Tuesday Closing Dairy Market Update - July Income Over Feed: $5.69

MILK:

The surprise is that both Class III and Class IV futures posted double-digit gains in all contracts through July 2022. Previously, stronger gains had been confined to nearby months. Maybe this is a change in thinking. However, we need to be careful that we do not read too much into this. USDA released the July Agricultural Prices report providing average commodity prices for the month. Prices on this report are used to calculate the income over feed prices for the Dairy Margin Coverage program (DMC). The average corn price was $6.12, up $0.12 from June. The Central Illinois soybean meal price was $365.23 per ton, down $12.95 per ton from June. The alfalfa blend price was $216.50 per ton, up $2.00 from June. This blend price is derived from the alfalfa hay price of $201 per ton and the premium/supreme price of $232.00 per ton. This results in an income over feed price of $5.69 and the lowest income over feed price since May 2020. Those who chose the $9.50 DMC price level and have not used up all of their milk allotment will receive a payment of $3.81 per cwt. A year ago, the average corn price was $3.21 per bushel. Alfalfa hay was $172 per ton. Premium/supreme hay was $192 per ton. Soybean meal was $291.25 per ton. The all-milk price was $20.60.

AVERAGE CLASS III PRICES:

3 Month:	$16.96
6 Month:	$17.16
9 Month:	$17.28
12 Month:	$17.37

CHEESE:

A steady block price and a slightly higher barrel price does not indicate the market has found support. Prices are going to continue to chop around as buyers and sellers do business. Time of year would suggest a floor should develop under prices, however continued interest in selling cheese is keeping buyers complacent.

BUTTER:

Price posted a nice gain as buyers turned more aggressive. This has moved price to the highest level it has been since June 29. It certainly does look as if butter is finally trending higher. It will have a long way to go to get back up to the level it had been in early April. Price has been slowly trending higher and the increase Tuesday may bring more buyers in from the sidelines as they will want to purchase supply at these lower prices.

OUTSIDE MARKETS SUMMARY:

September corn declined 6.25 cents, closing at $5.34. September soybeans declined 6 cents, closing at $12.9875 with September soybean meal down $1.20 per ton at $346.40. September wheat declined 2 cents, closing at $7.0675. October live cattle declined $1.42, ending at $126.90. October crude oil lost $0.71, closing at $68.50 per barrel. The DOW slipped 39 points, closing at 35,361 while the NASDAQ declined 7 points, closing at 15,259.

Tuesday Midday Dairy Market Summary - Milk Futures Post Gains

Block cheese price remained unchanged at $1.17 with no loads traded. Barrel cheese price increased 1.50 cents, closing at $1.38 with no loads traded. Butter price increased 5 cents, closing at $1.7650 with 14 loads traded. Grade A nonfat dry milk price increased 1.75 cents with two loads traded. Dry whey price remained unchanged at 49.75 with no loads traded. Class III futures are 1 to 24 cents higher. Class IV futures are 3 to 27 cents higher. Butter futures are 2.00 to 4.02 cents higher. Dry whey futures are steady. Grain futures are under significant pressure due to the impact of the hurricane on shipping. USDA will release the July Agricultural Prices report Tuesday afternoon.

Tuesday Morning Dairy Market Update - Ag Prices Report Released Today

OPENING CALLS:

Class III Milk Futures:	Steady to 5 Higher
Class IV Milk Futures:	Steady to 5 Higher
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Steady to 2 Lower
Soybean Futures:	2 to 5 Higher
Soybean Meal Futures:	$2 to $3 Higher
Wheat Futures:	3 to 7 Lower

MILK:

Class III milk futures continue to erode as the inability of cheese prices to move higher during this time of year dims the outlook for price potential. Milk production has remained stronger than expected throughout the summer and is anticipated to remain strong throughout the rest of the year. Higher feed prices will have an impact, but they may not have quite the impact as predicted as farms make adjustments and continue to push production. USDA will release the July Agricultural Price report Tuesday afternoon. This report will provide the average prices used in calculating income over feed and any payment that will be forthcoming for those who took part in the Dairy Margin Coverage program.

CHEESE:

Cheese buyers remain confident they will be able to continue to purchase supply without needing to chase the market. Manufacturers continue to offer product on the spot market in order to limit inventory build. Even though milk for manufacturing has declined due to greater demand for fluid, the production of other dairy products is sufficient to leave supplies readily available.

BUTTER:

Reduced butter production and increased demand is providing some support to the market. However, supply is not tight nor is it expected to become tight through the rest of the year. Buyers have been steadily purchasing supply as they prepare for upcoming demand. This has left them less aggressive on the spot market. Supply is readily available through regular channels.

Monday Closing Dairy Market Update - Milk Futures Have Difficulty Finding Strength

MILK:

At least some Class III contracts were able to close higher in the face of further negativity. What is lacking is strong demand that will utilize current higher milk production and inventory of dairy products. Until that happens, milk prices will remain in the current range or possibly lower. The concern is that if prices cannot rally any more than currently as we move through the time when buyers are generally more aggressive, what is going to happen once end of the year demand is filled? There is some hope increased government purchases of dairy products for food programs during the final quarter of the year, might be able to provide some support to the market. Whether that will be sufficient to utilize the extra milk being produced this year is yet to be seen. The increase of money to be provided through the Supplemental Nutrition Assistance Program may be used for any approved foodstuffs and not necessarily just dairy. But anything that could improve demand will be welcomed. Tuesday is the last day to trade August dairy futures and options.

AVERAGE CLASS III PRICES:

3 Month:	$16.43
6 Month:	$16.79
9 Month:	$16.96
12 Month:	$17.08

CHEESE:

Block price is solidly back into the range it has been in much of the year so far. Current fundamentals suggest price might remain that way for a period of time or maybe even the rest of the year. If there will be any hope for price to trend higher, supply will need to tighten. It may not take much, but it will need to cause buyers to become more aggressive as they prepare for end of the year demand.

BUTTER:

A slight slowing of butter production as some plants are selling cream rather than churning with the intent to limit inventory build along with continued strong exports, may be enough to keep a higher trend developing. Futures contracts do not have much premium built into them through the rest of this year. Traders are not convinced there is much upside unless they will be proven otherwise.

