Monday Closing Dairy Market Update - Milk Future End January on a Positive Note

MILK:

Buyer support steadily returned to the market Monday, helping to regain a portion of last week's losses at the end of the month. January Class III milk futures remained dead in the water with prices moving 1 cent per cwt higher at $20.37 per cwt with these spot month contracts focusing more on settlement pricing activity than trader market activity. Other nearby contracts posted double-digit gains, with February futures closing at $20.29 per cwt, while April Class III milk prices led nearby markets higher with a 30-cent rally. Overall focus on feed and production costs remains very real and will continue to have an impact on milk prices and the ability to change production levels over the near future. With most of the wholesale cheese market now moving past football parties, the focus will continue to be shifting to spring and summer demand, which is still a very moving target based on economic concerns and any restrictions placed on activities due to COVID. The monthly Agricultural Prices report was released Monday at 2 p.m. Central Time. Monthly average corn prices at the end of December increased 20 cents per bushel from the previous month, moving to $5.47 per bushel. All-hay prices were unchanged from the previous month at $187 per ton. All-milk prices are reported at $21.80 per cwt, up $1 per cwt from previous November price levels. These price shifts adjusted the Milk-to-Feed Price Ratio to 1.98, which is slightly above the November index level of 1.94.

AVERAGE CLASS III PRICES:

3 Month:	$20.73
6 Month:	$21.15
9 Month:	$21.17
12 Month:	$21.00

CHEESE:

Cash cheese prices bounced actively higher Monday morning with block prices posting a 4-cent gain, moving to $1.83 per cwt. While barrel cheese gained 3.75 cents per pound, moving to $.178 per pound at the end of the month. No trade developed in either the block or barrel market, but a combined five bids developed between the two market, with barrel cheese markets once again showing the most active bidder interest. Following a strong market pullback in dairy prices and cheese markets over the past two weeks, buyers are becoming slightly more active in order to regain longer-term price perspective, although seasonal demand is expected to be quickly wrapping up with football parties coming to an end. Although some end-user and retail buying will still develop over the next two weeks ahead of the Super Bowl Weekend, wholesale markets are now moving to longer-term spring and summer demand projections.

BUTTER:

Following last week's aggressive market retraction in the butter market, the complex remained steady with one load of butter trading Monday with prices at $2.54 per pound. The overall focus on upcoming Easter and Passover needs will be the focus of most wholesale buying over the coming weeks. But given the still-high COVID numbers and uncertainty about how early spring family gatherings will be affected in the coming months, there is still uncertainty surrounding the entire "demand side" of the butter market. The ability to build on last week's lows of $1.49 per pound, could help to spark moderate price support and buyer activity during early February, although reaching previous January highs soon may be a difficult feat to accomplish.

OUTSIDE MARKETS SUMMARY:

March corn lost 10 cents, closing at $6.26. March soybeans gained 20.5 cents, closing at $14.905, with March soybean meal up $7.70 per ton, closing at $418.90. March wheat fell 25 cents, closing at $76125. February live cattle gained $0.87, closing at $139.57. March crude oil increased $1.45, closing at $88.28 per barrel. The Dow added 406 points, trading at 35,131, while the NASDAQ gained 469 points, trading at 14,239

Monday Midday Dairy Market Summary - Dry Whey Continues to Rise

OUTSIDE MARKETS SUMMARY:

CORN:	10.25 Lower
SOYBEANS:	16 Higher
SOYBEAN MEAL:	$6.40 Higher
LIVE CATTLE:	$0.975 Higher
DOW JONES:	181 Points Higher
NASDAQ:	345 Points Higher
CRUDE OIL:	$0.21 Higher

MIDDAY MARKET UPDATE:

Cheese blocks increased 4 cents, closing at $1.8300 with no loads traded. Barrels gained 3.75 cents to $1.7800 with no loads traded. Dry whey gained a penny to 85 cents with one load traded. Dry whey futures are 0.75-1 cent higher. Butter was unchanged, remaining at $2.5400 with one load traded. Butter futures are 4 to 5 cents higher. Grade A nonfat dry milk increased 2.50 cents, closing at $1.8300 with two loads traded. Class III milk futures are 1 cent lower to 46 cents higher, while Class IV is 67 cents higher.

Global dairy market strongest since March 2021

        If there was any doubt about strength in the global dairy market, it was erased in the second Global Dairy Trade auction of 2022, its 300th trading event. The weighted average jumped 4.6%, biggest increase since Mar. 2, 2021, and followed the 0.3% rise on Jan. 4 and the 1.5% fall on Dec. 21. Traders brought 67.6 million pounds of product to market, with the average price climbing to $4,463 U.S., highest since March 2014.

All products offered were in the black, led by whole milk powder, up 5.6%, after holding steady on Jan. 4. Skim milk powder was up 5%, following a 1% increase, and butter was up 5%, after inching 0.3% higher. Anhydrous milkfat was up 0.6%, after slipping 0.7% last time. Cheddar was up 1.1% following a 4.9% jump.

        StoneX Dairy Group says the GDT 80% butterfat butter price equates to $2.7252 per pound U.S., up 12.8 cents, and compares to CME butter which closed Friday at $2.9350. GDT Cheddar, at $2.5157, was up 2.7 cents and compares to Friday’s CME block Cheddar at a real bargain $1.8075. GDT skim milk powder averaged $1.7977 per pound, up from $1.7114. Whole milk powder averaged $1.8517 per pound, up from $1.7536. CME Grade A nonfat dry milk closed Friday at $1.8150 per pound.

        StoneX’s Dustin Winston says North Asia (which includes China) buyers continue to seem hesitant, market share was up just slightly from the last event, but remain well below last  year’s levels. The Middle East picked up a large share of whole milk powder, according to Winston.

