Friday Closing Dairy Market Update - Cash Prices Remained Strong Through the Holidays

MILK:

Milk production is mixed across the country with sufficient supply for current demand. Sales of fluid milk are lower in large part due to schools being closed. This will increase next week as schools will again be in session. There is some uncertainty as far as school attendance is concerned as the surge in COVID impacts many areas of the country. It is unclear how that will affect dairy demand. The greater problem might stem from the lack of workers at the plant level, as well as the movement of milk and dairy products as time moves forward. It is clearly evident that logistical problems will continue and potentially become worse than they have been. Retail demand for milk is steady as consumers spend more time at home. Milk component levels are strong due to generally good quality feed available in most areas. Discounted milk is being sought after as long as it is available. Manufacturers are trying to get ahead of strong demand activity, producing dairy products to meet that demand.

AVERAGE CLASS III PRICES:

3 Month:	$19.81
6 Month:	$19.99
9 Month:	$20.00
12 Month:	$19.98

CHEESE:

For the week, blocks increased 10.75 cents with seven loads traded. Barrels increased 6 cents with 30 loads traded. Over the past two weeks, blocks have increased 9.25 cents while barrels have increased 8 cents. Dry whey price was unchanged for the week with no loads traded. Dry whey price is up 2 cents over the past two weeks. Demand from the food service industry has decreased recently while retail demand remains strong.

BUTTER:

For the week, butter jumped 20.50 cents with 30 loads traded. Over the past two weeks, price has increased 36.25 cents with a total of 58 loads traded. Buyers were leap frogging over each other in their attempt to purchase supply before price increased further. The problem is that the frenzy continued to push price higher, maybe more than it should have. Nevertheless, price is holding at these higher levels. Grade A nonfat dry milk price declined 1.50 cents this week with 12 loads traded. Price has declined 2.25 cents over the past two weeks with 25 loads traded.

OUTSIDE MARKETS SUMMARY:

March corn declined 2.75 cents, closing at $5.9325. January soybeans gained a penny to $13.2875 with January soybean meal down $1.90 per ton, closing at $411.70. March wheat fell 9 cents, ending at $7.7075. February live cattle declined $0.27, closing at $139.70. February crude oil fell $1.78, closing at $75.46 per barrel. The DOW declined 60 points, closing at 36,338 while the NASDAQ declined 97 points, closing at 15,645.

Friday Midday Dairy Market Summary - Spot Trading Uneventful

OUTSIDE MARKETS SUMMARY:

CORN:	1 Lower
SOYBEANS:	Unchanged
SOYBEAN MEAL:	$1.50 Lower
LIVE CATTLE:	$0.12 Lower
DOW JONES:	13 Points Higher
NASDAQ:	34 Points Lower
CRUDE OIL:	$1.51 lower

MIDDAY MARKET UPDATE:

Both Class III and Class IV prices were unchanged at $1.98 and $1.71, respectively. There was only a seller showing up with a load of barrels Friday, offering 2 cents higher than the market. Butter price increased 0.50 cent, closing at $2.4525 with four loads traded. There was an unfilled bid for two loads of butter remaining way down at $2.20. This does raise some concern that it was the bid placed. Sometimes, a high bid or offer indicates where the next level of interest is and the market possibly moving to that level. This may be unlikely but certainly not out of the question. Grade A nonfat dry milk price remained at $1.6550 with no loads traded. Dry whey price remained unchanged at 75 cents with no loads traded. Class III futures are 24 cents lower to 1 cent higher. Class IV futures are unchanged to 8 cents lower. Butter futures are 2.50 cents lower to 2.97 cents higher. Dry whey futures are unchanged to $0.52 cent lower.

 

Friday Morning Dairy Market Update - Higher Prices Anticipated

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Mixed
Soybean Futures:	2 to 5 Higher
Soybean Meal Futures:	$1 to $2 Higher
Wheat Futures:	Steady to 3 Lower

MILK:

Milk futures have had two weeks of very strong price increases. Buyers have been aggressive in the underlying cash market, which has provided support to milk prices. There is no shortage of milk, but the perception is that milk supply might tighten next year if cows continue to be culled heavily. That is the current perception of the market. It is doubtful underlying cash prices will continue to increase at the pace they have, but price weakness might be limited. The cost of goods and services are expected to increase again in the new year, which will continue to hamper expansions or the addition of cows into existing facilities. Markets will be open for a full day Friday.

CHEESE:

Maybe block cheese can reach $2.00 by the end of the year. Price is now at the highest level it has been since Nov. 12, 2020. There has been volatility this year but certainly not as much as 2020. Buyers of cheese have been aggressively purchasing cheese ahead of time to position themselves for first quarter demand and to rebuild inventory as prices move higher. Cheese inventory continues to remain higher than a year ago.

BUTTER:

Price has been straight up the past two weeks with little indication that it will run out of steam. There is a frenzy that has dominated the market as buyers continue to purchase at whatever price they can get the product. Manufacturing plants are holding back supply to make sure they have some inventory to meet later demand. This has limited the amount of butter that is available in the country and that is coming to the daily spot market.

Thursday Closing Dairy Market Update - November Income Over Feed Is $9.14

MILK:

Class III milk futures posted some strong gains in nearby months again with February reaching a high of $20.90 but was not able to close at that level. Markets will be open for a full day Friday with anticipation that February could move above $21.00 at some point. Class IV futures have numerous contracts trading above $21.00 due to the strong butter market. What was interesting Thursday is both butter and nonfat dry milk spot prices increased, but Class IV futures in the second and third quarters declined with June and July posting double-digit losses. USDA released the November Agricultural Prices report Thursday which resulted in an income over feed price of $9.14 and the highest income over feed price since November 2020. The average corn price was $5.27, an increase of $0.25 per bushel from October. The Central Illinois soybean meal price was $358.73, an increase of $33.30 per ton from October. The premium/supreme hay price was $246 per ton, a decrease of $1.00 per ton from October. This is the first month the calculation for the income over feed is using only the premium/supreme hay price rather than a blend price. The All-milk price was $20.80, up $1.10 per cwt from October. This results in a Dairy Margin Coverage program payment of $0.36 for those who chose the $9.50 level and who have not reached the maximum of 5 million pounds of milk for the year.