OUTSIDE MARKETS SUMMARY:

September corn fell 17.75 cents, closing at $5.4025. September soybeans fell 54.50 cents, ending at $13.0475 with September soybean meal down $6.60, ending at $347.60 per ton. September wheat declined 9.75 cents, closing at $7.0875. October live cattle declined $0.80, closing at $128.32. October crude oil gained $0.47, closing at $69.21 per barrel. The DOW declined 56 points, closing at 35,400 while the NASDAQ gained 136 points, closing at 15,266.

Monday Midday Dairy Market Summary - Cheese Shows Further Weakness

Cheese prices just cannot get a break. Increasing prices cannot establish a higher trend as those price increases have been short-lived. Blocks declined 4 cents closing at $1.71 with 3 loads traded. Barrel cheese price declined 3.75 cents closing at $1.3650 with 6 loads traded. Butter futures gained 0.75 cent closing at $1.7150 with 9 loads traded. Grade A nonfat dry milk price increased a penny to $1.3025 with no loads traded. Dry whey price slipped 0.25 cent closing at 49.75 with no loads traded. Class III futures are unchanged to 11 cents lower. Class IV futures are 5 cents lower to 8 cents higher. Butter futures are 1.07 cents lower to 0.40 cent higher. Dry whey futures are 0.50 cent lower. Tuesday is the last trading day for August futures and options.

Milk prices expected to rebound

Dairy Outlook: Government purchases are expected to help milk prices.

The Class III price has been declining since May, when it was $18.96. The August Class III price will end up near $16. Lower cheese and dry whey prices brought the Class III price down, according to Bob Cropp, University of Wisconsin-Madison dairy economist.

Cheddar barrels and 40-pound block cheese were on the decline since mid-July. By early August, barrels had dropped to $1.30 per pound and 40-pound blocks to $1.63 per pound. Dry whey, which was as high as 70 cents per pound in May, was just 47 cents per pound in early August.

“Prices in recent trades have been moving up and down, but are now higher than early August,” Cropp says. “On Aug. 20, barrels were $1.50 per pound, blocks $1.73 and dry whey 52 cents. The lower dry whey price since May takes about $1 off the Class III price.”

As life has returned to more normal, with people eating out, fans returning to sporting events, and conferences and other public events being held in person, the sale of butter and cheese has improved.

“Compared to a year ago, second-quarter American cheese sales were 10.8% higher, and other cheese was 5.4% higher,” Cropp says. “But fluid milk is running below a year ago, as people eat out more rather than at-home meals.”

In June, fluid milk sales were 6.7% below a year ago.

“There is a concern that with increased cases of COVID-19 reinstating the wearing of masks again that consumers may back off some on eating out and attending public events,” Cropp notes. “That could hurt butter and cheese sales. But schools are scheduled for in-person learning this fall, which will be positive for fluid milk and dairy product sales.”

Dairy exports strengthen

According to USDA, exports for June compared to a year ago were up 7% for nonfat dry milk-skim milk powder, 16% for whey products and 67% for butter, but cheese exports were 13% lower. Cheese exports through June were still 2% higher.

“The volume of exports through June was 13% higher, and exports could end the year at a record high. U.S. butter, cheese and nonfat dry milk-skim milk powder prices remain substantially lower than foreign export prices,” Cropp says. Also, milk production in Europe and New Zealand, two major exporters, may be no more than 1% higher than a year ago. Port congestion has and may continue to limit exports.

Cropp believes milk prices will get some support from government purchases. USDA has announced the purchase of cheese and fluid milk products for delivery the last three months of this year.

“This will be in addition to USDA’s normal purchases of dairy products for school lunches and other food programs,” he says. “Also, it has been announced that the SNAP program [Supplemental Nutrition Assistance Program] will be increased by 25%, which could increase fluid milk and cheese sales.”

How milk prices finish out the year and going into next year will depend upon the sale of dairy products, level of exports and level of milk production.

“The growth in milk production needs to slow to support higher milk prices. USDA estimates July milk production to be 2% higher than a year ago, Cropp says. “This is a lot of milk considering August milk production a year ago was up 1.9%.”

After increasing each month since July 2020, cow numbers have declined for two consecutive months, with June down 6,000 head and July down 3,000 head.

Adverse weather takes toll

Adverse weather has slowed milk per cow. Compared to July a year ago, milk per cow was up just 0.7%. Weather impacted California, Idaho and New Mexico, where each state experienced 0.7% less milk per cow.

California had the same number of cows, resulting in 0.7% less milk; Idaho had 9,000 more cows, resulting in just 0.8% more milk; and New Mexico had 5,000 fewer cows, resulting in 2.3% less milk.

Milk production for other top states was: Wisconsin up 4.6%, New York up 2.8% and Texas up 7.2%. Wisconsin had 21,000 more cows, and milk per cow was up 2.9%. New York added 4,000 cows and Texas, 35,000 cows.

With lower milk prices and higher feed costs, milk production is likely to slow for the remainder of the year and going into next year. On Aug. 3, the USDA Drought Monitor showed drought affecting 47% of the cow inventory.

“Drought was affecting 64% of the alfalfa hay acreage and 37% of corn production,” Cropp says. “With tighter feed supplies, feed prices are going to be higher this fall and winter, which will likely impact milk per cow and cow numbers, as more lower-producing cows are culled from the herd.”

As of now, Cropp says it seems reasonable that Class III could be in the $17s by September and for the rest of the year, with low $18s not ruled out for November and December.

Class III futures currently only reach a high of $17.50 in November. USDA lowered its price forecast from July and has Class III averaging just $16.55 for the year, compared to $18.16 last year.

From: Farm Progress

July milk output up 1% from June

 U.S. milk output was somewhat held in check in July by heat, humidity, and drought, especially in the west. The Agriculture Department’s preliminary data pegs July output at 19.14 billion pounds, up 1% from June, and just 2.0% above July 2020 though it is the 14th consecutive month to top year ago output. The 24-State total hit 18.3 billion pounds, up 2.1%.

