U.S. milk prices are making June Dairy Month a little happier for farmers.
The Agriculture Department announced the May Federal order Class III benchmark milk price at $18.96 per hundredweight, up $1.29 from April, $6.82 above May 2020, and the highest Class III since November 2020. The five-month average is at $16.91, up from $15.10 at this time a year ago and $15.05 in 2019.
Monday’s Class III futures settlements had the June price at $17.15; July, $17.62; August, $18.39; September, $18.75; October, $18.88; November, $18.72; and December at $18.40.
The May Class IV price is $16.16, up 74 cents from April, $5.49 above a year ago, and the highest since February 2020. Its average stands at $14.54, up from $13.96 a year ago, and compares to $15.81 in 2019.
Uncle Sam shells out more
The Agriculture Department announced additional COVID relief now that the Food Box program has ended, including “an investment of up to $1 billion, including $500 million in American Rescue Plan funding, in The Emergency Food Assistance Program (TEFAP) to support and expand the emergency food network so food banks and local organizations can reliably serve their communities.”
“USDA will enter into cooperative agreements with state, Tribal and local entities to more efficiently purchase food from local producers and invest in infrastructure that enables partner organizations to more effectively reach underserved communities.”
TEFAP details on the website say they are limited to Cheddar and American cheese and fluid milk, according to StoneX Dairy, but “may not be a hard-and-fast rule.”
“The theme of the announcement is very much centered around the inclusion of local companies to help source the commodities,” says StoneX, “learning from last year’s pandemic programs and hoping to utilize a more diverse food supply chain.”
“In general, we expect about 20% of the allocated money to go towards administration of the program and about 20% of the subsequent remaining funds to be used for purchasing dairy products, or about $136 million. We are unsure of the time frame, but believe it may be spread throughout the second half of the year.”
StoneX concluded, “This program itself doesn’t look to be a major influence in the supply-and-demand picture of the dairy markets. Standalone, we don’t think this would cause much, if any, big waves within the dairy markets. However, we want to caveat that with a disclaimer that the USDA mentioned multiple times throughout their press release that this is just the first part of the USDA’s Build Back Better program.”
Vats filled
April milk production totaled 19.3 billion pounds, up a hefty 3.3% from April 2020, according to USDA’s preliminary data, and the latest Dairy Products report shows that a lot of that milk ended up in the cheese vat.
Cheese output totaled 1.136 billion pounds, down 3.4% from March but up a bearish 8.0% from April 2020. Year to date (YTD) cheese output was at 4.49 billion pounds, up 3.7% from the same period in 2020.
Wisconsin produced 282.6 million pounds of that cheese total, down 6.8% from March but 6.4% above a year ago. California delivered 207.3 million pounds, down 1.7% from March but 4.8% above a year ago. Idaho contributed 87.0 million pounds, down 3.5% from March but 1.7% above a year ago.
Italian style cheese totaled 480.7 million pounds, down 4.3% from March but 7.4% above a year ago. YTD Italian hit 1.9 billion pounds, up 2.1%.
American type cheese, at 473.4 million pounds, was off 0.7% from March but 6.0% above a year ago. YTD American was at 1.85 billion pounds, up 5.8%.
Mozzarella output totaled 376.4 million pounds, up 6.6% from a year ago, with YTD mozzarella at 1.5 billion pounds, up 0.8% from 2020.
Cheddar, which is traded at the CME, totaled 334.2 million pounds, up 400,000 pounds or 0.1% from the March level which was revised down 4.9 million pounds, but was 4.1 million or 1.2% above a year ago. YTD Cheddar hit 1.3 billion pounds, up 4.0%.
U.S. churns produced 185.2 million pounds of butter, down 13.7 million pounds or 6.9% from March, and 42 million pounds or 18.5% below a year ago. YTD butter totaled 780 million pounds, down 5.7% from 2020. April 2020 saw the highest single-month butter output ever, up 31.8% from 2019.
Yogurt output totaled 412.1 million pounds, up 13.9% from a year ago, with YTD at 1.6 billion pounds, up 5.6%.