AVERAGE CLASS III PRICES:

3 Month:	$19.81
6 Month:	$20.14
9 Month:	$20.17
12 Month:	$20.14

CHEESE:

Demand for cheese is steady through retail outlets. There continue to be delays in deliveries with retail buyers compensating by purchasing ahead of time. With the increase of COVID-19 again, this is not going to change despite the CDC reducing the quarantine time now to only five days. Demand from the food service industry has slowed and may slow further if people remain at home more during the winter. Buyers continue to bid up for cheese, which may be tied with the end of the year inventory levels and positioning for the first quarter.

BUTTER:

Butter price pushed back to the highest level it has been since May 22, 2018. Declining inventory and lower production coupled with strong domestic and international demand has propelled price higher. The magnitude of the increase could indicate the market may run out of steam soon once buyers feel they have sufficient supply on hand for the time being.

OUTSIDE MARKETS SUMMARY:

March corn declined 9.50 cents, closing at $5.96. January soybeans fell 28.75 cents, ending at $13.2775, with January soybean meal down $1.80 per ton, closing at $413.60. March wheat declined 8 cents, ending at $7.7975. December live cattle slipped $0.35, ending at $139.05. February crude oil declined $0.10, ending at $76.46 per barrel. The Dow declined 91 points, closing at 36,398, while the NASDAQ declined 25 points, closing at 15,742.

Thursday Midday Dairy Market Summary - Cheese, Butter Continue Higher

OUTSIDE MARKETS SUMMARY:

CORN:	10 Lower
SOYBEANS:	29 Lower
SOYBEAN MEAL:	$1.60 Lower
LIVE CATTLE:	$0.05 Higher
DOW JONES:	56 Points Higher
NASDAQ:	89 Points Higher
CRUDE OIL:	$0.52 Higher

MIDDAY MARKET UPDATE:

Block cheese price increased 3 cents, closing at $1.98 with two loads traded. Barrel cheese price gained 2 cents, closing at $1.71 with 11 loads traded. There were three unfilled bids for barrels with two uncovered offers. Block buyers and sellers went home satisfied with no other business left to do. Butter price increased 1.50 cents, closing at $2.4475 with four loads traded. This is now the highest butter price since May 22, 2018. Grade A nonfat dry milk gained 0.75 cent, closing at $1.65 with three loads traded. Dry whey price remained steady at 75 cents with no loads traded. Class III futures are 1 to 35 cents higher. Class IV futures are 6 cents lower to 23 cents higher. Butter futures are 3.00 cents lower to 3.62 cents higher. Dry whey futures are steady to 1.50 cents higher. USDA will release the November Agricultural Prices report Thursday afternoon, providing prices used for determining income over feed for the Dairy Margin Coverage program.

Fluid Milk and Cream - Western U.S. Report 52

In California, farm level milk production is steady to higher. Class I demand is steady to     lower as educational purchasing has slowed due to winter school breaks. Class II demand has     declined; some producers are, reportedly, running lighter year-end production schedules.

Arizona milk production is steady. Strong demand for milk supplies is present as producers     are running busy schedules to meet current market demands. Purchasing is steady across all     Classes. 

Farm level milk production is steady in New Mexico. Some producers in the Southwest are, reportedly, running reduced schedules due to staffing shortages and a shortage of truck     drivers. Demand for Class I and II milk is steady. 

In the Pacific Northwest, milk production is steady. Extreme weather has, reportedly, caused some producers to dump milk as they are unable to move supplies from farms to production facilities. Milk producers in the area who were previously moving loads to Canada say that these deliveries have dried up. Demand for Class I milk has declined, while Class III demand is steady. 

Farm level milk production is steady to higher in the mountain states of Idaho, Utah, and Colorado. Producers in this area say that they do not expect the current inclement weather to negatively affect milk production. Milk supplies are available to meet the steady demand across all Classes. 

In the West, condensed skim contracts are steady. Demand for cream has declined throughout the     region as some Class II producers are running shortened year-end schedules. Cream is     available, though some deliveries are facing delays due to a shortage of truck drivers and     severe weather. Western cream multiples are unchanged at the bottom, while the top moved     higher.

     Western U.S., F.O.B. Cream
     Multiples Range - All Classes:               1.0000 - 1.2700

Thursday Morning Dairy Market Update - Strong Support Remains

OPENING CALLS:

Class III Milk Futures:	Steady to 5 higher
Class IV Milk Futures:	5 to 10 Higher
Butter Futures:	1 to 2 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 4 Lower
Soybean Futures:	11 to 14 Lower
Soybean Meal Futures:	$1 to $3 Lower
Wheat Futures:	Mixed

MILK:

Both Class III and Class IV futures continue to increase as underlying cash remains strong. The strength at this time of year is not unheard of but unusual. There is sufficient milk supply to satisfy both bottling and manufacturing, but the market is concerned over ongoing supply next year. If the trend of culling continues, milk supply could tighten. That could reduce the availability of milk for bottling and manufacturing resulting higher prices. The market will increase prices to the level at which producers will hold onto cows and add cows. That level has not yet been reached as seen on the milk production report. However, the livestock slaughter report last week indicated culling was slowing. The proof will be if milk production begins to increase over the level of the previous year. USDA will release the November Agricultural Prices report Thursday afternoon, providing prices used in the calculation of income over feed for the Dairy Margin Coverage program.

CHEESE:

The strength of cheese prices Wednesday with the rebound of barrels, increases the probability of higher prices again Thursday. Buyers remain aggressive and want to purchase available cheese for rebuilding ageing programs as well to satisfy current demand and prepare for potential demand in the first quarter of next year.

BUTTER:

Butter has strong support with buyers intent on purchasing what becomes available on the spot market at whatever the cost. Increased cream supply and higher churning activity will not change this anytime soon as manufacturing plants are holding some supply for later demand. Inventory has not yet been able to rebuild.