    Revisions lowered June’s 50-State estimate by 1 million pounds from last month’s report to 19.95 billion pounds, up 2.9% from 2020. The report wasn’t expected to excite traders either way.

    Interestingly, July cow numbers totaled 9.50 million head, down 3,000 from June, second month in a row they fell from the previous month, but were 128,000 above a year ago. June cow numbers were revised down 5,000 head.

    July output per cow averaged 2,015 pounds, up 14 pounds or 0.7% from 2020.

    California cows put 0.7% less milk in the tank in July as hot weather dropped output per cow by 15 pounds. Cow numbers mirrored those a year ago. Wisconsin was up 4.6%, on a 60 pound gain per cow and 21,000 more cows.

    Idaho was up 0.8%, on 9,000 more cows but output per cow was down 15 pounds. Michigan was up 4.3%, on 17,000 more cows and a 10 pound gain per cow. Minnesota was up 4.2% on 17,000 more cows and 5 pounds more per cow. New Mexico was down 2.3%, on a 15 pound loss per cow and 5,000 fewer cows.

    New York was up 2.8%, thanks to a 45 pound gain per cow and 4,000 more cows. Oregon was up 0.9%, on 2,000 more cows but output per cow was down 10 pounds. Pennsylvania was down 1.2%, on a loss of 7,000 cows and a 5 pound drop per cow.

    South Dakota unmistakably had the biggest gain, up 17.0%, on 21,000 more cows and a 25 pound increase per cow. Texas had the next biggest gain, up 7.2%, driven by 35,000 more cows and a 25 pound gain per cow.

    Vermont was up 1.4% on a 55 pound gain per cow but cow numbers were down 2,000. Washington State had the biggest decline of the six states showing a loss, down 6.7%, as soaring temperatures put stress on cows and farmers alike. Output per cow was down 85 pounds and cow numbers were down 8,000 head.

    Dairy cow culling remained strong in July and again topped that of a year ago as margins remain tight. The latest Livestock Slaughter report shows an estimated 247,900 head were sent to slaughter under federal inspection, up 10,400 from June and 14,200 or 6.1% above July 2020.

    Culling in the first seven month of 2021 totaled 1.81 million, down 14,900 or 0.8% from the same period a year ago.
    In the week ending Aug. 7, 59,500 dairy cows were sent to slaughter, up 1,000 from the previous week, and 6,600 or 12.5% above that week a year ago.

    The Agriculture Department announced details of the Pandemic Market Volatility Assistance Program (PMVA) to help dairy producers. USDA will provide $350 million in payments to farmers who received a lower value for their products due to market abnormalities caused by the pandemic. The assistance is part of a larger package including improvements to the Dairy Margin Coverage safety net which will update the feed cost formula to better reflect actual costs for high quality alfalfa. The change will be retroactive to January 2020 and is expected to provide additional retroactive payments of about $100 million for 2020 and 2021.

    PMVA payments will reimburse qualified farmers for 80% of the revenue difference per month based on an annual production of up to 5 million pounds of milk marketed and on sales from July through December 2020. The payment rate will vary by region based on the actual losses on pooled milk related to price volatility and be made through independent handlers and cooperatives.

    Speaking in the Aug. 23 “Dairy Radio Now” program, HighGround Dairy’s (HGD) Lucas Fuess said while details have not been finalized, the program was clearly designed to focus on smaller dairies. He said he doesn’t see it significantly impacting markets but will likely boost milk output the rest of 2021 and into 2022.

    The Biden Administration also announced a re-evaluation of the Thrifty Food Plan used to calculate Supplemental Nutrition Assistance Program (SNAP) benefits. The average SNAP benefit, excluding additional funds provided as part of pandemic relief, will increase 25% for Fiscal Year 2022 beginning Oct. 1.

    The Aug. 17 Daily Dairy Report says the increase in benefits could mean an additional $2 billion in dairy products purchased with SNAP funds. The increase provides each of the 42 million recipients an additional $1.19 per day.

    Dairy producers can surely use the help. Dairy margins were unchanged in the first half of August as increases in both milk prices and feed costs were largely offsetting since the end of July, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC. Strength in cash cheese prices were supportive of CME Class III futures which bounced about $1.50 per cwt. from recent lows, the MW stated.

    The MW cautioned however that “The overall tone of the market remains bearish with spot futures still down around $2.50 from their May highs. Milk production remains strong for this time of the year. Demand uncertainty lingers from the advancing Delta variant of Covid-19 and indications from Open Table that U.S. restaurants are no longer showing growth in demand, with some significant slowing evident in states more heavily impacted by the current Covid-19 surge. Mobility data similarly suggests a modest slowdown in travel,” the MW stated.

    The August World Agricultural Supply and Demand Estimates lowered its milk production estimate 100 million pounds from July, the MW said, “But the bigger surprise was on the feed side where USDA cut the corn yield projection by 4.9 bushels from July to 174.6 bushels per acre, down 2 million from the average industry estimate. The soybean yield was similarly trimmed to 50.0 bushels per acre from 50.8 and was below the average pre-report estimate of 50.3 bushels. Both corn and soybean meal pushed higher following the report, and high feed costs continue to raise breakeven prices for most dairy operations which now generally need at least $18.00 per cwt. to cover all costs, the MW concluded.

    Checking demand; June cheese disappearance was up 3.8% from May, unchanged from June 2020, and up 5.1% year to date, according to the USDA’s latest data. Total disappearance was driven by stronger American-style cheese demand, says HGD, but negatively impacted by weaker non-American usage.

    Butter was also up 3.8% from May but down 3.5% from a year ago, and the third consecutive month disappearance was below a year ago. HGD says robust demand in first quarter kept year to date disappearance (up 2.0%) higher in the first half of 2021.

    Nonfat dry milk domestic disappearance was up 6.4% from May but down 20.7% from a year ago, and up 0.3% YTD. HGD says it was the weakest June domestic disappearance on record.

    Looking globally; the Aug. 17 Global Dairy Trade auction ended eight consecutive declines but not by much. The weighted average inched up 0.3%, following the 1.0% drop Aug. 3, 2.9% drop on July 20, and 3.6% on July 6.

