Late Friday morning Class III futures portended a February price at $20.45; March, $21.31; April, $21.39; May, $21.30; and June at $21.22.
The January Class IV price is $23.09 per cwt., up $3.21 from December, $9.34 above a year ago, and the highest Class IV price since August 2014.
International dairy prices remain strong. The Feb. 1 Global Dairy Trade auction saw the weighted average jump 4.1%, following the 4.6% increase on Jan. 18. The average metric ton price climbed to $4,630 U.S., up from $4,463 and the highest in eight years.
All products offered were again in the black, led by buttermilk powder, up 9.7%. It did not trade in the last event. Whole milk powder was up 5.8%, following a 5.6% rise last time, and skim milk powder was up 2.1%, after jumping 5%. Butter was up 3.3%, after a 5% boost, and anhydrous milkfat moved 1.4% higher, after a 0.6% advance. GDT Cheddar was up 2.4%, after a 1.1% gain last time.
StoneX Dairy Group says the GDT 80% butterfat butter price equates to $2.8140 per pound U.S., up 8.9 cents after jumping 12.8 cents on Jan. 18, and compares to CME butter which closed Friday, a steal at $2.50. GDT Cheddar, at $2.5783, was up 6.3 cents and compares to Friday’s CME block Cheddar at a bargain $1.90. GDT skim milk powder averaged $1.8375 per pound, up from $1.7977. Whole milk powder averaged $1.9614 per pound, up from $1.8517. CME Grade A nonfat dry milk closed Friday at $1.8325 per pound.
Shedding some light on what is going on in the global market, the Daily Dairy Report’s Monica Ganley wrote in the Jan. 28 Milk Producers Council newsletter; “European (milk) production is trailing prior year levels with some of the greatest losses seen in major dairy nations like Germany and France. In the Southern Hemisphere, the New Zealand milk production season continues to disappoint with December output down 5% compared to prior year. Argentina is still posting strong production figures, but the volumes are modest and logistical challenges are preventing the resulting dairy products from making a dent in global demand. As such, global milk supplies are lacking and are generally expected to support prices at higher than historical levels over the coming months.”
December milk equivalent exports out of New Zealand were down 0.1% from December 2020, according to StoneX, and a little weaker than the 0.8% increase they were expecting. “It’s estimated that stocks have been pulled down 4-5% compared to the previous year, but stocks weren’t pulled down quite as much as was expected. Shipments to China being down 14% year over year is a little concerning, but lines up with the weak offcial import numbers for China in December. We’ll see if that bounces back for January,” StoneX concludes.
Dairy traders in Chicago pretty much ignored the GDT and CME prices start February mixed, as a massive winter storm hit the nation’s mid-section covering nearly 2,000 miles with freezing temperatures and heavy snow. Traders were also anticipating the December Dairy Products report issued Friday afternoon.
The Cheddar blocks recovered the previous week’s losses and then some and ended three weeks of decline, closing Friday at $1.90 per pound, up 11 cents on the week, highest since Jan. 14, and 26 cents above a year ago.
The barrels finished at $1.8950, 15.25 cents higher on the week, highest since Jan. 19, 39.50 cents above a year ago, and a half-cent below the blocks. There was 1 sale of block reported for the week at the CME and 7 of barrel.
Midwest cheesemakers continue to tell Dairy Market News that milk availability is generally balanced but cheese plant downtime due to logistic and staffing shortages kept discounts on hand. Prices at report time ranged from Class to $2 under. Supplies are stalled in shipping and plants are thus prone to downtime. Cheese demand remains slower than it was in late fall, at least partially due to market price downward pressure, but markets experienced some bullish correction this week. Inventories have grown but are not at concerning levels.
Steady demand for cheese remains in western retail markets while food service demand has declined, says DMN. Many restaurants in the region reportedly remain closed due to COVID concerns and labor shortages. International demand remains strong but exports continue to face delays due to port congestion but alternative transportation is being sought. Delays also continue due to a shortage of truck drivers. Stocks are available and cheese output is steady though some plants are running below capacity due to labor shortages.
After plunging 39.50 cents the previous week, the butter fell to $2.4525 per pound Wednesday, lowest since Dec. 30, but closed Friday at $2.50, down 4 cents on the week and $1.2325 above a year ago. 18 sales were reported.
Cream is readily available in the Midwest, according to DMN, and a lot of it is moving to churns. Plant managers suggest sales in retail and food service have slowed but is giving them opportunity to build spring holiday inventory. Market tones are undecided despite the bullish Cold Storage report, says DMN, and double digit leaps and falls in the latter half of January have buyers hesitant.
Western cream demand is unchanged but labor shortages are causing some churns to run below capacity. Strong demand for butter is present in domestic and international markets. Port congestion and a shortage of truck drivers continues to cause delays. Butter output is steady to lower as labor shortages and delayed deliveries are causing reduced schedules, says DMN.
Grade A nonfat dry milk fell to $1.7975 per pound Wednesday, then reversed gears and closed Friday at $1.8325, up 2.75 cents on the week and 71.25 cents above a year ago, with 28 sales reported.
Dry whey kept pushing its record higher, finishing Friday at 85.75 cents per pound, up 1.75 cents on the week and 32.25 cents above a year ago, on 2 sales.
StoneX says high protein whey demand has improved as gyms closings aren’t a concern anymore and people look to get back into shape.
The January 28 Dairy and Food Market Analyst gave some insight on why butter prices crashed the last week of January, stating; “Domestic foodservice sales have taken a hit from the latest surge in (Omicron) cases. According to technology firm “Open Table,” restaurant traffic fell to a nearly nine-month low during the second week of January, down 30% from pre-pandemic levels. Since then, sales have only recovered modestly with the latest weekly data showing restaurant traffic down 23%, a level comparable to April 2021.”