Wednesday Closing Dairy Market Update - Milk Futures Close Mixed, But Most Contracts Higher

MILK:

Milk production is fairly flat across much of the nation, which is not unusual for this time of year. Weather has been good overall, which has kept milk per cow steady to slightly higher. The decline of cow numbers and reduced overall milk supply compared to a year ago has tightened supply more than usual at this time of year. Spot milk has been more plentiful with prices $2 to $4 under class. That is not expected to last for very long as milk will again be in demand from bottlers that supply school accounts. More milk has been moving to manufacturing due to schools being closed for the holiday period. However, demand from bottlers for school accounts is beginning to increase. Milk futures continue to show strength with support stemming from underlying cash prices. Class IV futures are about $1.00 higher than Class III which is unusual. The continued strength of butter will keep Class IV milk price higher. Reduced inventory of butter may keep it that way for a while.

AVERAGE CLASS III PRICES:

3 Month:	$19.63
6 Month:	$19.93
9 Month:	$19.99
12 Month:	$20.01

CHEESE:

Cheese manufacturers have been very busy with increased milk availability. That will begin to change now that bottlers will begin processing for school accounts. Even the increase of cheese output during the holiday has not put pressure on prices. Buyers are concerned about milk supply down the road even though current cheese inventory remains higher than a year ago. The level of cheese demand during the first quarter of the year is a question that cannot be answered. Earlier purchasing of cheese may slow once buyers feel comfortable with supply.

BUTTER:

Butter price is not slowing down its rise. Buyers are in a frenzy attempting to purchase what they can to avoid paying yet higher prices. Churning activity is increasing due to greater availability of cream. Some plants are reportedly holding inventory for future needs rather than moving it to the market as soon as it is produced. This is creating a tighter spot market causing buyer concern.

OUTSIDE MARKETS SUMMARY:

March corn gained 0.75 cent, closing at $6.0550. January soybeans declined 2.75 cents, closing at $13.5650 with January soybean meal down $0.50 per ton. March wheat gained 4.25 cents, ending at $7.8775. December live cattle gained $0.92, closing at $139.40. February crude oil gained $0.58, ending at $76.56 per barrel. The Dow closed 90 points higher at 36,489 points, while the NASDAQ fell 16 points to close at 15,766 points.

Wednesday Midday Dairy Market Summary - Barrel Cheese Rebounds

OUTSIDE MARKETS SUMMARY:

CORN:	1 Higher
SOYBEANS:	4 Lower
SOYBEAN MEAL:	$0.10 Higher
LIVE CATTLE:	$1.00 Higher
DOW JONES:	65 Points Higher
NASDAQ:	48 Points Lower
CRUDE OIL:	$0.44 Higher

MIDDAY MARKET UPDATE:

Block cheese price increased 2 cents, closing at $1.95 with one load traded and one unfilled bid remaining at the close. Price has now exceeded the previous high from Dec. 15 and is the highest price since Jan. 12. Barrel cheese price rebounded gaining 5.75 cents, closing at $1.69 with five loads traded. There was an unfilled bid remaining down at $1.6125 and an uncovered offer remaining at $1.7250. It is very unusual that unfilled bids or offers are posted that wide. Butter price gained 3.25 cents ending at $2.4325 with no loads traded. Price is now very close to the high set on July 16, 2019. Grade A nonfat dry milk price declined 1.50 cents, closing at $1.6475 with five loads traded. Dry whey price remained steady at 75 cents with no loads traded. Class III futures are one cent lower to 17 cents higher. Class IV futures are 9 cents lower to 19 cents higher. Butter futures are 0.37 -- 4.90 cents higher. Dry whey futures are 1.00 cent lower to 0.50 cent higher.

Wednesday Morning Dairy Market Update - Uncertainty Over Cheese

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	5 to 10 Higher
Butter Futures:	1 to 2 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 4 Lower
Soybean Futures:	8 to 12 Lower
Soybean Meal Futures:	$1 to $3 Lower
Wheat Futures:	2 to 4 Lower

MILK:

The outlook for milk prices certainly has improved as futures have increased substantially. Some caution has surfaced due to the weakness of barrel cheese Tuesday, but this is initially being viewed as a temporary weakness. Spot milk prices continue to remain stronger than usual during this period of time, with prices at or 50 cents above class. More milk moving to manufacturing is not creating any concern and has been welcomed by most plants allowing them to increase production. Milk production is holding despite higher feed prices and increasing costs for other goods and services. The price outlook for milk has improved immensely but that is not translating into greater profitability at this point. USDA will release the Agricultural price report for November on Friday providing numbers used to determine income over feed.

CHEESE:

Cheese is maintaining solid support overall. The weakness of barrels will keep traders guessing as to price potential as we move through the end of the year and into the first quarter. Buyers have been purchasing ahead and could eventually slow their purchases once they feel satisfied with supply.

BUTTER:

Buyers remain aggressive even at the current price level. There is a frenzy driving the market as increasing price pulls more buyers in to obtain supply before price could again go higher. Cream is becoming more available which will increase churning activity. However, current demand remains higher than production.

Strong cheese exports overcome weaker domestic market

The Agriculture Department gave us the latest on U.S. dairy product demand. Starting with cheese, October disappearance totaled 1.18 billion pounds, up just 0.7% from October 2020, with strong exports overcoming weaker domestic disappearance, according to HighGround Dairy’s Lucas Fuess in the Dec. 20 “Dairy Radio Now” broadcast. It was the weakest October domestic disappearance since 2017, according to HGD.

American-style cheese disappearance, at 458.8 million pounds, was down 4.1% from a year ago and down for the second consecutive month. Fuess warned that, if the domestic disappearance decline persists, we could see prices drop after holiday demand subsides.

Butter disappearance totaled 209.8 million pounds, down 1.3% in total and down 3.6% domestically, first year over year decline since June following impressive gains in third quarter. Exports were up 91.4% but only totaled 9.8 million pounds.

Fuess speculated that holiday butter demand may have been front loaded in August and September as buying appeared earlier than normal. He’s says that’s not overly concerning because butter output is weaker and inventories are declining at a pretty quick pace.