    Butter led the gains, up 4.0%, following a 3.8% rise in the last event. Anhydrous milkfat was up 1.5%, following a 1.3% gain. Cheddar was up 2.8%, after inching 0.7% higher, and skim milk powder was up 1.1%, after it rose 1.5% last time. Whole milk powder was down 1.5%, after dropping 3.8% last time.

    StoneX Dairy Group says the GDT 80% butterfat butter price equates to $2.1111 per pound U.S., up 8 cents, after advancing 7.5 cents last time, and compares to CME butter which closed Friday at a huge bargain $1.6625. GDT Cheddar, at 1.8990, was up 5.4 cents, and compares to Friday’s CME block Cheddar at $1.6925. GDT skim milk powder averaged $1.3845 per pound, up from $1.37.

    Whole milk powder averaged $1.6112 per pound, down from $1.6322. CME Grade A nonfat dry milk closed Friday at $1.25 per pound.

    StoneX’s Dustin Winston says “North Asia (which includes China) purchases were in line with their market share last event but below year ago levels. The smaller purchasing regions; Africa, South/Central America, and North America were the only regions to increase their market share from both last event and year ago levels.” China is buying lots of product outside of the GDT as well.

    Looking ahead, HighGround Dairy points out that “Despite a solid milk production season in 2020/21 and a flat outlook for this year, Fonterra’s 12-month offer volumes are now the lowest in a little more than three years (May 2018).”

    Following double digit gains the previous week, the CME Cheddar blocks saw daily loses the third week of August while the barrels moved higher temporarily narrowing the spread, and then fell back. The blocks closed Friday at $1.6925 per pound, down 12 cents on the week but 4.25 cents above a year ago.

    The barrels climbed to $1.5125 per pound Wednesday, highest since July 14, but saw their Friday finish at $1.4775, still up 2.75 cents on the week, 14.75 cents above a year ago, and 21.50 cents below the blocks. 6 cars of block exchanged hands on the week at the CME and 21 of barrel.

     The 640 block packaging issues continue to be a threat, according to StoneX. Talk at the recent Idaho Milk Processors Association conference was that production of the boxes could catch up by mid-September. Cheese makers dealing with the issue either dump the milk or move it into barrel production.

    Meanwhile, Midwestern cheesemakers report strong sales, according to Dairy Market News. Plant managers reported turning down new orders because they can’t keep up. Nonfat dry milk is increasingly being used to fortify, as milk supplies are tight. Production schedules were steadily busy and market tones were still in flux as the block barrel spread remains well above the norm.

    Retail and food service cheese demand remains steady in the West. Concern is growing over the surge in COVID and its impact on demand. Global demand also remains strong however loads intended for overseas continue to face delays due to port congestion. Cheese markets are mixed. Milk supplies are sufficient to keep vats busy despite the seasonal decline in milk but some plants are running under capacity due to labor shortages, says DMN.

    Spot butter closed Friday at $1.6625 per pound, down 0.75 cents on the week but 14.75 cents above a year ago. There were 32 sales reported on the week.

    Grade A nonfat dry milk closed at $1.25 per pound, down 2 cents on the week but 25.25 cents above a year ago, with 7 cars finding new homes on the week.

    CME dry whey finished 1.25 cents higher, closing Friday at 53 cents per pound, 19.50 cents above a year ago, with 2 sales reported on the week at the CME.

    The September Federal order Class I base milk price was announced at $16.59 per hundredweight, down 31 cents from August, $1.85 below September 2020, and the lowest Class I since April. It equates to $1.43 per gallon, down 2 cents from August, and compares to $1.59 per gallon a year ago. The nine month Class I average is $16.41, down from $16.65 a year ago and $16.51 in 2019.

    Speaking of Class I; June sales of packaged fluid products fell to 3.4 billion pounds, down 6.7% from June 2020, after dropping 4.3% in May. Conventional product sales totaled 3.2 billion pounds, down 6.9%. Organic products, at 228 million, were down 3.7%, and represented 6.7% of total sales for the month.

    Whole milk sales totaled 1.2 billion pounds, down 6.0% from a year ago, with year to date consumption down 7.9%. Whole milk represented 32.8% of total milk sales for the six month period.

    June skim milk sales, at 196 million pounds, were down 12.7% from a year ago and down 14.4% year to date.
    Total packaged fluid milk sales for the first half of 2021 amounted to 22.1 billion pounds, down 5.4% from 2020. Conventional product sales totaled 20.7 billion pounds, down 5.4%. Organic products, at 1.4 billion, were down 0.9%, and represented 6.5% of total milk sales for the period.

    The August 13 Daily Dairy Report states that USDA data shows that nearly 7.5 billion breakfasts and lunches were served pre-pandemic, from March 2019 to February 2020, through the National School Lunch Program (NSLP) and School Breakfast Program (SBP). However, from March 2020 to February 2021, the month stay at home orders began, and the subsequent year, meal output declined by 2.2 billion, a 30% drop. If each meal contained a half-pint of milk, this loss equates to 137.5 million gallons of milk or about 1.183 billion pounds, roughly 100 million pounds less than Texas’ June milk production.

    The USDA’s latest Crop Progress report showed 73% of U.S. corn at the dough stage, as of the week ending Aug.15, up from 56% the previous week, 1% behind a year ago, but 5% ahead of the five year average. 22% was dented, 1% ahead of a year ago, and matched the five year average. 62% was rated good to excellent, down 2% from the previous week, and 7% below a year ago.

    The soybean crop shows 94% blooming, up 3% from the previous week, 1% behind a year ago, and mirrored the five year average. 81% were setting pods, up from 72% the previous week, 2% below a year ago, but 2% ahead of the five year average. 57% were rated good to excellent, down 3% from the previous week, and 15% below a year ago.