        Speaking of China, December dairy imports fell a combined 13.4% from December 2020, according to HighGround Dairy’s (HGD) analysis, but adds the caveat; “While there is a lot of red on the table, it is important to remember the data is compared to a record December in 2020 with December 2021 the second highest ever observed despite the year over year losses.”

Whole milk powder imports took the biggest hit, says HGD, down 38%. Skim milk powder was down 21.6%, and whey products were down 31.9%, a 20-month low.

Bloomberg reports that China’s hog herd has rebounded and is now at a six-year high of 449 million, so with the country no longer aggressively building their herd there has been a slowdown in whey demand for piglets, according to HGD.

Staying in the global market; EU November exports were up 1.7% from 2020, according to StoneX, which was stronger than the minus1.3% they forecast. “Exports to China are still rather weak, seeing a month to  month decrease of 23%,” says StoneX, “but other countries such as Indonesia, Nigeria, Philippines, and the U.S. are making up for that. Shipments to Indonesia rose 57% month to month and up 38% YoY. Some of the largest month to month gains were butter, yogurt, and whey protein isolates. Liquid milk exports were down from the previous month but are still strong on a YoY basis,” according to StoneX.

Dairy prices here at home strengthened, except for cheese, in the Martin Luther King holiday shortened week. The Cheddar blocks closed Friday at $1.8075 per pound, down 11.25 cents on the week, lowest since Nov. 18, 2021, 24.50 cents below its Jan. 12 peak, but 19.75 cents above a year ago when they fell 11 cents to $1.61.

The barrels, after peaking at $1.96 the previous Friday, closed this week at $1.8125, down 14.75 cents, 42 cents above a year ago, and a half-cent above the blocks. There were 4 sales of block on the week at the CME and 2 of barrel.

StoneX says it hears continued reports of tight butter and nonfat dry milk (NFDM) but not Cheese. “Cheese demand is likely strong, but we have cheese out there to meet that demand. That seems to be the narrative developing this week and spot prices are reflecting that narrative.” Traders await the December Milk Production and Cold Storage reports issued Monday, January 24.

Dairy Market News reports that milk availability varied in the Midwest. Plants running fully staffed operations say milk is available but the discounted prices of $3 and $4 under Class are no longer being offered. Still, there are plants running lighter lines, as employees are short due to COVID related absences. Cheese sales were slowing, according to some, as prices rose and “market tones are lacking the bravado of prior weeks.”

Retail cheese demand is steady to lower in the West while food service is mixed. Contacts note that rising COVID cases in the region have caused a decline in sales. Food service mozzarella sales are, reportedly, increasing as strong demand is present for pizza making, thanks to football playoffs. International cheese demand remains strong but transportation issues caused by a shortage of truck drivers and port congestion continue to cause delays. Cheesemakers say milk is available but delayed deliveries and labor shortages are causing some plants to run reduced schedules, according to DMN. Continuing port woes are likely hurting U.S. exports of cheese despite our competitive prices.

Butter was firing on all cylinders, shooting to a $2.9350 per pound finish Friday, up 21 cents, highest since Sept. 28, 2015, and $1.5325 above a year ago. 32 sales transpired on the week. Butter’s CME record is $3.1350 per pound on Sept. 25, 2015. The U.S. price, while above the GDT, is below European levels.

Midwest churners are calling for cream and have been very active since before the holidays. Freight continues to be the biggest hurdle, particularly moving cream from Idaho and the Mountain States. Butter sales have begun to settle. The holidays were very busy, but prices have caused buyer hesitancy.

Western cream demand is unchanged. Loads of cream are heading to the Midwest though some faced delays from bad weather and a shortage of truck drivers. Butter demand is strong in domestic and international markets and inventories are tight. Butter makers are running below capacity due to labor shortages and delayed deliveries of production supplies, according to DMN.

Grade A nonfat dry milk climbed to $1.85 per pound Tuesday, highest since June 12, 2014, but closed Friday at $1.8150, unchanged on the week, but 64.25 cents above a year ago, on 7 sales for the week.

Dry whey closed at another new record high, 80 cents per pound, up 3 cents on the week and 26 cents above a year ago, with 2 sales reported at the CME.

The good news keeps coming. Per-capita dairy consumption in the U.S. has been growing and is at the highest levels since 1960, according to the National Milk Producers Federation. “Exports in 2021 are on pace for a record,” says NMPF, “and now, with last year’s retail sales data available, we can see that 2020’s gains in grocery-store purchases weren’t just a rechanneling of lost school and restaurant business toward at-home consumption. By comparing 2021 with 2019, we can see that dairy’s gains are built to last, according to data from industry researcher IRI.”

Commercial disappearance remained strong in November, according to USDA data. Cheese totaled 1.18 billion pounds, up 5.2% from Nov. 2020, topping the year ago level for the second consecutive month, and the largest year over year gain of any month since April, according to HGD. HighGround says this was the strongest cheese disappearance on a volume basis of any month on record.

Butter disappearance totaled 232.1 million pounds, up 3.4%, and topped that of a year ago for the fifth consecutive month. Nonfat and skim milk powder totaled 211.3 million pounds, up 1.9%, thanks primarily to exports, though domestic demand was weaker.

HGD’s Lucas Fuess, speaking in the Jan. 24 ‘Dairy Radio Now’ broadcast, said Class III and Class IV futures curves look very good for farmer returns this year but cautioned that demand destruction could occur due to the rising prices.

“If we do get too expensive, there could be some buyers around the world that take a step back and maybe hesitate to purchase U.S. dairy,” he warned, “But in the time being, we don’t see that happening as the world remains short on protein and continues to pay up even at these purchase levels.”

