Class IV low was $10.67 in May and a high of $16.65 in January.
More help coming
U.S. Secretary of Agriculture Sonny Perdue announced Monday that the USDA will purchase an additional $1.5 billion worth of food for nationwide distribution through the Farmers to Families Food Box Program. The department has distributed over 132 million food boxes, according to a USDA press release.
The additional funding for the program was included in the just-passed COVID-19 relief package as part of the Consolidated Appropriations Act.
HighGround Dairy says, “In this fifth round of purchases, USDA will again purchase combination boxes to ensure all involved recipient organizations have access to fresh produce, dairy products, fluid milk and meat products, and seafood products.”
StoneX Dairy says, “With food box and Section 32 purchases we should be looking at the government buying 2% of milk production February through April, and maybe as much as 3% in April if the dairy donation program ramps up with moderate participation.”
But, StoneX warned, “We’re encroaching on a place where market participants feel as though there may be little to no downside to milk and cheese markets because of the USDA. Forget about setting a floor price, thus the CME put options or DRP Insurance, the USDA is again providing pandemic put options. Eventually, and this may be a year down the road, the USDA bids will likely go away and the market will have to trade its own merits.”
HighGround expects CME spot block Cheddar to top $2.00 per pound, reaching as high as $2.25 in the near term, but warned that “while this food box spending is significant, it is important to remember there are some bearish factors balancing this announcement.”
GDT up 3.9%
The first Global Dairy Trade of 2021 shot higher Tuesday as the overall weighted average was up 3.9%, following a 1.3% gain on Dec. 15 and 4.3% on Dec. 1.
All products offered saw gains, led by lactose, up 7.4%, after a 1.5% rise Dec. 15. Butter was up 7.2%, following a 6.0% jump, seventh consecutive session of gain, and anhydrous milkfat was up 5.5%, after climbing 1.9%.
GDT Cheddar was up 5.0%, following a 4.2% boost. Skim milk powder was up 4.1%, following a 1.2% rise, and whole milk powder was up 3.1%, after inching 0.5% higher last time.
StoneX equated the GDT 80% butterfat butter price to $2.0030 per pound U.S., up 13.5 cents from the last event, which saw a 10.4 cent gain last time. CME butter closed Tuesday at a huge bargain $1.4475. GDT Cheddar cheese equated to $1.8498 per pound, up 8.4 cents, which follows a 7.2 cent gain, and compares to Tuesday’s CME block Cheddar at $1.6775.
GDT skim milk powder averaged $1.3805 per pound, up from $1.3290, and whole milk powder averaged $1.4996, up from $1.4560. CME Grade A nonfat dry milk closed Tuesday at $1.1750 per pound.
Prices from 2019
Cash dairy product prices ended 2020 below where they were a year ago, but what a roller coaster ride they had.
Cheddar block cheese saw a COVID-pandemic-driven bottom of $1.00 per pound on April 15, then soared to a $3.00 peak on July 13, and closed New Year’s Eve at $1.65, up 5.25 cents on the New Year’s holiday shortened week but 24 cents below a year ago.
The barrels bottomed out April 9 at $1.00 per pound, peaked at $2.53 on Oct. 30, and closed Dec. 31 at $1.5425, up 7.75 cents on the week, 10 cents below a year ago, and 10.75 cents below the blocks; 33 cars of block traded hands last week at the CME and 19 of barrel.
The first day of trading in 2021 saw the blocks fall 3.25 cents, with 11 cars trading hands, but the gears reversed Tuesday, as traders weighed the morning’s GDT and the USDA Food Box announcement, and took them up 6 cents, to $1.6775.
The barrels were down 6 cents Monday on an offer but they jumped 7.25 cents Tuesday, to $1.5550, 12.25 cents below the blocks.
Dairy Market News says the markets have begun to show some stability, at least in the near term. Spot milk prices had already been reported at lower discounts than previous weeks. Demand notes were mostly unchanged, according to DMN.
Ample milk flows are keeping Western cheese plants busy, and most are running at capacity. Customers are taking regular shipments, says DMN, but predicting demand has been a moving target throughout the year as purchase tendencies are somewhat erratic. Retail demand is steady and strong while foodservice demand has been weak, though there are exceptions. Pizza cheese and process cheese for fast food burgers are stronger than the rest of food service items.
CME butter, which hadn’t seen anything below $2.00 per pound since late November 2019, saw a far different scenario in 2020. The butter hit bottom at $1.10 on April 23, saw a one day price high of $2.0150 on June 4, and closed the year at $1.42, lowest since Dec. 1, 2020, down 10.5 cents on the week, and 53 cents below a year ago. There was only 1 sale last week.
Monday’s butter dropped 2.50 cents, to $1.3950 per pound, lowest since Nov. 30, 2020. It jumped 5.25 cents Tuesday and hit $1.4475.
Central butter market tones lack certainty, reports DMN. Some plant managers relayed positive notes from food service customers. Churning was limited New Year’s Week but DMN says the overall picture is that “churning will be strong for the foreseeable future with ample cream available.”
Western butter makers also have plenty of cream. Retail demand slowed going into the winter holidays.
However, some contacts reported that orders had picked up as retailers restocked shelves. Food service accounts continue to struggle, says DMN. Restaurant sales were starting to show signs of life a few weeks ago but tighter restrictions in efforts to combat COVID-19 have curtailed any further gains in foodservice.
Grade A nonfat dry milk saw its peak at $1.2975 per pound on Jan. 22, but saw a low point of 79.25 cents per pound on May 1. The powder finished the year at $1.1425 per pound, down a half-cent on the week and 9 cents below a year ago, on 12 reported sales for the week.
The powder inched up a half-cent Monday and added 2.75 cents Tuesday, climbing to $1.1750.
CME dry whey saw its 2020 low at 28.75 cents per pound on July 7. It peaked at 47 cents on Dec. 10, and closed Dec. 31 at 46.25 cents per pound, down a half-cent on the week but 14.75 cents above a year ago, with 1 sale for the week.
Monday’s traders took the whey up a quarter-cent and added 1.50 cents Tuesday, hitting 48 cents per pound, highest CME price since Jan. 18, 2019.
Milk ratio climbing
Another jump in the U.S. All Milk price offset sharply higher corn and soybean prices to push the November milk feed price ratio higher. The USDA’s latest Ag Prices report shows the ratio at 2.58, up from 2.50 in October and the highest since July, but was down from 2.65 in November 2019.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk could purchase 2.58 pounds of dairy feed of that blend in November.
The U.S. All-Milk price averaged $21.30 per hundredweight (cwt.), up $1.10 from October and 20 cents above the November 2019 average.
California’s All Milk price hit $23.00, up $1.80 from October and $3.50 above a year ago. Wisconsin’s, at $22.70, was up $1.20 from October and 20 cents above a year ago.
The national average corn price averaged $3.79 per bushel, up 18 cents per bushel from October, which follows a 21 cent rise in October, and is 11 cents per bushel above November 2019.
Soybeans averaged $10.30 per bushel, up 67 cents from October, following a 39 cent rise in October, and is $1.71 per bushel above a year ago.
Alfalfa hay averaged $167 per ton, down $4.00 from October and $2.00 per ton below a year ago.
The November cull price for beef and dairy combined averaged $59.30 per cwt., down 70 cents from October, $1.60 above November 2019, but $12.30 below the 2011 base average of $71.60 per cwt.