Monday Morning Dairy Market Update - Limited Volatility Expected

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 4 Lower
Soybean Futures:	Steady to 3 Lower
Soybean Meal Futures:	$2 to $3 Higher
Wheat Futures:	6 to 8 higher

MILK:

Class III milk futures seem to have nowhere else to go except lower. Underlying cash cheese prices show no indication of trending higher. Milk production shows no indication of trending lower. Less milk is available for manufacturing due to greater bottling needs for school systems, but supply remains sufficient for manufacturing needs. Cooler weather is beginning to show up in many places, which will improve cow comfort and milk production. However, some rebound will not be fully realized until the next lactation of cows. Hopefully, demand will increase much more than it is. It will be a slow start to the week as traders will likely wait for spot trading to establish or exit positions.

CHEESE:

Cheese is choppy and will likely remain that way for an undetermined period of time. Maybe even through the end of the year. Demand should increase as packagers and recutters begin purchasing for holiday needs, but with readily available supplies, buying may not be aggressive.

BUTTER:

Price is trying to build an uptrend, but it is developing slowly. Supply is sufficient for current demand, but increased demand is anticipated as the calendar heads toward fall and the holidays. Demand for Labor Day has already been filled with no other major demand period until late in the year. Regular demand will need to utilize production and reduce inventory.

Friday Closing Dairy Market Update - Fake Cheese May Become Available

MILK:

Even though the recent bout of heat and humidity in many areas has had an impact on milk output, production levels remain higher than a year. There have been advancements made in cooling systems that are able to minimize the impact of hot weather on cow comfort. The missing aspect is that demand needs to improve substantially to utilize higher milk supply and tighten availability. Spot milk prices have increased substantially with no milk available at a discount anymore. With sufficient milk available to the market, buyers remain complacent and continue to purchase dairy products on the spot market on an as-needed basis. Class III milk futures began the week on a positive note with increasing underlying cash only to top out on Tuesday and then fall back through the end of the week. Traders will be very cautious early next week.

AVERAGE CLASS III PRICES:

3 Month:	$16.43
6 Month:	$16.79
9 Month:	$16.96
12 Month:	$17.08

CHEESE:

For the week, blocks increased 5.75 cents with five loads traded. Barrels decreased 7.50 cents with nine loads traded. Dry whey price decreased 3 cents with only one load traded. Barrels have given back about half of what they had gained since the beginning of the month. General Mills is possibly developing an animal-free cheese brand called Renegade Creamery. The cheese would use proteins similar to dairy proteins produced without a cow. There is no animal-free cheese currently on the market, but it probably will be available over time as companies continue to explore ways to produce milk and other dairy product substitutes.

BUTTER:

For the week, butter increased 4.50 cents with 19 loads traded. Grade A nonfat dry milk price gained 4.25 cents with four loads traded. Overall, butter price is trending higher, but certainly not by leaps and bounds. Both retail and food service industry demand is improving and should continue to do so as the second half of the year progresses.

OUTSIDE MARKETS SUMMARY:

September corn gained 5.25 cents, ending at $5.58. September soybeans declined 8.25 cents, closing at $13.5925 with September soybean meal down $2.30 per ton, closing at $354.20. September wheat declined 6.75 cents, ending at $7.1850. August live cattle declined $1.27, closing at $122.00. October crude oil increased $1.32, closing at $68.74 per barrel. The DOW gained 242 points, closing at 35,455 while the NASDAQ gained 184 points, closing at 15,130.

 

Friday Midday Dairy Market Summary - Barrel Cheese Falls

Block cheese price remained unchanged with no loads traded. An offer was placed early in spot trading with the seller unwilling to lower the offer. No buyer showed up to do any business. Barrel cheese price declined 6.75 cents, closing at $1.4025 with six loads traded. Sellers wanted to move product and were aggressive at offering lower. There was one uncovered offer remaining at the close. Butter price increased 0.75 cent, closing at $1.7075 with one load traded. Grade A nonfat dry milk price increased 0.75 cent, closing at $1.2925 with two loads traded. Dry whey declined 0.50 cent, ending at 50 cents with no loads traded. Class III futures are 28 cents lower to 4 cents higher. May is the only contract posting a gain. Class IV futures are 3 cents lower to 10 cents higher. Butter futures are 1 to 1.50 cents higher. Dry whey futures are 0.57 to 0.87 cents lower.

Fluid Milk and Cream - Western U.S. Report 34

California milk production is decreasing. Spot loads are said to be limited. Some processors     report that hauling constraints have resulted in milk shorting on recent orders. Class I     demand is higher. Class II and III orders are steady. 

Milk availability is tightening in Arizona as output drops and demand increases. Bottling sales are strong. Demand from Class II- and Class III-based dairy manufacturers is level. 

Following a week of more cow-friendly weather, milk supplies are steady in New Mexico. Class I sales are higher, and Class II demand is seeing an uptick as well. Balancing is active, but not stressed. Widespread driver shortages and some receiving bottlenecks at plants have led to some missed orders. The missed loads, however, were able to be rerouted to balancing plants with available processing capacity. 

Pacific Northwest milk output is declining. More milk is being diverted into Class I as bottling demand grows. Class II demand is steady to lower. Class III orders are steady to higher, with some cheesemakers maxing out production. 

Farm level milk production is decreasing in the mountain states of Idaho, Utah, and Colorado. Handlers say Idaho spot milk, which was ubiquitous and discounted as recently as last week, is no longer available. School orders are pushing Class I demand higher. Class II and III sales are steady. 

Contracted condensed skim is steady. Cream is less available as milk supply drops. However, contacts report that pervasive hauler issues and staffing shortages at plants are having an impact on cream consumption; the current cream supply would be tighter if processing facilities were able to operate at capacity. The cream multiples range narrowed this week.


     Western U.S., F.O.B. Cream
     Multiples Range - All Classes:               1.1400 - 1.2700


     Information for the period August 23 - 27, 2021, issued weekly

     Secondary Sourced Information:

CALIFORNIA MARKET ORDER

Milk pooled on the California Order 51 totaled 1.840 billion pounds in July 2021. Class I     utilization was 381.6 million pounds and accounted for about 20.7 percent of producer milk.     The Statistical Uniform Price for milk delivered to plants in Los Angeles County, CA was     $16.94, down $0.36 from June 2021, but $2.22 above the same month a year ago.