Interestingly, the Dec. 15 Daily Dairy Report pointed out that Canada is the top market for U.S. butter and milkfat, accounting for more than 30% of U.S. exports in the past five years and 28% so far in 2021. Canada is also the primary market for U.S. cream. In the first 10 months of 2021, three out of every four loads was sent to Canada, according to the DDR, and through October, Canada imported a record-breaking 43 million pounds of butter, 30% more than in 2020.

Recent heavy rains and flooding in the lower mainland of British Columbia may have resulted in larger imports in November and December. The DDR says “The BC Dairy Association reported that the province was able to fill fluid milk orders but industrial processing dropped 20% in the weeks after the flooding.

Nonfat dry milk-skim milk powder disappearance hit 227.6 million pounds in October, up 9.3%, though exports were down 12.3%. The increase follows two consecutive months of weakness, says HGD, and the strength was driven by domestic demand. Exports year to date however are up 10.6% from a year ago and Fuess said we’re probably looking at another record year for powder exports.

Total dry whey disappearance amounted to 83.4 million pounds, down 3.0% from a year ago. Domestic demand was down for the sixth consecutive month, driven by lower exports which were down 21.5%, as China has imported less.

HGD says whey’s domestic weakness is “likely driven by weaker supply and tight product availability. While demand is firm and the price recently hit a record high at the CME, disappearance has struggled with limited product to sell.”

Meanwhile, the big topic of the recent American Dairy Products Institute’s Dairy Ingredients Seminar in Santa Barbara, California was inflation, according to the Dec. 3 Dairy and Food Market Analyst. Editor and analyst Matt Gould wrote that attendance was high and so were spirits, as most attendees were bullish.

However, “Virtually everyone is experiencing significant cost pressure and, looking into 2022, will raise prices and overages on their customers,” wrote Gould. “The million-dollar question: How much of a cost increase can we pass on? Answers that we heard ranged from 5% to 15%.”

Dairy product prices are soaring in Europe, according to the DFMA. European 82%-fat butter traded above $3.00 per pound, the week of Dec. 6, and Cheddar cheese traded between $2.20 and $2.30 per pound.

European milk production is crashing, the DFMA reported, and the latest period saw output down 3.7% in the big-three milk producing regions of Germany, France, and the United Kingdom.

Things aren’t much better “down-under.” DMN reports that Australian milk output through October, the fourth month of the season, continued to be disappointingly low. “October is the usual high point of seasonal milk production. While there are more seasonal months to follow than have occurred so far, production will be trending lower, so making up for the past will be a challenge in the future.”

Season to date, the DDR says Australian milk production is down 2.9%, compared to July through October 2020.

“New Zealand milk production through October is also termed disappointing,” says DMN. “While hopes are for a recovery, the typical trend of lower production month after month through the rest of the season will require a decent rebound to overcome the deficit so far.

Early observations of the November results are said to suggest that when official results are released, November will offer little help.”

The New Zealand dairy herd declined for the third consecutive year during the 2020/21 season, according to the DFMA, after finishing last season at 4.9 million head, 1.8% lower than the count in 2018 and 0.4% smaller than a year earlier. The number of acres in dairy production shrank to a total of 4.2 million, which was an eight-year low and down 1.0% from a year earlier,” the DFMA stated.

Back on the home front; CME dairy prices were mixed the week before Christmas. The markets didn’t have a lot to feed on as regularly monitored USDA reports were few, however traders were anticipating Monday’s November Milk Production report. The last Global Dairy Trade of 2021 is Tuesday and the November Cold Storage report is released Wednesday.

The Cheddar blocks appeared to make an attempt at $2 per pound and got to $1.9475 per pound on Wednesday, highest since Jan. 12, 2021, but closed Friday at $1.8875, 2.25 cents higher on the week and 27 cents above a year ago.

The barrels didn’t fare so well, closing at $1.63, down 5 cents on the week, ending four consecutive weeks of gain, 15.50 cents above a year ago, and 25.75 cents below the blocks. CME sales included 9 cars of block and 38 of barrel.

Retail cheese orders are very busy, according to several Midwest cheesemakers. Curd and barrel producers, particularly, told Dairy Market News that demand is strong, supplies are limited, and do not foresee a change in upcoming weeks. Spot milk pricing mirrored the previous week, at Class III to slightly over. That said, some plants are already getting offered milk for the upcoming holiday weeks at slight discounts. Cheese market tones remain on similar ground to the past few weeks. It’s not a necessarily bearish sentiment, says DMN, but the block-over-barrel price gap “keeps the bulls corralled.”

Cheese demand is steady in the west in retail, food service, and internationally. Port congestion continues to cause delays as does the continuing shortage of truck drivers. Block inventories have been tight in recent weeks and, reportedly, tightening. Spot availability of barrels was unchanged. Cheese producers are running busy schedules in the region, as milk continues to be available.

Butter, after jumping 12 cents the previous week, suffered a melt-down Monday, dropping 6.25 cents, but rallied to close Friday at $2.0925 per pound, down 3 cents on the week but 63.75 cents above a year ago, on 42 sales on the week.

Bulk butter remains notably tight in the Midwest, according to DMN, and producers say customer interest is very active. Cream is available, at least from Western suppliers, however freight costs and general limitations are tribulations for plant management. Cream, regionally, was not as available as the previous week but demand is expected to trend lower Christmas Week and the final week of 2021. Butter market tones continued to shift bullishly on tight quantities and demand health, according to DMN.

Cream is available in the west and some contacts report sending loads to other regions. Demand is seasonally strong, though some contacts believe demand will decline in the coming weeks. Demand for butter is steady across retail and food service markets.

International demand is strong though some contacts say export sales are being limited by increased delivery times due to port congestion. Spot butter inventories are limited and unsalted butter is especially tight, and that is what is exported. A shortage of truck drivers continues to cause delays to deliveries of cream and production supplies and labor shortages have caused some butter producers to reduce output, according to DMN.