Unfortunately, inflation continues to soar in the U.S. The consumer price index for all food was 287.0, up 6.3% in December from 2020, according to DMN. The dairy products index, at 235.4, was up 1.6%. Fresh whole milk was up 4.9%; cheese, down 0.6%; and butter was up 0.8%.

The February Federal order Class I base milk price was announced by the USDA at $21.64 per hundredweight, up $1.93 from January, $6.10 above February 2021, and the highest Class I price since Dec. 2014. It equates to $1.86 per gallon, up from $1.69 in January and $1.34 a year ago.

The latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC., says “Dairy margins strengthened sharply to start the year as a continued surge in milk prices combined with a mild correction in the feed markets to boost projected profitability.”

“The milk market has caught fire from a perfect storm of declining global production at the same time as demand for dairy products soar,” the MW stated. “USDA’s Foreign Agriculture Service reported record November monthly exports, with 492.1 million pounds of dairy product shipped during the month, up 17.3% from 2020 and 60 million above the previous November record set in 2017. NDM exports of 168.5 million pounds were up 24.7% from 2020, with strong demand from Mexico, the Philippines, Colombia and Vietnam pacing gains. NDM stocks have been declining after reaching a high of 349 million pounds in June, dropping to 196.5 million pounds in November,” the MW reported.

“More milk being diverted away for cheese has caused NDM production to decline since mid-2021, trailing 2020 by 54 million pounds between July and November. November’s production of 155.4 million pounds was down 2.4% from 2020. This helped support Class IV prices, with the USDA announced price in December of $19.88 per cwt. up $6.46 from 2020 and the highest announced price in seven years.”

“Class IV futures are trading above $22 per cwt. in each of the next four months,” according to the MW, “and Fonterra is now forecasting their highest pay price ever as production declines in New Zealand. Feed prices meanwhile have corrected as much-needed rain is forecast for parched areas of Argentina and Southern Brazil while the USDA’s January WASDE report was considered neutral for corn and soybeans,” the MW concluded.

Meanwhile, the National Milk Producers Federation says the Pandemic Market Volatility Assistance Program will provide up to $350 million in pandemic assistance payments to dairy farmers early this year. “This initiative will partially reimburse producers for unanticipated losses created during the COVID-19 pandemic when federal dairy food box purchases weighted heavily toward cheese, combined with a change to the Class I mover formula created the unintended consequence of significant financial losses.” 

Payments will reimburse qualified dairy farmers for 80% of the revenue difference per month on 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 actual losses on pooled milk related to price volatility. As part of the program handlers also will provide virtual or in-person education to dairy farmers. More details are posted at the NMPF website.

Dairy cow culling increased from the previous month but fell below that of a year ago in December, according to USDA’s latest Livestock Slaughter report.

An estimated 267,800 head were sent to slaughter under federal inspection in December, up 22,500 from November but 5,700 head or 2.1% below December 2020. Culling for the year totaled 3.1 million, up 42,900 or 1.4% from a year ago.

In the week ending Jan. 8, 63,000 dairy cows were sent to slaughter, up 10,600 from the previous week, but 4,500 head or 6.7% below a year ago.

The Agriculture Department’s latest Livestock, Dairy, and Poultry Outlook, issued January 19, mirrored milk price and production projections in the January 12 World Agricultural Supply and Demand Estimates report.

The Outlook also reported that the number of milk cows is projected to continue decreasing in the first part of 2022. For the first half of the year, milk cows are projected to average 9.38 million head. However, in the second half of the year, they are projected to increase to 9.385 million. The estimated number of cows for the year 2022 is 9.385 million, unchanged from last month’s projection. Average yield per cow is projected to be 24,265 pounds, unchanged from last month’s projection.

The December publication of ‘Dairy: World Markets and Trade’, by USDA’s Foreign Agricultural Service, projects that milk production for the top five major exporters will total 647.1 billion pounds in 2022, a modest increase of 0.7% from the total expected for 2021. Milk production totals for the European Union and New Zealand are expected to grow by 0.7% and 0.5%, respectively, says USDA.

Monday Morning Dairy Market Update - Traders Turn Optimistic Again

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	4 to 6 Higher
Soybean Futures:	14 to 20 Higher
Soybean Meal Futures:	$4 to $6 Higher
Wheat Futures:	5 to 8 Higher

MILK:

Class III milk futures had a strong second half of last week. Higher spot cheese prices turned the market around as traders thought the bottom might be in again and cheese buyers stepped back up to the plate. Class IV futures rebounded as well, but they had not declined as much as Class III and remain close to the highs. General fundamentals are similar to what they had been over the past weeks, but the heightened volatility will continue. Traders are wound up and ready to react over any movement of underlying spot prices. Cow numbers are below a year ago while milk per cow remains above year ago levels. This is offsetting much of the loss of cow numbers with December milk production only 0.1% below a year ago. A winter storm moved up through the Northeast, which will impact milk production, hauling, processing and delivery of dairy products to some extent. However, it is not expected to have much impact as far as loss of milk or product. USDA will release the December Agricultural Prices report Monday. The report will contain average prices for the month used in the calculation of income over feed, determining whether there will be a payment under the Dairy Margin Coverage Program.

CHEESE:

The rebound of cheese may have set the stage for further buying this week. Buyers had been holding back waiting to see how much prices would decline. Now that prices rebounded, it may bring more buyers back into the spot market in the attempt to take advantage of lower prices. This may result in sellers holding back. Buyers may need to chase the market higher, resulting in little benefit by waiting for lower prices.