Friday Morning Dairy Market Update - Limited Buying Interest

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 4 Lower
Soybean Futures:	2 to 8 Lower
Soybean Meal Futures:	$1 to $2 Lower
Wheat Futures:	Mixed

MILK:

Class III milk futures dropped back further than they should have in relationship to underlying cash, but selling pressure increased the losses. Even though spot milk prices are commanding a premium, indicating a tighter supply of milk, there is still sufficient available for all manufacturing and bottling needs. At the present rate of milk production and overall supplies, there is limited upside price potential. Class IV futures closed higher, providing some light to the dairy complex. Milk futures are expected to show weakness prior to spot trading as traders remain skeptical over price strength.

CHEESE:

Cheese prices have accomplished very little this year. Current prices are near the same level they were earlier this year. There have been price increases, but they have been short lived. Prices should increase seasonally as buyers prepare for end-of-year demand. But with sufficient supplies, buyers have not had to purchase aggressively.

BUTTER:

Price may have begun to trend higher, but it will be slow going as there is little reason for buyers to be aggressive. Inventoried butter is being used to supplement fresh supply to meet demand. This should slowly reduce inventory, eventually getting it back in line with last year.

Thursday Closing Dairy Market Update - Weakness of Cheese Exaggerated as Traders Turn Aggressive Sellers

MILK

Class III futures were steady to lower across the board with September through February contracts posting double-digit losses. The weakness of cheese was exaggerated as traders turned aggressive sellers in the futures market. There is sufficient milk for both bottling and manufacturing, but more milk is moving to bottling, reducing the amount available for manufacturing. Earlier, there were reports that some plants had to turn away new order for cheese because they would not be able to fill those orders. Yet, spot cheese prices are not reflecting that. There are some reports that the current heat and humidity in the Central Region is having a greater impact on milk production than throughout the previous periods of the summer. It may be difficult for cows to recover from the current hot weather period. This is not expected to cause a shortage that will push milk prices higher, but it may tighten supply enough to support the market. It is unclear what that level might be, and we hope that it will be higher than futures are currently indicating. Spot milk prices are reported at $0.50 to $1 over class, indicating milk supply is tightening. The report Wednesday of Horizon Organic ceasing to purchase milk from 28 farms in Vermont and New Hampshire as well as other farms in Main and New York as of September 2022, is of grave concern. This currently leaves three milk buyers of organic milk is this region of which one is planning on leaving the region in the future. In 1970, there were 4,000 dairy farms in Vermont with the current count being around 580 farms, of which around one-third of them are organic.

AVERAGE CLASS III PRICES

3 Month:	$16.65
6 Month:	$16.92
9 Month:	$17.05
12 Month:	$17.15

CHEESE

Cheese demand is strong both domestically and internationally. There have been continued reports of some difficulties of moving product due to a shortage of truck drivers. This has been an ongoing problem since last year and likely will not change anytime soon. Cheese supply is sufficient, and even with more milk moving to bottling, current supply is adequate. Buyers of cheese have no concern over supplies.

BUTTER

The concern over the impact of the Delta variant of COVID on demand is unwarranted. It might have more impact on the ability to move product to where it needs to go, but it likely will not have an impact on demand. What is not consumed through the foodservice industry is going to be consumed at home. Some restaurants are reporting a continued increase in traffic. Price should remain sideways to higher.

OUTSIDE MARKETS SUMMARY

September corn gained 1.50 cents, closing at $5.5275. September soybeans jumped 21.40 cents, closing at $13.6750, with September soybean meal up $4.20, closing at $356.50 per ton. September wheat jumped 14 cents, closing at $7.2525. August live cattle fell $1.15, closing at $123.27. October crude oil lost $0.56, ending at $67.80 per barrel. The Dow declined 192 points, closing at 35,213, while the NASDAQ declined 96 points, closing at 14,946.

Thursday Midday Dairy Market Update - Cheese Falls Back

Block cheese price declined a penny, closing at $1.70 with no loads traded; an offer moved price lower with no buyers to be found. Barrel cheese price declined 1.75 cents, closing at $1.47 with one load traded. Price initially increased 1.25 cents to $1.50 where the load was traded. Offers then kept pushing price lower into the close. There were no unfilled bids at the close. This moved Class III futures quickly lower with contracts posting losses of 3 to 28 cents. Butter price slipped 0.25 cent, ending at $1.70 with no loads traded. Grade A nonfat dry milk price gained 1.50 cents, closing at $1.2850 with no loads traded. Dry whey price declined a penny, closing at 50.50 cents with one load traded. Class IV futures are 3 to 8 cents higher. Butter futures are 0.25 cent lower to 2 cents higher. Dry whey futures are 0.67 cent higher,

USDA Establishes Dairy Donation Program

Department of Agriculture Deputy Secretary Jewel Bronaugh (Bruh-NAW) Wednesday announced the establishment of a $400 million Dairy Donation Program. The program aims to facilitate timely dairy product donations while reducing food waste. The establishment of DDP is part of the $6 billion pandemic assistance USDA announced in March and follows last week's announcement of the $350 million Pandemic Market Volatility Assistance Program for dairy farmers. Under the DDP, eligible dairy organizations will partner with non-profit feeding organizations that distribute food to individuals and families in need. Those partnerships may apply for and receive reimbursements to cover some expenses related to eligible dairy product donations. The program was inspired in part by the donations made by Michigan Milk Producers Association in conjunction with the Food Bank of Eastern Michigan in response to the Flint water crisis. Deputy Secretary Bronaugh says, “Together we can help someone in need, minimize food waste and support the U.S. dairy industry.”

Thursday Morning Dairy Market Update - Limited Futures Movement Prior to Cash Trade

OPENING CALLS

Class III Milk Futures:	Mixed
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 4 Lower
Soybean Futures:	2 to 5 Lower
Soybean Meal Futures:	Steady to $1 Higher
Wheat Futures:	6 to 9 Higher

MILK:

The September contract is being priced but remains open for substantial volatility if underlying cash moves significantly. However, underlying cash does not seem to have much potential for large price swings. Milk supply is sufficient for demand even with more milk moving to school accounts. Milk receipts at plants are declining seasonally. This should provide some support to the market, but it may not be enough to cause any concern for buyers. Trade is expected to be light with limited price movement prior to spot trading.