Grade A nonfat dry milk saw daily gains and finished Friday at $1.6775 per pound, up 5.25 cents on the week, highest since July 18, 2014, and 52.75 cents above a year ago. There were 8 carloads that found new homes on the week. In case you’re wondering, the CME record was $2.16 per pound on Dec. 5, 2007.

CME dry whey held at its record high 71.25 cents per pound for 5 consecutive sessions, but jumped 1.75 cents Friday on a sale to set a new record 73 cents per pound, 27.50 cents above a year ago.

The Agriculture Department’s latest Livestock, Dairy, and Poultry Outlook, issued Dec. 15, mirrored milk price and production projections in the Dec. 9  World Agricultural Supply and Demand Estimates report.

The Outlook reported that the number of U.S. milk cows has continued to decline each month since June 2021. Year-over-year growth in milk supply was low in August and September and fell below the previous year in October.

The number of dairy cows is expected to continue declining in first and second quarter 2022, according to the Outlook. Accordingly, the annual 2022 forecast was lowered to 9.385 million head, 10,000 head below the last month’s forecast and 65,000 less than the forecast for 2021.

The 2022 forecast for milk per cow is 24,265 pounds, 15 pounds lower than last month’s forecast. The projection for 2022 milk production was lowered to 227.7 billion pounds, 0.4 billion pounds below last month’s forecast but 1.5 billion pounds above 2021.

From the week ending June 12, 2021, to the week ending on November 6, federally inspected dairy cow slaughter has been above the corresponding weeks in 2020.

For the week ending November 13, it was slightly below the corresponding week of the previous year, and for the following weeks, it was slightly above the corresponding weeks. In most recent weeks, federally inspected milk cow slaughter has been below corresponding weeks in 2019.

In the week ending Dec. 4, 63,800 dairy cows were sent to slaughter, up 15,600 from the previous week, but 2,100 head or 3.2% below a year ago.

Cull prices continue to be strong, says StoneX, but slaughter levels are slowing, perhaps “indicating that farmer’s aren’t taking advantage of the opportunity, which could indicate that the dairy herd contraction is beginning to slow.”

“Bull or bear, producers should not overlook good price levels especially as it related to insurance,” StoneX warns. “Whether you believe in $25 milk or not, insurance in 2022 has likely never been cheaper.” “Producers should be looking at Dairy Revenue Protection and Livestock Gross Margin dairy insurance.”

One more story on demand; U.S. fluid milk sales unfortunately offer no holiday cheer to the dairy industry. The USDA’s latest data shows October sales of packaged fluid products at 3.8 billion pounds, down 5.2% from Oct. 2020.

Conventional product sales totaled 3.5 billion pounds, down 5.2% from a year ago. Organic products, at 224 million pounds, were down 5.4%, and represented 6.0% of total sales for the month.

Whole milk sales totaled 1.2 billion pounds, down 3.9% from a year ago, with year to date consumption down 6.3%. Whole milk represented 33.1% of total milk sales for the ten month period.

Skim milk sales, at 205 million pounds, were down 11.6% from a year ago and down 13.1% year to date.

Total packaged fluid milk sales for the ten months amounted to 36.6 billion pounds, down 4.5% from 2020. Conventional product sales totaled 34.3 billion pounds, down 4.7%. Organic products, at 2.3 billion, were down 2.6%, and represented 6.4% of total milk sales for the period. The figures represent consumption in Federal milk marketing order areas, which account for approximately 92% of total fluid milk sales in the U.S.

In politics, The National Milk Producers Federation thanked Wisconsin Senator Tammy Baldwin for her “continued advocacy for accurate labeling and public health” in her questions for Dr. Robert Califf during this week’s hearing on his nomination to be commissioner of the U.S. Food and Drug Administration.

“Labeling integrity needs to be a top-of-mind issue for Dr. Califf as he moves toward his second stint as FDA commissioner. The ground has shifted since his previous tenure in the Obama administration, both as dairy imitators proliferate and the abuse of lax labeling enforcement creates nutritional confusion for consumers,” said NMPF president Jim Mulhern. Califf said he would make the issue a priority should he be confirmed.

NMPF and the U.S. Dairy Export Council praised a letter from the USDA and the Department of Transportation urging the world’s leading ocean carriers to reform their practices to provide better service to U.S. exporters. The letter specifically referenced the need to expand use of available West Coast terminal capacity and “restore reciprocal treatment of imports and exports inherent in trade.”

They urged the Administration to “call out profiteering by foreign-owned carriers at the expense of dairy exporters and take steps to address the supply chain crisis that’s cost the dairy industry $1.3 billion the first three quarters of 2021.”

Tuesday Closing Dairy Market Update - Milk Futures Push Higher

MILK:

Class III milk futures showed quite a bit of volatility Tuesday as contracts seesawed up and down, finally settling with most contracts higher. The weakness of barrels did not change the bullish minds of traders. With the continued strength of Class III futures, there are more predictions being released as far as the potential for milk prices. Milk production in other countries is down due to farmers across the world struggling with higher costs of production. This is taking place at a time when demand for dairy is increasing. Some of this is due to consumers wanting a nutritious diet due to the concern over COVID and dairy fits that very well. A healthier lifestyle may reduce some of the impacts from COVID and is certainly a positive outcome from the pandemic. The problem for farms is that the pandemic has increased the costs of many things that are used in the production of milk, leaving us with trading dollars for dollars. Higher milk prices are offset by higher feed prices, leaving farms in no better condition. This is what has impacted milk production and has caused concern for buyers of dairy products. To what extent this will push milk prices is difficult to predict. Corn futures fell Tuesday in response to a slight change in weather forecast for South America with chances of rain increasing over the next two weeks. This triggered some liquidation in futures as profits were being taken from the market as well as farmers selling some of the corn they have in storage due to the strong prices.

AVERAGE CLASS III PRICES:

3 Month:	$19.55
6 Month:	$19.85
9 Month:	$19.93
12 Month:	$19.95

CHEESE:

Cheese buyers have been aggressive and remain that way even though holiday demand is satisfied. Buyers are looking ahead and are concerned over supplies as time moves forward. It does seem farm profitability is not going to be any better due to continued problems in many sectors of the economy. Prices of goods and services are expected to increase again with the coming of the new year. This may result in more farms liquidating and milk supply tightening.