BUTTER:

It was interesting to see the sharp decline of butter price last week had limited impact on Class IV futures. The increase of butter on Friday moved Class IV futures back up near the highs again. Butter production is slowly increasing but inventory remains substantially below year earlier levels. Price may regain more of the loss of last week.

Friday Closing Dairy Market Update - The End of a Volatile Week

MILK:

It certainly has been a volatile week in dairy markets as traders react significantly to swings in underlying cash. If prices are trying to find a balance between supply and demand, they certainly seem to have difficulty finding it. The question this week has been whether the markets are overdone to the downside or to the upside. Class III futures have been able to regain much of the early losses of the week. However, they have a long way to go before regaining the losses of the past two weeks. It is not the same for Class IV futures even though butter prices fell dramatically this week. Milk production has been mainly steady to slightly higher in some areas. Demand is holding well for fluid milk. Cheese demand for pizza is strong due to the playoffs and the upcoming Super Bowl. There continue to be issues with transportation and processing ability due to the continued impact from COVID. Grain prices remain strong this week as concern over the impact of a conflict in Ukraine might have an impact on international grain shipping. Ukraine exports a good portion of corn and wheat to the world market. Higher feed prices will have an impact on farm profitability.

AVERAGE CLASS III PRICES:

3 Month:	$20.64
6 Month:	$21.02
9 Month:	$21.04
12 Month:	$20.86

CHEESE:

For the week, blocks declined 1.75 cents with five loads traded. Barrels declined 7 cents with five loads traded. Dry whey price increased 4 cents with four loads traded. Dry whey continues to make new highs, providing support to Class III prices. Dry whey has not reached a level at which demand is being affected or any significant switch to alternatives as was the result in 2007. Demand for some types of cheese may slow more noticeably in the next few weeks as football will be finished for another season.

BUTTER:

The rebound of butter was nice to see Friday, but the gain was minor in relationship with the loss of the week. Butter fell 39.50 cents this week with 24 loads traded. Most of the loads were traded Friday. Grade A nonfat dry milk declined a penny with 17 loads traded during the week. Cream is becoming increasingly available for butter production. Churning activity is increasing slowly where plants are not hindered by employee shortages or trucking delays. Many plants have been able to work through that and keep production steady.

OUTSIDE MARKETS SUMMARY:

March corn gained 10.75 cents, closing at $6.36. March soybeans jumped 21.75 cents, closing at $14.70, with March soybean meal up $6.50 per ton, closing at $411.20. March wheat gained 9.25 cents, closing at $7.8625. February live cattle gained $0.87, closing at $138.70. March crude oil increased $0.21, closing at $86.82 per barrel. The Dow jumped 565 points, closing at 34,725, while the NASDAQ gained 418 points, closing at 13,771.

Friday Midday Dairy Market Summary - Spot Dairy Prices Gain

OUTSIDE MARKETS SUMMARY:

CORN:	9 Higher
SOYBEANS:	25 Higher
SOYBEAN MEAL:	$6.30 Higher
LIVE CATTLE:	$0.70 Higher
DOW JONES:	190 Points Higher
NASDAQ:	223 Points Higher
CRUDE OIL:	$0.56 Higher

MIDDAY MARKET UPDATE:

Buyers stepped up Friday after a period of weakness wanting to take advantage of lower prices. The surprise was the strength in all categories. Block cheese price increased 6 cents, closing at $1.79 with one load traded. There were no unfilled bids or uncovered offers remaining at the close. Barrel price increased 6.50 cents, ending at $1.7425 with no loads traded. There were unfilled bids for three loads remaining at the close. Butter price increased 5 cents, closing at $2.54 with 19 loads traded. There were two unfilled bids and one uncovered offer remaining at the close. Grade A nonfat dry milk price bounced 3 cents, settling at $1.8050 with seven loads traded. Dry whey price increased a penny setting another new high of 84 cents. Class III futures are steady to 62 cents higher with March posting the greatest strength. Class IV futures are 14 to 63 cents higher. Butter futures are 4.82 to 7.50 cents higher. March through June contracts are limit up. Dry whey futures are 0.45 to 1.25 cents higher.

Friday Morning Dairy Market Update - Overnight Activity Indicates Further Strength

OPENING CALLS:

Class III Milk Futures:	10 to 15 Higher
Class IV Milk Futures:	Mixed
Butter Futures:	Steady to 1 Lower

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 4 Higher
Soybean Futures:	5 to 10 Higher
Soybean Meal Futures:	$2 to $4 Higher
Wheat Futures:	4 to 6 Higher

MILK:

The rebound of milk futures was nice to see Thursday with follow through taking place overnight. Traders were quick to react to any strength or stability in the spot market as there had been disbelief that prices fell as much as they had. The anticipation had been, and still is, for tighter milk supply over the next few months or even much of the year. This idea stems from the decline of cow numbers that has been evident since last Fall and the probable continuation of that trend. High feed prices and other increasing costs continue to cut into profitability if there in any depending on the farm. So far, overall milk production has been holding well as the loss of cow numbers is being made up by production per cow leaving milk production down 0.1% below a year ago. Milk futures are expected to remain higher into the spot trading period.

CHEESE:

There is closer spread between blocks and barrels than there generally has been. However, this does not indicate market strength or weakness. Cheese makers indicate that a closer spread is more desirable keeping production steady for both categories. Dry whey continues to lead higher with another new high again Thursday.

BUTTER:

There is no way of predicting the direction of butter Friday. A lower bid and higher offer Thursday left price unchanged. Sellers believe the price is too cheap and buyers think it is too expensive. This could result in a standoff for a time as buyers and sellers try to find value in the current supply and demand environment.

