Thursday Closing Dairy Market Update - February All-Milk Price Was $24.70

MILK

Milk futures are in the process of regaining the losses of the previous week. It will be up to underlying cash to see whether the losses will be fully regained. USDA released the February Agricultural Prices report Thursday, showing the average corn price for the month at $6.10 per bushel, up $0.53 from January and up $1.35 from February 2021. The premium/supreme hay price was $266 per ton, up $4 per ton from January and up $55 per ton from a year ago. The all-milk price increased to $24.70, up $0.50 from January and up $7.60 from a year ago. I was not able to access the soybean meal price through the central Illinois processor report. The report has been moved and was inaccessible. I will follow up with the soybean meal price and the income-over-feed price for the month of February in my commentary Friday. USDA released its estimates for planted acreage Thursday. It estimates corn acres at 89.5 million, down 3.9 million acres from last year. Soybean acres are estimated at 91.0 million, an increase of 3.8 million acres from last year. This pushed new-crop corn futures 27.75 cents higher with new-crop soybean futures down 49.75 cents.

AVERAGE CLASS III PRICES

3 Month:	$24.14
6 Month:	$23.98
9 Month:	$23.63
12 Month:	$22.11

CHEESE

The rebound of cheese renewed the bullishness of the market. Traders were quick to jump in to buy futures in the anticipation of yet higher prices. It is uncertain whether cheese prices will regain what they had lost recently. Demand is good and manufacturers are busy processing increasing milk receipts. Higher corn prices may continue to support milk prices as well as potentially keep culling higher than usual and milk supply from growing.

BUTTER

International butter demand is strong, keeping plants busy producing product for export shipments. Buyer demand is good for obtaining supply to build inventory for later in the year. Ice cream production is steadily improving, pulling on some of the available cream supply. There is limited price potential in the near term as supply is sufficient for demand.

OUTSIDE MARKETS SUMMARY

May corn increased 10.75 cents, closing at $7.4875. May soybeans fell 45.75 cents, ending at $16.1825, with May soybean meal down $5.60 per ton, closing at $467.50. May wheat declined 21.25 cents, ending at $10.06. April live cattle declined $0.80, ending at $139.37. May crude oil fell $7.54, closing at $100.28 per barrel. The Dow fell 550 points, closing at 34,678, while the NASDAQ declined 222 points, closing at 14,221.

Thursday Midday Dairy Market Summary - Cheese Finds Further Strength

OUTSIDE MARKETS SUMMARY:

CORN:	10 Higher
SOYBEANS:	46 Lower
SOYBEAN MEAL:	$6.40 Lower
LIVE CATTLE:	$0.67 Lower
DOW JONES:	180 Points Lower
NASDAQ:	69 Points Lower
CRUDE OIL:	$5.20 Lower

MIDDAY MARKET UPDATE:

Block cheese price increased 7 cents, closing at $2.25 with two loads traded. Barrel cheese price increased 4.25 cents, closing at $2.2025 with 12 loads traded. There was an uncovered offer for a load of blocks way up at $2.40 with three unfilled bids below barrels at 3 to 7 cents below the market. Butter price declined 1.25 cents, closing at $2.70 with nine loads traded. Grade A nonfat dry milk price increased a penny to $1.8450 with one load traded. Dry whey price declined 1.50 cents, ending at 66.25 cents with one load traded. Class III futures are steady to 47 cents higher. Class IV futures are 10 cents lower to 10 cents higher. Butter futures are 1.22 cents lower to 1.00 cent higher. Dry whey futures are unchanged to 1.27 cents lower. Corn futures are substantially higher with soybean futures substantially lower due to potentially less corn acres planted than soybean acres this year. USDA will release the February Agricultural Prices report Thursday, providing prices for calculating income over feed.

Fluid Milk and Cream - Western U.S. Report 13

In California milk production is increasing, following seasonal trends. Loads of milk are     available at a discount due to unplanned down time. Contacts report that there is limited     availability at production facilities due to labor shortages and that limited tanker     availability is prohibiting their ability to move loads out of state. Demand is steady     across Classes. 

Contacts report that milk production in Arizona is increasing, but that output remains below 2021 levels. Some processors report that they are no longer utilizing  milk from outside of the state, as supplies are available locally. Demand for Class I milk is steady to higher as some larger educational facilities are returning from spring break. Demand for Class IV is steady. 

In New Mexico farm level milk production is trending higher, though contacts report that production is down year over year. Milk is available in the state to meet current demands. Demand for Class I milk is steady to lower as spring break season has decreased educational institution purchasing. Demand for Class II is steady.

Pacific Northwest milk production is increasing, following seasonal trends. Class I demand is lower as some educational institutions have adjourned for spring break. Balancing operations in the area are, reportedly, able to process these additional loads of milk. Class II and III demand is steady. 

Increased milk production in the mountain states of Idaho, Utah, and Colorado is contributing to greater spot availability. Some stakeholders in the area report that loads of milk are being sold from $3 to $5 under Class IV. Plant managers say that they are unable to run at capacity due to labor shortages. Across all Classes, demand is unchanged. 

Condensed skim contracts are steady, in the West. Ice cream makers are scooping up more loads of cream as they increase production in preparation for warmer weather. Demand for cream is strong, and stakeholders say that spot inventories are tightening. Cream multiples are unchanged at the bottom, while the top moved higher.