BUTTER:

The strength of butter has been somewhat of a surprise throughout the holiday period. Buyers are not blinking an eye at the higher prices and continue to aggressively purchase supply. They seem to be outbidding each other to get supply at whatever the cost. The market is beginning to get to feel out of control. Strong demand will continue to push price higher.

OUTSIDE MARKETS SUMMARY:

March corn fell 10 cents, closing at $6.0475. January soybean declined 3.25 cents, closing at $13.5925 with January soybean meal gaining $1.10 per ton, closing at $415.90. March wheat fell 20.50 cents, closing at $7.8350. December live cattle jumped $1.17, ending at $138.47. February crude oil gained $0.48, closing at $76.05 per barrel. The DOW gained 96 points, closing at 36,398 while the NASDAQ declined 90 points, closing at 15,782.

Tuesday Midday Dairy Market Summary - Butter Blasts Higher

OUTSIDE MARKETS SUMMARY:

CORN:	10 Lower
SOYBEANS:	4 Lower
SOYBEAN MEAL:	$2.80 Higher
LIVE CATTLE:	$1.10 Lower
DOW JONES:	92 Points Higher
NASDAQ:	84 Points Lower
CRUDE OIL:	$0.29 Higher

MIDDAY MARKET UPDATE:

Cheese prices diverged, taking some of the early bullishness out of the market. Block cheese price increased 2 cents, closing at $1.93 with two loads traded. Barrel cheese price declined 4.25 cents, closing at $1.6325 with 10 loads traded. The weakness of barrels more than offset the strength of blocks, which has impacted the January Class III contract, taking it from a high of $20.00 earlier Tuesday to the current level of $19.85. Class III futures are mixed with prices ranging from 5 cents lower to 15 cents higher. Butter price jumped 9.50 cents, closing at $2.40 with 12 loads traded. Buyers seem to be in a frenzy now that price continue to increase when seasonally it decreases. Price is now back to the highest level it has been since July 19, 2019. There is no indication a price resistance level has been achieved. Grade A nonfat dry milk price declined 0.50 cent, closing at $1.6675 with three loads traded. Dry whey price remained unchanged at 75 cents with no loads traded. Class IV futures are 1 to 25 cents higher. Butter futures are 0.25 to 6.90 cents higher. Dry whey futures are steady to 1.42 cents higher.

Dairy Checkoff Drives 2021 Sales Growth

Despite the challenges brought on by COVID-19, the Dairy Checkoff continued to help its foodservice partners to grow sales of U.S. dairy foods. Dairy Management Incorporated, the organization that oversees the checkoff, says more domestic dairy got shipped into the international marketplace in 2021. The checkoff continued its effort to connect with the Gen Z consumers, while the dairy industry’s sustainability journey reached new levels during a busy year. DMI CEO Barbara O’Brien says the dairy checkoff delivered on its mission to drive sales and trust. “We not only adapted to the realities of COVID, but we used it as an opportunity to become even more consumer-centric, more efficient, and more collaborative,” O’Brien says.  She points out the continued success of the checkoff’s partnership with globally-recognized companies like Domino’s, Taco Bell, and McDonald’s. Overall dairy sales at those chains grew between three and six percent this year.

Tuesday Morning Dairy Market Update - Further Strength Expected

OPENING CALLS:

Class III Milk Futures:	4 to 8 Higher
Class IV Milk Futures:	5 to 10 Higher
Butter Futures:	Steady to 1 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Higher
Soybean Futures:	8 to 12 Higher
Soybean Meal Futures:	$2 to $4 Higher
Wheat Futures:	2 to 4 Lower

MILK:

There is quite a bit of bullishness in milk futures as demand for dairy products remains strong even after holiday orders are filled. Increasing prices at this time of year is unusual, but not unheard of. Milk production has been declining due to high feed prices and increasing cost of goods and services. Cost of production continues to increase. This is squeezing profitability with farms cutting where they can which is affecting overall milk production. Weather has been good for cow comfort aiding in keeping milk production per cow strong as cows are not dealing with weather stress. More milk continues to move to manufacturing as schools are closed. This may have little impact on supply and demand for cheese and butter as increased supply of milk to manufacturing is temporary.

CHEESE:

Cheese prices are increasing with blocks likely to reach back to the previous high of $1.9475 set two weeks ago. Buyers are anxious over supply, which is keeping them buying to protect against further price increases. Sellers will continue to hold back as long as buyers remain aggressive.

BUTTER:

Demand is strong both domestically and internationally. Price continues to increase as buyers turn more aggressive to outbid each other to increase ownership for next year. Butter price on the last Global Dairy Trade auction was $2.65 compared to Monday's price of $2.3050. This makes it attractive for the international buyer keeping exports strong. Butter has the advantage of being purchased now and then frozen for later use without changing the consistency.

Monday Closing Dairy Market Update - Milk Keeps Pace With Grain

MILK

Milk futures were higher with February through September Class III futures closing at $20 or higher. February Class III futures out through the end of the year closed at new contract highs. At least it seems as if milk prices are keeping up with escalating grain prices. If the income-over-feed price moves more favorable, farmers may want to add more cows again. However, that is not going to happen very quickly as other costs are increasing substantially as well. Feed inventory also needs to be taken into consideration. The initial impact might be slowing of culling and then waiting to see whether higher milk prices will remain for an extended period of time. The supply of replacement heifers is lower, possibly reducing the ability to increase cow numbers. There are milk plants that have told some of their patrons that have been discussing expansions but could not, due to the ability of the plant to process the milk, that they would be allowed to expand if they wanted to. This is a complete about-face from what has been taking place over the past years.