Thursday Closing Dairy Market Update - Futures Post Strong Rebound

MILK:

Milk futures made a nice rebound despite only a minimal increase of barrel cheese. The fact that there was an increase of barrels and dry whey was enough to trigger strong buying interest as traders exited sold positions. It really did not indicate a change in trend or that a bottom was again established, but traders did not think prices should have declined as much as they had, so they are wound up like a spring. Any indication of strength or weakness will be overexaggerated. This should not be surprising, as it is the nature of the market. Many farms have indicated that even with increased culling and balancing the ration to reduce cost, it has resulted in increased production. Reducing crowding sometimes results in increased production. Balancing rations sometimes results in finding alternatives that work better in the ration. Spot milk supply has not changed much in the Midwest with supplies remaining available but still with slight discounts. Milk continues to move around between plants to either handle extra milk due to employee shortages or to fill plants that can process more and desire to run on full schedules.

AVERAGE CLASS III PRICES:

3 Month:	$20.30
6 Month:	$20.66
9 Month:	$20.71
12 Month:	$20.57

CHEESE:

Spot cheese markets did not provide much direction Thursday, but traders reacted significantly in milk futures. Barrel buyers were a little more aggressive, but block price was uncertain. There were bids below the market with limited interest in pushing them higher. The offer was higher with no interest in lowering. Demand for cheese at the retail level is termed as steady with demand from the food service industry weaker. Demand for cheese from pizza manufacturers is strong for the playoffs and the Super Bowl..

BUTTER:

Spot butter trading was anticipated to be volatile, but nothing exciting came out of it, as price remained unchanged. Lower bids were placed with a substantially higher offer posted with little interest in coming together to do any business. Bulk butter continues to remain tight. Cream is available but not as available as it had been during the holidays.

OUTSIDE MARKETS SUMMARY:

March corn declined 1.75 cents, closing at $6.2525. March soybeans gained 8.25 cents, closing at $14.4825, with March soybean meal up $4.20 per ton, closing at $404.70. March wheat fell 18 cents, ending at $7.77. February live cattle slipped $0.22, closing at $137.82. March crude oil declined $0.74, closing at $86.61 per barrel. The Dow slipped 7 points, while the NASDAQ fell 189 points.

Thursday Midday Dairy Market Summary - Class III Dairy Futures Bounce

OUTSIDE MARKETS SUMMARY:

CORN:	4 Lower
SOYBEANS:	10 Higher
SOYBEAN MEAL:	$4.70 Higher
LIVE CATTLE:	$0.37 Lower
DOW JONES:	74 Points Lower
NASDAQ:	156 Points Lower
CRUDE OIL:	$0.38 Lower

MIDDAY MARKET UPDATE:

Block cheese price remained unchanged at $1.73 with no loads traded. Barrel cheese price increased 1.50 cents, closing at $1.6775 with no loads traded. Dry whey price increased a penny to 83 cents with one load traded. Bids were placed for blocks but were placed below the market with buyers not very aggressive. Barrel buyers were more aggressive as they wanted to take advantage of the lower price to purchase product. Butter price remained unchanged at $2.49 with a low bid and a higher offer placed and no interest in coming together. The buyer thought price was still too high, placing their bid 7 cents lower while the seller thought price had fallen too far, placing an offer 20 cents above the market. Grade A nonfat dry milk price slipped 0.25 cent ending at $1.7750 with 3 loads traded. Class III futures are unchanged to 39 cents higher. Class IV futures are 33 cents lower to 20 cents higher. Butter futures are 2.00 cents lower to 1.47 cents higher. Dry whey futures are 0.25 to 1.55 cents higher.

Fluid Milk and Cream - Western U.S. Report 4

In California milk production is steady to higher this week. Contacts report that     transportation delays and staffing shortages are causing some unexpected down time within     processing facilities in the state. Demand for Class I and Class II are steady. 

Milk production in Arizona is unchanged. Supplies of milk continue to be available for processors in the state to run busy schedules. Plant managers say that the shortage of truck drivers in the region is causing delays to the deliveries of loads. Class I demand is trending higher.
     

Farm level milk production is unchanged in New Mexico. Staffing shortages and a shortage of     truck drivers have been cited as causing delays to load deliveries. Steady demand is present     for Class I. Demand for Class II is trending lower this week. 

Contacts in the Pacific Northwest say that milk production is trending higher. Bad weather earlier in January had, reportedly, caused production to drop below some producers’ forecasted levels. Plant managers in the area continue to cite labor shortages as contributing to reduced production schedules. Steady demand is present across all Classes. 

Milk production in the mountain states of Idaho, Utah, and Colorado is steady to higher. Producers in the area say that supplies of milk are available, but that some production schedules have been reduced due to delayed deliveries of milk. Demand is unchanged across all Classes. 

In the West, contracts for condensed skim are steady. Cream inventories are available to meet regional production needs. Demand for cream is steady; some report continued interest from purchasers in the Midwest. A shortage of truck drivers, in the region, is causing delays to the deliveries of loads. 

Western cream multiples contracted this week, as the bottom moved higher and the top slid lower.

     Western U.S., F.O.B. Cream
     Multiples Range - All Classes:               1.0500 - 1.2600

Thursday Morning Dairy Market Update - Markets Search for Support

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	4 to 10 Lower
Butter Futures:	2 to 4 Lower

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Mixed
Soybean Futures:	3 to 5 Higher
Soybean Meal Futures:	Steady to $1 Higher
Wheat Futures:	2 to 4 Lower

MILK:

Class III milk futures have taken a beating over the past two weeks. There has been no support from underlying spot cheese as buyers have moved to the sidelines. Class IV futures have fared better but may come under more pressure now that butter price has fallen. Just like it was not likely futures would rise forever, it is not likely they will fall forever. The market is trying to find a balance between supply and demand and price. Overall milk production is holding well with milk per cow above a year ago.