CHEESE:

Cheese prices are no better than they were early this year. There has been some volatility, but overall, prices have remained in a range. This is a large contrast to the volatility of last year. Current fundamentals suggest there may be limited upside potential for cheese prices through the rest of the year.

BUTTER:

Price may be trying to stairstep higher, but a higher trend may be slow to unfold. Supply is plentiful. Some plants have been limiting production by selling some cream back to the market rather than churn in order to limit inventory growth. However, demand should improve as the year progresses, which will pull inventory lower.

 

Wednesday Closing Dairy Market Update - Cattle Slaughter Increased

MILK

Milk production has been declining seasonally, while demand for fluid milk to supply school systems has been increasing. Many schools are already in session with the remaining schools to be in session over the next week or so. Demand for fluid milk has been pulling quite a bit away from manufacturing. However, there is still plenty of milk available to all areas of the industry. Dairy farms and milk plants in the East and Northeast have been dealing with the impact of Tropical Storm Henri. There has been power outages and damaged roads. There has been no indication of any large volumes of lost milk at this time. Dairy cattle slaughter for the month of July totaled 247,900 head, according to the monthly slaughter report. This was 10,400 head less than the amount slaughtered in June and 14,200 head less than July 2020. Horizon Organic is discontinuing the purchase of milk from 28 dairy farmers in Vermont and New Hampshire beginning September 2022. Their parent company, Danone, informed the Northeast Organic Dairy Producers Alliance that they have adequate supply in the Midwest and West and can purchase milk cheaper from large dairy operations.

AVERAGE CLASS III PRICES

3 Month:	$16.89
6 Month:	$17.12
9 Month:	$17.21
12 Month:	$17.28

CHEESE

Spot milk availability has tightened significantly over the past few weeks. In fact, there is no discounted milk anywhere. Some cheese plants indicate they are turning down orders due to the increase in demand, less spot milk available and lower milk receipts from dairy farms. However, this has not translated in stronger prices as of yet. There remain sufficient cheese supplies available for current demand.

BUTTER

Butter production has been slowing as some plants have been selling cream rather than churning to keep supply in line with demand. Price is trying to work higher, but it may be difficult to see a consistent gain. There are reports of delays in butter deliveries to the ongoing trucking issues that seem to be prevalent in many industries. Demand should slowly improve as the calendar moves toward the end of the year.

OUTSIDE MARKETS SUMMARY

September corn gained 6.75 cents, closing at $5.5125. September soybeans gained 9 cents, closing at $13.46, with September soybean meal down $2.60 per ton, closing at $352.30. September wheat declined 6.75 cents, closing at $7.1125. August live cattle fell $1.37, closing at $124.42. October crude oil gained $0.82, closing at $68.36 per barrel. The Dow gained 39 points, closing at 35,406, while the NASDAQ gained 22 points, closing at 15,042.

Wednesday Midday Dairy Market Summary - Cheese Creeps Higher

Block cheese price increased 0.50 cent, closing at $1.76 with one load traded. Barrel cheese price increased 0.25 cent, closing at $1.4875 with one load traded. Even though both cheese categories increased, it was not enough to provide any significant price support. It seems traders will swing the pendulum to buy when cash prices rise significantly. Otherwise, the overall bearishness remains. Butter price declined 1.25 cents, ending at $1.7025 with five loads traded. Grade A nonfat dry milk price remained unchanged at $1.27. Dry whey price declined 0.50 cent, ending at 51.50 cents with no loads traded. Class III futures are 8 cents lower to 12 cents higher. Class IV futures post a higher trade of 10 cents in July 2022 with no other activity. Butter futures are 1 cent lower to 1.57 cents higher. Dry whey futures are steady to 0.40 cent lower.

Wednesday Morning Dairy Market Update - Underlying Cash Needs to Hold

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	Steady 5 Higher
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 3 Lower
Soybean Futures:	2 to 5 Lower
Soybean Meal Futures:	Steady to $1 Lower
Wheat Futures:	6 to 9 Lower

MILK:

Class III milk futures moved higher early Tuesday, but buyer interest ran its course when spot barrel price failed to increase. This normally would not have been bearish, but that is not the case in the current market environment. Traders have been accustomed to limited price strength on account of underlying cash price increases being short-lived. The Milk Production report showed strong milk production even during a month of record hot weather. The Cold Storage report showed increasing cheese stocks. This did not paint a picture of higher prices anytime soon. Class III milk futures show prices in the $17.00 range throughout the next year and a half.

CHEESE:

Buyers of cheese are looking ahead to end-of-year demand and are purchasing supplies accordingly. The problem is they are able to purchase those supplies without having to be aggressive on the spot market. This leaves prices fluctuating daily as business is being accomplished on an as-needed basis and at reasonable prices.

BUTTER:

The trend in butter may be turning higher. However, there is no reason to believe buyers will become very aggressive. Lower inventory in July is a good sign demand is exceeding production. This may reduce inventory and support further price strength.

Tuesday Closing Dairy Market Update - CME Adds Extension Period to Spot Trading

MILK

Class III milk futures spent most of the day in positive territory but succumbed to selling pressure into the close in some of the nearby contracts. Traders were somewhat disappointed over the inability of barrel cheese price to extend gains Tuesday. With milk production remaining strong and the possibility of production remaining quite a bit higher through the end of the year, there is little reason for bottlers and manufacturers to be concerned about tightening supply. Feed prices will be high throughout the next year relative to last year with some areas already paying very exorbitant prices for dairy-quality hay. Some relief is on the way whenever the government figures out how they are going to appropriate the money for the market volatility payments and the calculation for the revised Dairy Margin Coverage payments. However, those will fall far short of compensating for increased costs this year. The CME implemented a conditional extension period for spot-market trading on Monday. The following is the release from the CME:

"The Conditional Extension Period shall only be triggered when an auction reaches the maximum duration of 10 minutes and will be in effect for 15 seconds following the final call. No new orders may be entered during the Conditional Extension Period. Existing orders may remain and be executed during the Conditional Extension Period. With exception of the highest bid and the lowest offer, orders may be cancelled during the Conditional Extension Period."