AVERAGE CLASS III PRICES

3 Month:	$19.51
6 Month:	$19.80
9 Month:	$19.88
12 Month:	$19.89

CHEESE

Cheese prices are holding and slowly improving, but not as much as Class III milk futures indicate. When a market turns more bullish, traders put more price premium into futures in the anticipation of higher prices yet to come. Block cheese price has yet to regain what it lost over a week ago. It is possible price could hit $2 before the year is finished if buyers remain concerned that milk supply would continue to tighten. There is sufficient cheese available for demand with inventory higher than last year. However, buyers are anxious and concerned, which is keeping them buying. Dry whey price has reached a level at which there was demand destruction that last time price was this high. This could begin to take place again.

BUTTER

Cream supply has become more available recently, which should allow plants to increase churning activity. Demand has been outpacing production, reducing inventory to a level quite a bit below a year ago. International demand has remained strong with exports this year 132.5% above a year ago. Buyers continue to purchase believing higher price is yet to come.

OUTSIDE MARKETS SUMMARY

March corn gained 9 cents, closing at $6.1475. January soybeans jumped 30.50 cents, closing at $13.6250, with January soybean meal up $8.70 per ton, closing at $414.80. March wheat declined 10.75 cents, ending at $8.04. December live cattle closed $0.25 higher at $137.30. February crude oil jumped $2.15, closing at $75.94 per barrel. The Dow gained 352 points, ending at 36,302, while the NASDAQ gained 218 points, closing at 15,871.

Monday Midday Dairy Market Summary - Cheese, Butter Move Higher

OUTSIDE MARKETS SUMMARY:

CORN:	7 Higher
SOYBEANS:	25 Higher
SOYBEAN MEAL:	$6.40 Higher
LIVE CATTLE:	$0.22 Higher
DOW JONES:	229 Points Higher
NASDAQ:	184 Points Higher
CRUDE OIL:	$1.80 Higher

MIDDAY MARKET UPDATE:

Class III futures were mixed until spot trading took place. Block cheese price increased 3.75 cents, closing at $1.91 with two loads traded. Barrel cheese price increased 2.50 cents, closing at $1.6750 with four loads traded. Blocks have now regained half of what they lost during the middle of the month. Barrels are still in a range. Butter price increased 5.50 cents, closing at $2.3050 with 10 loads traded. This is the highest butter price since Aug. 21, 2019. Grade A nonfat dry milk price slipped 0.25 cent, closing at $1.6675 with one load traded. Dry whey price remained unchanged at 75 cents with no loads traded. Class III futures are unchanged to 30 cents higher with January showing the greatest gain. Class IV futures are 3 to 25 cents higher. Butter is 0.07 cent lower to 6.32 cents higher. Dry whey futures are steady to 0.35 cent higher.

Monday Morning Dairy Market Update - Trade May Be Slow to Develop

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	4 to 6 Higher
Soybean Futures:	10 to 12 Higher
Soybean Meal Futures:	$3 to $4 Higher
Wheat Futures:	3 to 5 Higher

MILK:

January Class III futures had a wide price swing overnight with price ranging from 22 cents lower to 26 cents higher. The current market shows a bid and offer 40 cents apart. In fact, most of the bid and offers in all milk futures are wide with traders, unsure of market direction, placing orders and then turning off the screen for the night. Steady cheese prices on Thursday does leave traders guessing as to price direction. Milk production is steady with weather continuing to remain good for cow comfort. Feed prices continue to creep higher and will remain a concern. The potential for higher milk prices may offset the increase of feed prices, keeping milk production strong. Culling may slow as most farmers may have adjusted to where they want to be with cow numbers for the time being.

CHEESE:

Spot cheese prices could go either way Monday. It is unlikely prices will fall due to there being no apparent void under the market. However, price may have a difficult time moving much higher due to holiday demand having been supplied and first quarter potential demand already being prepared for. Prices may be choppy this week.

BUTTER:

Price is not expected to weaken now that Christmas is past. That demand had been filled earlier and buyers continue to remain aggressive. There is a fear of tighter supply as we move through 2022, which has been causing buyers to increase ownership for expected first quarter needs.

Thursday Midday Dairy Market Summary - Butter Continues to Increase

OUTSIDE MARKETS SUMMARY:

CORN:	4 Lower
SOYBEANS:	2 Higher
SOYBEAN MEAL:	$2.60 Lower
LIVE CATTLE:	$1.10 Lower
DOW JONES:	26 Points Lower
NASDAQ:	103 Points Lower
CRUDE OIL:	$0.29 Lower

MIDDAY MARKET UPDATE:

Both block and barrel cheese prices remain unchanged at $1.8725 and $1.65, respectively. There were no loads traded in each category with no one showing up to do any business. Buyers and sellers must have turned their attention to Christmas and did not need to accomplish any further business. That was not the case for butter as price increased 6 cents, closing at $2.25 with nine loads traded. Buyers remain active and aggressive through the end of the year as concern is developing over supply next year. Grade A nonfat dry milk price remained unchanged at $1.67 with no loads traded. Dry whey price increased 1.50 cents, closing at 75 cents with one load traded. This is the highest price since dry whey began trading on the spot market in early 2018. Class III futures are 19 cents lower to 15 cents higher. February shows the greatest loss while May shows the greatest gain. Class IV futures are 1-20 cents higher. Butter futures are 0.30 cent to 4 cents higher. Dry whey futures are 0.75 cent lower to 0.70 cent higher. USDA will release the November Livestock Slaughter report this afternoon.

Fluid Milk and Cream - Western U.S. Report 51

California farm level milk production is trending higher. Demand for bottling has declined;     contacts report that winter school breaks have caused a decrease in educational purchasing.     Some Class II producers have reduced purchasing as they are, reportedly, running lighter     year-end production schedules. 

Milk production is steady to higher in Arizona. Milk supplies are being utilized by producers who are working to meet strong holiday demand. Demand has softened for Class I and Class II, while steady for Class III. 

In New Mexico, milk production is unchanged. Steady demand is present across all Classes. Delays to milk production supplies and staffing shortages are causing some Southwestern production facilities to run reduced schedules. 

Farm level milk production is trending higher in the Pacific Northwest. Stakeholders say that recent weather has been favorable to milkers in the area. Some milk from the Pacific Northwest is being sent to Canada to help in areas recently hit with inclement weather. Class I demand is down, while Class III demand is unchanged. 