A team called the Dairy Exports Working Group (DEWG) stated that they were going to begin addressing the supply chain disruptions that are affecting dairy exports. This group is made of some members of the Port of Los Angeles, the International Dairy foods Association and the container shipping company CMA CGM. The DEWG plans on finding out how to collect and streamline dairy exports, increase rail availability, and implement a "fast lane concept" for vessels that have full or empty cargo containers. This is may not only be a help to the dairy industry but all who import and export products. This will not be an immediate solution but will take time to sort out and implement.

CHEESE:

Cheese is being produced and product is available. Buyers have sufficient on hand for the time being leaving purchases on an as-needed basis. There are also some orders that have been placed and are slowly being filled for the second quarter already. This may reduce the aggressive purchasing over a short period of time as we had seen during December and the first half of January. Buyers are looking ahead to compensate for production and shipping delays.

BUTTER:

The rug was pulled out from under the market Wednesday. There is no way of telling whether the decline was overdone or if it was the beginning of yet further weakness. Buyers may hold back in anticipation of lower price before stepping back into the market again. It will be interesting to see whether nonfat dry milk price will follow a similar pattern. Overnight butter futures suggest further losses Thursday.

Wednesday Closing Dairy Market Update - Cattle Slaughter Increased

MILK:

Dairy Market News reports milk production in the Northeast is steady to increasing. This is being welcomed by manufacturing plants as demand for cheese remains strong. Milk is being picked up but there remain some difficulties as far as handling all the milk due to employees being absent. Staffing should be improving as it seems the country is over the impact of COVID infections that resulted from the holiday period. Some milk is being shifted to other plants depending on the amount of milk a plant can handle. Spot cheese and butter prices are falling, which is leaving some plants holding higher-priced inventory and buyers sitting on higher-priced product after purchasing aggressively in December and the first half of January. It is hard to believe that February Class III futures reached a high of $22.95 two weeks ago and are now $3.50 lower with futures back down to where they were just before Christmas. Dairy cattle slaughter in December totaled 267,800 head. This was an increase of 22,500 head from November but 5,700 head less than December 2020. This is the third highest slaughter of this year.

AVERAGE CLASS III PRICES:

3 Month:	$19.99
6 Month:	$20.30
9 Month:	$20.39
12 Month:	$20.32

CHEESE:

Block cheese price has declined 7.75 cents so far this week with barrels down 15 cents. Even though barrels have fallen 30 cents from their highs while blocks are down 33.50 cents, buyers still show little interest in buying the break. There is the idea that the market may be overdone to the downside, but it seems that it likely was overdone to the upside, and now the market is trying to discover where the true value is based on supply and demand. Cheese plants remain busy as demand remains steady.

BUTTER:

The huge decline of butter Wednesday was a surprise. No one stepped in aggressively to purchase the break. This weakness may keep buyers on the sidelines. There are some plants and buyers holding a lot of higher-priced inventory right now. There was an idea that downside price risk would be minimal. Domestic demand for butter is steady but has slowed a little. International demand remains strong.

OUTSIDE MARKETS SUMMARY:

March corn gained 7 cents, closing at $6.27. March soybeans jumped 32.75 cents, closing at $14.40 with March soybean meal up $8.50 per ton, closing at $400.50. March wheat fell 23 cents, ending at $7.95. February live cattle gained $0.95, closing at $138.05. March crude oil gained $1.75, closing at $87.35 per barrel. The Dow declined 130 points, closing at 34,168, while the NASDAQ gained 3 points, ending at 13,542.

Wednesday Midday Dairy Market Summary - Butter Falls Apart

OUTSIDE MARKETS SUMMARY:

CORN:	5 Higher
SOYBEANS:	30 Higher
SOYBEAN MEAL:	$7.10 Higher
LIVE CATTLE:	$1.07 Higher
DOW JONES:	299 Points Higher
NASDAQ:	348 Points Higher
CRUDE OIL:	$1.80 Higher

MIDDAY MARKET UPDATE:

Block cheese price declined 3 cents, closing at $1.73 with one load traded. Barrel cheese price declined 4.25 cents, closing at $1.6625 with one load traded. There were no unfilled bids or uncovered offers remaining at the close. This kept pressure on some Class III futures and increased some of the pressure on others. Fortunately, dry whey price held steady at 82 cents with no loads traded. Butter was the surprise with price plummeting 21 cents, closing at $2.29 with three loads traded. This moves price back to the lowest level since Jan. 3. Price has fallen 44.50 cents so far this week. The last time we had a move of this magnitude was June 4, 2022, when price increased 29 cents in one day. The decline Wednesday was the largest one-day decline since Dec. 10, 2015, when price fell 49 cents in one day. A void developed under the market and once buyers were satisfied, there was no one to aggressively take up the baton. Grade A nonfat dry milk price declined 2.50 cents, closing at $1.7775 with three loads. Class III futures are 60 cents lower to 13 cents higher with March taking the brunt of it while gains are seen in 2023 contracts. Class IV futures are steady to 54 cents lower. Butter futures are 0.52 cent to 12.00 cents lower with expanded limits in place Wednesday. Dry whey futures are steady to 0.25 cent higher.