Editor and analyst Matt Gould also reported that there was much talk at the IDFA’s “Dairy Forum” about the supply chain shortages affecting manufacturers. From minor ingredients, to trucking, to packaging, to labor, manufacturers are managing through extreme supply chain challenges,” Gould said.
Port congestion is another continuing issue and prompted Agriculture Secretary Tom Vilsack to announce a new program to help deal with it. The initiative was addressed at a webinar of agriculture industry and policy leaders hosted by the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC).
The program was launched in partnership with the Port of Oakland, according to a joint press release, and will “set up a new “pop-up” site at the port dedicated to easing the loading of empty containers with agricultural exports. The new site will also have a dedicated gate with the ability to pre-cool refrigerated shipping containers in order to reduce bottlenecks at the main entrance to the port. The new arrangement should be available beginning in March.
“Congestion in and around U.S. ports is one of a series of export supply chain challenges undercutting dairy exporters’ ability to reliably meet the needs of overseas customers for high-quality U.S. dairy products,” said USDEC’s Krysta Harden. “This new partnership should help alleviate some of those challenges.”
Meanwhile, legislation was introduced in the Senate this week that would also help. Sponsored by Senators Amy Klobuchar (D-MN) and John Thune (R-SD), the Ocean Shipping Reform Act (S. 3580) is the Senate response to the House version (HR 4996) passed by a wide bipartisan vote (364 - 60) in December.
The International Dairy Foods Association also gave the legislation a thumbs-up and touted a USDA final rule that IDFA says will “maintain low-fat, flavored milk and other needed flexibilities in USDA child nutrition program meal requirements through the 2023-2024 school year.”
“Today’s announcement clears up several years of confusion and takes a positive step toward restoring more varieties of milk to the school meals program. The final rule allows schools to continue to serve milk that students prefer to drink while remaining consistent with the Dietary Guidelines. The rule gives clarity to school meals professionals and food makers as they plan ahead amid supply chain challenges, and it will improve students’ access to dairy products, particularly milk and its 13 essential nutrients, and cheese as a nutrient-rich protein alternate,” according to the IDFA. NMPF also praised the final rule.
CWT member cooperatives kicked off 2022 this week by securing 106 contracts for 15 million pounds of American-type cheeses, 2.0 million pounds of whole milk powder and 1.7 million pounds of cream cheese. These products will go customers in Asia, Central America, the Caribbean, Middle East-North Africa and South America, and will be shipped now through July 2022, according to CWT.
A higher December All Milk Price offset higher corn, soybean, and hay prices to nudge the December milk feed ratio higher for the fourth month in a row. The USDA’s latest Ag Prices report has the ratio at 1.98, up from 1.94 in November, but well below last year’s 2.17.
The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk would purchase 1.98 pounds of dairy feed of that blend.
The U.S. All Milk Price averaged $21.80 per cwt., up $1.00 from November and $3.50 above December 2020.
The December national average corn price added another 20 cents, jumping to $5.47 per bushel and is $1.50 per bushel above December 2020.
Soybeans averaged $12.50 per bushel, up another 30 cents from November and $1.90 per bushel above December 2020.
Alfalfa hay averaged $213 per ton, up $3 from November and $47 per ton above a year ago.
Looking at the cow side of the ledger; the December cull price for beef and dairy combined averaged $69.10 per cwt., down a dime from November, $11 above December 2020, but is $2.50 below the 2011 base average of $71.60 per cwt.
Dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Missouri, stated in the Feb.7 Dairy Radio Now broadcast there will be no Dairy Margin Coverage payment for December, ending 12 straight months. FSA announced the December 2021 milk margin above feed costs at $9.53 per cwt., he said, up 39 cents from November, 99 cents above December 2020, and just 3 cents above the maximum coverage. This is the first time since November 2020 that producers with coverage at $9.50 per cwt, will not receive a payment on eligible production,” according to Brooks.
Based on his Feb. 2 estimates, Brooks does not see a payment the rest of 2022, adding the caveat that markets have a tendency to change quickly so the program is still one that producers need to consider and make sure they’re active in. He said the 2022 fundamentals look like there will be a small cushion between the rising costs producers are seeing but more than likely, it won’t be enough for some producers, as rising interest rates on operating loans come into play.
He doesn’t see a big incentive for producers to add cows however he concluded; “At any level, somebody is making money milking cows and somebody’s losing money, so there probably will be some producers who will add cows but in general, if they do, it’s probably not going to have a massive impact on increasing our herd size here this year.”
In the week ending Jan. 22, 62,500 dairy cows were sent to slaughter, up 400 from the previous week, but 5,400 head or 7.95% below a year ago.
The Consortium for Common Food Names (CCFN) requested that the U.S. government “further its efforts to proactively secure ‘firm and explicit commitments’ from trading partners to preserve the rights of common name users and strongly combat the EU’s misuse of geographical indications (GIs) to monopolize generic food and beverage terms.”
The request comes in comments filed this week by CCFN with the U.S. Trade Representative (USTR) as part of the agency’s annual Special 301 Report on Intellectual Property Protections comment process. More than 160 Members of Congress have already called on USTR to take similar steps.
“The EU’s deliberate campaign of misusing the GI system to confiscate common food and beverage names is nothing more than a thinly veiled attempt to stifle legitimate competition and cut American producers out of the EU and third country markets,” said Jaime Castaneda, CCFN Executive Director.