In the mountain states of Idaho, Utah, and Colorado milk production is trending higher.     Producers in the area are finding milk available to meet current market needs as demand is     steady across all Classes. 

Condensed skim contracts are steady, in the West. Cream demand is declining as some Class II producers in the region are running shortened year-end schedules. Cream is becoming more available; some stakeholders in the region report sending loads to other regions. Western cream multiples moved lower this week.

     Western U.S., F.O.B. Cream
     Multiples Range - All Classes:               1.0000 - 1.2500

Thursday Morning Dairy Market Update - Overnight Activity Points Higher

OPENING CALLS:

Class III Milk Futures:	Steady to 10 Higher
Class IV Milk Futures:	5 to 15 Higher
Butter Futures:	1 to 2 Higher

OUTSIDE MARKET OPENING CALLS:

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

MILK:

Overnight trading activity in Class III futures was a little higher than usual with prices mixed. However, looking at the bids and offers, it indicates higher prices may unfold as trading activity increases Thursday morning. The Cold Storage report Wednesday was neutral to slightly bearish for cheese, but the numbers on the report are not expected to influence trading at this point. President Biden indicated there will be no shutdowns in the country due to the surge of the virus. This will keep dairy demand strong from the food service industry. Winter weather continues to remain somewhat mild, providing comfortable conditions for cows, allowing for milk production to remain strong. USDA will release the November Livestock Slaughter report Thursday, which should indicate continued heavy culling of the dairy herd as was shown on the milk production report. Thursday is the last trading day for the week. Markets will be closed on Friday and will reopen Sunday night.

CHEESE:

Prices may regain the ground they lost last week. Overall demand remains strong as buyers have been looking ahead and buying to increase supply for first quarter expected demand. More milk will be available for manufacturing over the next week as schools are closed and school milk is diverted from bottling. The extra milk will be handled easily and will be welcomed by most manufacturers.

BUTTER:

Butter is on a roll with price reaching back to the highest level since Oct. 4, 2021. Price would need to move another 25 cents to reach the high set in 2019. That may be a tall order, but in Thursday's market environment it could be possible. Strong domestic and export demand should keep price supported. The Cold Storage report showed a large decline of stocks in November, adding to the current bullishness of the market.

Wednesday Closing Dairy Market Update - Cheese and Butter Inventories Decline

MILK

Milk futures had a strong day following the cash markets higher. February, March and July contracts closed at $20 or higher. Class IV showed a strong close in all contracts with February able to close at $21. The strength is somewhat surprising for this time of year. The Global Dairy Trade action took place Tuesday and showed a slight weakness of the trade-weighted average. After eight consecutive events showing increases, Tuesday's event showed a decrease of 1.5%. The main culprit was whole milk powder, which had a decline of 3.3% to $3,867 per metric tons or $1.75 per pound. Anhydrous milk fat increased 0.9% to $6,724 per metric ton or $3.05 per pounds. Butter increased 1.0% to $5,851 per metric ton or $2.65 per pound. Cheddar cheese increased 0.5% to $5,241 per metric tons or $2.38 per pound. Lactose gained 3.7% to $1,390 per metric ton or $0.63 per pound. Skim milk powder increased 0,7% to $3,745 per metric ton or $1.70 per pounds. The January Class I price was released and showed an increase of $0.54 from December with a price of $19.71.

AVERAGE CLASS III PRICES

3 Month:	$19.38
6 Month:	$19.66
9 Month:	$19.76
12 Month:	$19.76

CHEESE

There was much anticipation as to the amount cheese inventory would decline in November. It did show a decline, but the decline was rather light based on history. American cheese stocks declined 8.1 million pounds from October. Inventory remains 10% above a year ago. Swiss cheese inventory declined 694,000 pounds to a total of 20.7 million pounds. Inventory remains 3% above a year ago. Total cheese stocks declined 18.2 million pounds to a total of 565.7 million pounds. This was nearly unchanged from a year ago. Total cheese stocks declined 27.0 million pounds to a total of 1.422 billion pounds. This is 5% above a year ago.

BUTTER

Butter inventory dropped 67.0 million pounds to a total 211.8 million pounds. This is a large decline over the course of one month. Inventory is now down 16% from a year ago. This should keep butter price high for an extended period of time.

OUTSIDE MARKETS SUMMARY

March corn gained 4.25 cents, ending at $6.0250. January soybeans jumped 20.75 cents, closing at $13.2875, with January soybean meal up $8.80 per ton, closing at $402.80. March wheat jumped 15 cents, ending at $8.14. December live cattle gained $0.22, closing at $135.75. February crude oil gained $1.91, closing at $73.03 per barrel. The Dow closed 261 points higher at 35,754, while the NASDAQ gained 181 points, closing at 15,522.

Wednesday Midday Dairy Market Summary - Spot Prices Move Higher

OUTSIDE MARKETS SUMMARY:

CORN:	4 Higher
SOYBEANS:	21 Higher
SOYBEAN MEAL:	$8.80 Higher
LIVE CATTLE:	$0.27 Higher
DOW JONES:	228 Points Higher
NASDAQ:	112 Points Higher
CRUDE OIL:	$1.10 Higher

MIDDAY MARKET UPDATE:

Block cheese increased 1.25 cents, closing at $1.8725 with 2 loads traded. Barrel cheese increased 2.50 cents, closing at $1.65 with 7 loads traded. Dry whey price increased a penny, closing at 73.50 cents with 1 load traded. Gains in cash pushed Class III futures higher with February up 36 cents. Futures range from 2 cents lower to 36 cents higher with February, March, July and August at $20.00 or higher. Butter price increased 4.75 cents closing at $2.19 with 3 loads traded. Grade A nonfat dry milk price increased 0.75 cent ending at $1.67 with 10 loads traded. Class IV futures are showing light trade with contracts ranging from 8-31 cents higher. Butter futures are 2.00-5.75 cents higher. Dry whey futures are 0.25 cent to 1.50 cents higher. USDA will release the November Cold Storage report Wednesday afternoon.