Wednesday Morning Dairy Market Update - Further Weakness Evident Overnight

OPENING CALLS:

Class III Milk Futures:	5 to 15 Lower
Class IV Milk Futures:	4 to 10 Lower
Butter Futures:	2 to 3 Lower

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 4 Lower
Soybean Futures:	Mixed
Soybean Meal Futures:	Steady to $1 Lower
Wheat Futures:	10 to 15 Lower

MILK:

Milk futures are under pressure and will remain that way as long as underlying cash prices show weakness. Milk production is steady even though cow numbers continue to decrease. However, the production report for December seems to indicate that culling might be slowing with production per cow increasing. If milk prices weaken too much over the next few months, cow numbers will be less likely to increase. The addition of cows to existing facilities and expansions will be limited. Farms are doing a balancing act as the winter months unfold. Costs are high and there is difficulty getting certain goods, resulting in finding some alternatives right now. This is not going to change anytime soon as a report on Tuesday indicated around 70% of the nation's goods are moved with semi-trucks. At the present time, it is estimated the trucking industry has a shortage of 80,000 truck drivers. This affects the farming industry receiving goods as well as affecting the ability to deliver dairy products on schedule. This makes products more expensive.

CHEESE:

Buyers have purchased sufficient cheese for expected demand earlier and have limited interest in purchasing now. Buying is taking place on a limited bases on the spot market as cheese is available in the country, allowing buyers to already purchase for second quarter orders or expected demand. End users are ordering ahead of time to receive supplies when they need it. This changes the seasonality of the market.

BUTTER:

There is concern the market may have reached a top as buyers have increased ownership sufficiently to slow purchases. World price remains high with strong demand with the U.S. price in line with world price. Increased churning activity will provide more butter for the domestic market over time.

Tuesday Closing Dairy Market Update - Milk Futures Suffer Significant Losses

MILK:

Milk futures showed quite a bit of pressure due to the weakness of underlying cash. Some contracts hit limit down, but no contracts remained there. Futures are falling as fast or faster than they increased. It was surprising futures went as high as they had as quickly as they had, and now it is surprising the opposite is true. Buyers are not really interested in buying the break. The milk production report Monday was neutral to the market, but it did show that the production may be stabilizing after the period of decline. Fourth-quarter milk production was down 0.1% with annual milk production up 1.4%. There were 14 of the top 24 states showing declines in milk production for the month. The largest decline took place in New Mexico with a loss of 15.0%. Washington declined 7.3%. Both Florida and Illinois declined 5.2%. The rest of the states showed declines of less than 4.0%. The state with the largest increase was South Dakota with a gain of 20.0% over the previous year. Texas gained 3.4%. Georgia increased 2.6% and California gained 2.2%. The rest of the states with increases showed gains of less than 2.0%.

AVERAGE CLASS III PRICES:

3 Month:	$20.33
6 Month:	$20.02
9 Month:	$20.64
12 Month:	$20.53

CHEESE:

Buyers of cheese are content to sit on the sidelines for now. They purchased aggressively and ahead of time to make sure they had sufficient supply on hand as well as to make sure they had product when needed due to production and delivery problems. Now they do not need to purchase as aggressively and are purchasing as they need to fill orders. There are reports that cheese orders have slowed as well.

BUTTER:

One has to wonder whether the top is in for butter price. It could follow a similar pattern as cheese. Buyers purchased ahead of time and are now comfortable with current supplies. Churning is increasing as cream is more available. It will take time before inventory moves back up to where it had been earlier last year.

OUTSIDE MARKETS SUMMARY:

March corn slipped a penny, closing at $6.20. March soybeans gained 4.25 cents, ending at $14.0725, with March soybean meal down $1.90 per ton, closing at $392. March wheat jumped 17.50 cents, ending at $8.18. February live cattle gained $0.77, ending at $137.10. March crude oil jumped $2.29 per barrel, closing at $85.60. The Dow declined 67 points, ending at 34,298, while the NASDAQ declined 316 points, closing at 13,539.

Tuesday Midday Dairy Market Update - Cheese and Butter Continue to Decline

OUTSIDE MARKETS SUMMARY:

CORN:	3 Higher
SOYBEANS:	4 Higher
SOYBEAN MEAL:	$1.70 Lower
LIVE CATTLE:	$0.12 Higher
DOW JONES:	197 Points Lower
NASDAQ:	290 Points Lower
CRUDE OIL:	$2.01 Higher

MIDDAY MARKET UPDATE:

Block cheese price declined 3.50 cents, closing at $1.76 with two loads traded. Barrels cheese price declined 7 cents, closing at $1.7050 with one load traded. The continued weakness is somewhat surprising with buyers not very interested in buying the break. The December Cold Storage report likely moved buyers to the sidelines, as they can see there are plentiful supplies of cheese. Some reports of slowing demand along with increasing inventory does not bode well for the market in the near term. Butter price fell 14.75 cents closing at $2.70 with two loads traded. There were no unfilled bids at the close of spot trading. Grade A nonfat dry milk price declined a penny, settling at $1.8025 with two loads traded. Dry whey price was the only bright spot with price gaining 2 cents closing at 82 cents and another new record high. Class III futures are 2 to 59 cents lower. Class IV futures are 2 to 53 cents lower. Butter futures are 1.37 to 7.50 cents lower. Dry whey futures are 0.75 to 2.00 cents higher.

Tuesday Morning Dairy Market Update - Traders to React to Reports

OPENING CALLS:

Class III Milk Futures:	5 to 10 Lower
Class IV Milk Futures:	4 to 8 Lower
Butter Futures:	1 to 2 Lower

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Mixed
Soybean Futures:	Mixed
Soybean Meal Futures:	$2 to $3 Lower
Wheat Futures:	7 to 11 Higher

MILK:

Class III milk futures retraced substantially over the past week, following cheese prices lower. Milk prices still look good but not as good as they had. Traders feel there is limited downside to the market and that this is a price correction. However, the weakness of cheese prices has been a little more than anticipated. Buyers have not yet stepped up to take advantage of the price weakness to increase ownership for later demand. The milk production report was neutral but does give some indication that cow numbers and milk production might be stabilizing. This may alleviate some of the concern that milk supply would continue to tighten as the year progressed.

