MILK
Class III milk futures suffered some significant losses this week due to the weakness of cheese prices. Blocks were the weakest, declining each day this week as buyers held back, waiting for lower prices. The July Milk Production report was neutral, having limited influence on prices. USDA announced a new Pandemic Market Volatility Assistance Program and improvements to the Dairy Safety Net of the Dairy Margin Coverage program. About $350 million in pandemic assistance payments will go to dairy 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 that includes permanent improvements to the Dairy Margin Coverage safety net program. Under the program, payments will reimburse qualified dairy 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 fluid milk 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. Payments will be made through agreements with independent handlers and cooperatives. Handlers and cooperatives will distribute the monies to their patrons according to a formula set by USDA. Cooperatives and handlers will be reimbursed for allowed administrative costs. Improvements will also be made to the Dairy Margin Coverage program to better reflect the actual costs dairy farmers pay for high-quality alfalfa hay. The change will be retroactive to January 2020, which is expected to result in further benefits to farmers of about $100 million for last year and this year. The specifics of the change to the alfalfa hay prices are yet to be released.
AVERAGE CLASS III PRICES
| 3 Month: | $16.70 |
| 6 Month: | $17.02 |
| 9 Month: | $17.13 |
| 12 Month: | $17.21 |
CHEESE
For the week, blocks declined 12 cents with six loads traded. Barrels increased 2.75 cents with 21 loads traded. Dry whey increased 1.25 cents with two loads traded. Blocks have now erased two-thirds of the gains earlier in the month. Price has declined as rapidly as it had increased. This action will make traders more apprehensive of any price increases, leaving little reason to keep or put any extra premium in the market.
BUTTER
For the week, butter declined 0.75 cent with 32 loads traded. Grade A nonfat dry milk price declined 2 cents with seven loads traded. USDA will release the July Cold Storage report on Monday, providing an indication of butter demand and supplies compared to a year ago. Inventory is expected to show a decrease from June while stocks are expected to remain substantially higher than a year ago.
OUTSIDE MARKETS SUMMARY
September corn declined 11.25 cents, closing at $5.3875. September soybeans fell 29.25 cents, ending at $12.9375, with September soybean meal gaining $1.80 per ton, ending at $353.30. September wheat fell 13.25 cents, closing at $7.1425. August live cattle gained $0.87, ending at $124.27. September crude oil declined $1.37, closing at $62.32 per barrel. The Dow gained 226 points, closing at 35,120, while the NASDAQ gained 173 points, closing at 14,715.