Dry whey totaled 74.4 million pounds, down 5.2 million pounds or 6.5% from March and 1.4 million pounds or 1.8% below a year ago. YTD dry whey was at 313.4 million pounds, down 2.6%.
Dry whey stocks slipped to 60.5 million pounds, down 5.1% from March and 16.5 million or 21.5% below those a year ago.
Nonfat dry milk output fell to 194.6 million pounds, down 4.7 million pounds or 2.4% from March and 8 million or 3.9% below a year ago. Powder production YTD is at 775.5 million pounds, up 5.5% from 2020.
Stocks dropped to 302 million pounds, down 15.1 million pounds or 4.7% from March and a whopping 90.6 million pounds or 23.1% below a year ago.
Skim milk powder production crept to 41.6 million pounds, up 2 million pounds or 5.0% from March but were 10 million pounds or 19.4% below a year ago. YTD skim milk powder, at 148.9 million pounds, is down 20.6% from 2020.
April regular hard ice cream output amounted to 68.4 million pounds, up 7.8% from a year ago, with YTD output at 251.0 million pounds, up 5.7% from 2020.
Cheese prices leaking
CME block Cheddar cheese closed the Memorial Day holiday-shortened week at $1.50 per pound, as traders anticipated the afternoon’s Dairy Products report. The blocks were down for the fifth week in a row, losing 30 cents in that time period, and were $1.0525 below that week a year ago when they gained 32.25 cents, hitting $2.5525.
The barrels finished Friday at $1.6150, up 4.50 cents on the week but 74.50 cents below a year ago when they shot up 33.75 cents to $2.36; 33 cars of block were sold last week at the CME and 20 of barrel.
Traders took the blocks down another 2.50 cents Monday and a penny came off Tuesday, slipping to $1.4650, lowest CME price since May 11, 2020.
The barrels were down 3 cents Monday and lost 0.75 cents Tuesday, dipping to $1.5775, an inverted 11.25 cents above the blocks.
Midwest cheese producers are busy, reports Dairy Market News, and “milk availability is evidence that peak flush season has yet to be achieved. Cool weather continued to put a surplus of milk into cheese vats,” and “it is getting to a point where milk handlers are aggressively seeking out destinations for notable volumes of milk. Contacts are hopeful that heat in the forecast will begin to stanch the current flow of milk.”
Western cheese demand is steady in both retail and food service markets. Milk is readily available, allowing producers to run full schedules. However, cheese output is, reportedly, outpacing demand. Market tones are unsteady though contacts believe the lower prices should lead to increased exports however port congestion and shipping issues are continuing to cause delays.
Cash butter finished Friday at $1.7750 per pound, down 3.50 cents on the week and 15 cents below a year ago when it gained 26.50 cents and was trading at $1.9250. There were 17 carloads that found new homes on the week.
Monday’s butter was down a half-cent, and it stayed there Tuesday at $1.77.
Central contacts reported continued strength in food service butter demand and suggest overall demand has grown closer to pre-COVID levels. There was plenty of cream following the holiday but not as hearty as expected. Some contacts expect tightness in upcoming weeks, says DMN, and “market tones are quiet with some potential bullish undertones.”
Western cream loosened last week as some processors paused operations over the holiday but limited tanker availability curtailed movement out of the region. Some expect cream to tighten in the coming days, but the current supply is adequate.
Butter output is steady to seasonally lower though Southwest plants are growing inventories to meet fall demand. Retail sales are lower but steady. Food service demand is healthy but cautious and some contacts report diminished export interest.
Grade A nonfat dry milk closed Friday at $1.26 per pound, down 3.25 cents on the week but still 28.25 cents above a year ago; 10 sales were reported.
CME powder gained a penny Monday and it jumped 3 cents Tuesday to $1.30.
Spot dry whey fell to 60 cents per pound last Tuesday, lowest since March 16, 2021, but closed Friday at 60.25, 2 cents lower on the week but 25.75 cents above a year ago, on 2 trades.
The whey was down 0.75 cents Monday but it gained a penny Tuesday, climbing back to 60.50 cents per pound.