AVERAGE CLASS III PRICES

3 Month:	$16.90
6 Month:	$17.16
9 Month:	$17.25
12 Month:	$17.30

CHEESE

There is concern the rally in cheese prices may be limited with the inability of barrels to increase Tuesday. This bearish attitude continues to permeate the market and will be very difficult to shake unless the market is affected adversely with a decline of milk production or a substantial prolonged increase in demand for fresh cheddar cheese. But with the increase of inventory during the month of July, this is not a likely scenario for the foreseeable future.

BUTTER

Price extended its gain Tuesday moving price back to the highest level in a month. The decline of inventory in July was a positive aspect for the market, which could provide further support for price as demand increases seasonally.

OUTSIDE MARKETS SUMMARY

September corn gained 6.50 cents, closing at $5.4450. September soybeans jumped 43 cents, closing at $13.37, with September soybean meal up $8.30 per ton, closing at $354.90. September wheat slipped 1.75 cents, closing at $7.18. August live cattle declined $0.65, closing at $125.80. October crude oil gained $1.90, closing at $67.54 per barrel. The Dow gained 31 points, closing at 35,366, while the NASDAQ gained 27 points, closing at 15,020.

Tuesday Midday Dairy Market Summary - Blocks Post Minor Gain

Block cheese price increased a penny, closing at $1.7150 with one load traded. Barrel cheese price remained steady at $1.4850 with no loads traded. This provided minor support to Class III futures with contracts ranging from 1 to 11 cents higher. The March 2022 contract posts the largest gain. Butter price gained 3.50 cents, closing at $1.71 with 10 loads traded. Grade A nonfat dry milk price gained a penny to $1.27 with one load traded. Dry whey price remained unchanged at 52 cents. Class IV futures are steady to 2 cents lower. Butter futures are 1.82 to 2.30 cents higher. Dry whey futures are unchanged. Traders see limited upside and are trading with caution and not picking any price direction.

Tuesday Morning Dairy Market Update - Some Follow-Through Trade Expected

OPENING CALLS:

Class III Milk Futures:	Steady to 5 Higher
Class IV Milk Futures:	Steady to 5 Higher
Butter Futures:	Steady to 1 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 4 Higher
Soybean Futures:	10 to 15 Higher
Soybean Meal Futures:	$1 to $2 Higher
Wheat Futures:	5 to 7 Lower

MILK:

Class III milk futures found strength from the increase in cheese prices Monday. The increase was a bit more than expected due to traders being very cautious over any increase of underlying cash. Futures may have a difficult time moving much higher unless further gains are seen in underlying cash. There is sufficient milk supply available for both bottling and manufacturing. More milk is moving to school systems but there are still sufficient supplies for manufacturing. Trading activity may be subdued until spot trading provides further direction.

CHEESE:

The increase of cheese in inventory for the month of July was not what we would like to see. It is not unusual to see as increase of cheese from June to July, but it does not provide much support to prices. The weather was hot in July, but it did not have much impact on milk production. Cheese production remained strong without sufficient demand to absorb the production. The report may keep a lid on price potential.

BUTTER:

Butter inventory declined in July, providing some hope for stronger prices later this year. Inventory is now 7% above a year ago with the potential for declines bringing inventory more in line with a year ago. Strong demand and lower output is beginning to have an impact.

Monday Closing Dairy Market Update - Cheese Inventory Increases

MILK

Class III milk futures posted double-digit gains in September through November contracts. Although the bump was nice, traders will remain cautious, questioning the duration of the increase. Overall market fundamentals have not changed over the past few weeks other than the fact that less milk is moving to manufacturing due to the increase of demand from bottlers for the school systems. This is not likely to tighten cheese or other dairy product supplies, but will at least limit growth of inventory, maybe. That will depend on the level of demand that will be seen throughout the rest of the year. There is not much left of the summer that will affect milk production with hot weather. However, it does seem that cows did well throughout the summer, for the most part, with production in July up 2.0% over July last year even though some states reported the hottest weather on record for the month. We could see some very strong milk production through the rest of the year. Feed will be an issue in some places with substantially higher prices due to the drought. Corn crop conditions declined 2 percentage points in the good-to-excellent category, slipping to 60%. This compares to 64% a year ago. Soybeans declined 1 percentage point to 56% good/excellent compared to 69% a year ago.

Average Class III Prices

3 Month:	$16.93
6 Month:	$17.17
9 Month:	$17.24
12 Month:	$17.29

CHEESE

Cheese inventory increased in the month of July. This was really not a good sign due to the fact that it decreased during the month of June. American cheese inventory increased 8.6 million pounds or 1%, totaling 818.2 million pounds. This is 4% higher than a year ago and the highest July inventory since 2018. Swiss cheese inventory increased 110.000 pounds to a total of 22.7 million pounds and is 11% above a year ago. Other cheese inventory gained 5.6 million pounds, totaling 608.5 million pounds. This is 4% above a year ago and the highest for the month of July. Total cheese increased 14.3 million pounds from June, reaching 1.449 billion pounds and 4% higher than last year. This is the highest July inventory on record.

BUTTER

Butter inventory in July totaled 397.4 million pounds. This was a decline of 17.2 million pounds or 4% below June. Inventory remains 7% above a year ago but made some nice progress as the June report showed inventory 14% above the previous year. Stocks are at the highest level for July since 1993.

OUTSIDE MARKETS SUMMARY

September corn slipped 0.75 cent, closing at $5.38. September soybeans gained 0.25 cent, ending at $12.94, with September soybean meal down $6.70 per ton, closing at $346.60. September wheat gained 5.50 cents, ending at $7.1975. August live cattle jumped $2.17, closing at $126.45. September crude oil jumped $3.50, closing at $65.64 per barrel. The Dow gained 216 points, ending at 35,336, while the NASDAQ gained 228 points, closing at 14,943.