CHEESE:

The December Cold Storage report indicted that there is plenty of cheese available. This may temper some of the aggressive buying that we have seen over the past two months. Demand for fresh cheddar may keep price supported on the daily spot market. However, buyers may not be interested in building more inventory but rather purchase on an as-needed basis.

BUTTER:

Butter inventory continued to decline in December as expected. The fact that supply is 27% less than a year ago, should continue to provide support to the market. However, even though supply is lower, production is increasing. There is sufficient supply to supplement fresh production to meet demand. The decline of price Monday was a surprise. If the pattern holds true, buyers should step back in and take advantage of the price decline to increase ownership

Monday Closing Dairy Market Update - Reports Were Neutral to Bearish

MILK:

Milk production in the top 24 states for December was down 6 million pounds from a year ago, which was basically unchanged on a percentage basis. USDA did not make a large revision to November's production, revising it higher by only 0.1%. Production per cow averaged 2,027 pounds, 8 pounds above December 2020. Cow numbers declined by 8,000 head from November and are 42,000 head less than a year earlier. Milk production in the U.S. was down 0.1% from December 2020, totaling 18.825 billion pounds. Production per cow increased 11 pounds above a year ago at 2,008 pounds. Cow numbers declined 7,000 head, totaling 9.375 million head. The rate of decline of cow numbers slowed from what has been taking place over the past four months. Production per cow is making up for much of the loss of cow numbers. Milk production for the last quarter of the year was down 0.1% from the same period a year ago. Milk production for the year was 1.4% higher than 2020.

AVERAGE CLASS III PRICES:

3 Month:	$20.77
6 Month:	$20.96
9 Month:	$20.90
12 Month:	$20.72

CHEESE:

The December Cold Storage report was rather bearish for cheese with inventory growth for the month. American cheese inventory increased 11.6 million pounds with inventory at the end of the year 6% higher than 2020. American cheese inventory increased six of the past 12 months with the increases very erratic throughout the year. Inventory generally declines during the second half of the year. This year, stocks increased from the previous month in July, August, September and December. Inventory remained higher than the previous year for 11 months of the year. Swiss cheese inventory increased 1.2 million pounds from November and closed the year 10% above 2020. Other cheese inventory increased 10.0 million pounds, totaling 576.8 million pounds, and basically unchanged from a year earlier. Total cheese inventory reached 1.445 billion pounds, up 22.8 million pounds from November and 3% higher than a year ago.

BUTTER:

December butter inventory declined 11.4 million pounds to a total of 199.0 million pounds. This was 27% below December 2020. Inventory declined steadily during the last half of the year with stocks ending the year slightly higher than December 2019. This should provide support to price unless buyers have sufficient supply for the time being.

OUTSIDE MARKETS SUMMARY:

March corn closed 4.75 cents higher at $6.21. March soybeans declined 11.25 cents, ending at $14.03, with March soybean meal up $1.20 per ton, closing at $393.90. March wheat jumped 20.50 cents, closing at $8.0050. February live cattle fell $1.60, closing at $136.32. March crude oil declined $1.83, ending at $83.31 per barrel. The Dow made a huge reversal, closing 99 points higher at 34,365, while the NASDAQ also made a huge reversal, closing 86 points higher at 13,855.

December Milk Production down slightly

December Milk Production down slightly 

Milk production in the 24 major States during December totaled 18.0 billion pounds, down slightly from December 2020. November revised production, at 17.2 billion pounds, was down 0.2 percent from November 2020. The November revision represented a decrease of 16 million pounds or 0.1 percent from last month's preliminary production estimate. Production per cow in the 24 major States averaged 2,027 pounds for December, 8 pounds above December 2020. The number of milk cows on farms in the 24 major States was 8.88 million head, 42,000 head less than December 2020, and 8,000 head less than November 2021. 

October-December Milk Production down 0.1 Percent 

Milk production in the United States during the October - December quarter totaled 55.5 billion pounds, down 0.1 percent from the October - December quarter of the prior year. The average number of milk cows in the United States during the quarter was 9.38 million head, 67,000 head less than the July - September quarter, and 46,000 head less than the same period last year.

Monday Midday Dairy Market Summary - Spot Prices Decline

OUTSIDE MARKETS SUMMARY:

CORN:	2 Higher
SOYBEANS:	15 Lower
SOYBEAN MEAL:	$0.90 Lower
LIVE CATTLE:	$2.02 Lower
DOW JONES:	672 Points Lower
NASDAQ:	342 Points Lower
CRUDE OIL:	$1.79 Lower

MIDDAY MARKET UPDATE:

Block cheese price declined 1.25 cents, closing at $1.7950 with one load traded. Price initially gained 1.75 cents before a load was traded. After that load was traded, two offers pushed price lower into the close with no further buyer interest. Barrel cheese price declined 3.75 cents, closing at $1.7750 with three loads traded. Class III futures initially held but succumbed to more aggressive selling after spot trading. Class III futures are 27 cents lower to 15 cents higher. Contracts through August are under pressure while September and later contract are steady to higher. Butter price fell 8.75 cents, closing at $2.8475 with no loads traded. Butter may follow the direction of cheese. Grade A nonfat dry milk price slipped 0.25 cent, closing at $1.8125 with two loads traded. Dry whey price remained unchanged at 80 cents. Class IV futures are 23 cents lower to 20 cents higher. Butter futures are 2.95 cents lower to 1.75 cents higher. Dry whey futures are unchanged for the day. USDA will release the December Milk Production report. I estimate milk production to show a decline of 0.6% from a year ago with cow number down 6,000 head from November. The December Cold Storage report will also be released at the same time.