     Western U.S., F.O.B. Cream
     Multiples Range - All Classes:               1.0500 - 1.3000

Large Dairy Operations Grow Faster than Small Operations

New data from USDA’s Economic Research Service shows the U.S. dairy sector has experienced a gradual shift in milk production toward larger dairy operations. The research indicates that the shift in production from small dairy herd-size farms to large dairy herd-size farms mirrors total factor productivity growth across the dairy sector. Total factor productivity, or TFP, is a broad measure of agricultural productivity that compares the total output to the total land, labor, capital, and material inputs used in farm production. Between 2000 and 2016, the largest dairy operations, those with more than 1,000 milk cows, experienced a TFP growth rate of 2.993 percent per year. Meanwhile, TFP growth for the smallest operations, those with fewer than 100 milk cows, increased at an annual rate of 0.639 percent. TFP growth across all operations was primarily driven by technological progress—growth associated with innovations in systems, processes, and techniques that convert inputs into milk output—and environmental effects that positively impacted feed availability.

Thursday Morning Dairy Market Update - Traders Cautious Ahead of Cash

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Mixed
Soybean Futures:	3 to 5 Lower
Soybean Meal Futures:	Mixed
Wheat Futures:	Mixed

MILK:

The market was ready for a rebound and cheese price coming off the lows during spot trading was all it took to trigger buying. This may continue if buyers of cheese want to take advantage of lower prices to increase ownership of more cheese for later demand. There is no tightness of milk supply at the present time and there may not be if price remain high. Farmers will want to push milk production. Of course, much will depend on feed availability and feed prices. USDA will release the Prospective Plantings and Quarterly Grain Stocks report Thursday morning, which may have a large impact on feed prices. The February Agricultural Prices report will be released Thursday afternoon which should show an income over feed price above the level that would trigger a Dairy Margin Coverage program payment.

CHEESE:

Cheese price coming off the lows Wednesday during spot trading may bring in more aggressive buying interest Thursday. Buyers may want to take advantage of the lower prices to increase ownership of supply for later demand. Cheese demand remains steady with sufficient supply available to meet demand.

BUTTER:

Price is comfortable and range bound. Demand is being met with inventory increasing month over month. Much of the demand for the Easter season has been met leaving regular demand carrying the market. Cream is readily available.

Wednesday Closing Dairy Market Update - March Class III Price: $22.45

MILK

The calendar is moving forward with spring flush beginning in most areas. Milk receipts at plants are increasing from the low level, but production is not running above a year ago. Most plants are receiving sufficient milk supply to satisfy demand with many hoping for increased milk supply as spring flush progresses. Plants would like to be able to meet demand as well as build inventory for upcoming demand. There is strong demand for dairy cattle and spring heifers at sales, as some producers are looking to keep barns full. Demand for bottled milk is variable depending on school systems and when they have spring break. Overall bottling demand is steady. USDA announced the March Federal Order class prices. Class II price was $24.76, up $0.97 from February and up $9.69 above a year ago. Class III price was announced at $22.45, up $1.54 from February and $6.30 above a year ago. Class IV price was $24.82, up $0.82 from February and $10.64 above a year ago.

AVERAGE CLASS III PRICES

3 Month:	$23.70
6 Month:	$23.62
9 Month:	$23.36
12 Month:	$21.91

CHEESE

Cheese price may have found a level at which buyers and sellers may be comfortable doing business. Initial lower prices during spot trading brought in more aggressive buying. This could continue as buyers would like to increase their ownership of supply and would like to take advantage of these lower prices. However, buyers also may have a good supply already purchased ahead and may not need to be very aggressive for the time being.

BUTTER

Later butter futures contracts continue to hold a discount for current cash. Generally, futures would carry a premium in anticipation of increasing demand and higher prices later in the year. Price might remain in a sideways range for some time as buyers and sellers take care of business and build supply for later in the year.

OUTSIDE MARKETS SUMMARY

May corn gained 11.75 cents, closing at $7.38. May soybean jumped 21 cents, closing at $16.64, with May soybean meal up $7.01 per ton, closing at $473.10. May wheat gained 13 cents, closing at $10.2725. April live cattle declined $0.72, ending at $140.17. May crude oil gained $3.58, ending at $107.82 per barrel. The Dow declined 65 points, ending at 35,229, while the NASDAQ declined 177 points, closing at 14,442.

Wednesday Midday Dairy Market Summary - Cheese Price Bounce From Lows

OUTSIDE MARKETS SUMMARY:

CORN:	11 Higher
SOYBEANS:	29 Higher
SOYBEAN MEAL:	$8.70 Higher
LIVE CATTLE:	$0.70 Lower
DOW JONES:	122 Points Lower
NASDAQ:	92 Points Lower
CRUDE OIL:	$2.78 Higher

MIDDAY MARKET UPDATE:

Block cheese price initially declined 2 cents before a trade took place, then rebounded to close a penny higher at $2.18 with two loads traded. Barrel cheese price declined 3 cents, closing at $2.16, with three loads traded. Barrels initially declined 4 cents before buying interest brought it up a penny off the lows by the close. Prices moved to a level at which buyers felt comfortable stepping back in. This may keep the market choppy as business is done. Butter price slipped 0.50 cent, closing at $2.7125, with four loads traded. Grade A nonfat dry milk price increased 0.50 cent, closing at $1.8350, with five loads traded. Dry whey price declined 1.25 cents, closing at 67.75, with four loads traded. Class III futures are 22 cents lower to 39 cents higher. Class IV futures are 12 cents lower to 10 cents higher. Butter futures are 0.50 cent to 3.85 cents higher. Dry whey futures are 0.12-0.75 cent higher. USDA will release the March Federal Order prices Wednesday afternoon. Traders anticipated a Class III price of $22.42 and a Class IV price of $24.85.

USDA Publishes Origin of Livestock Final Rule for Organic Dairy

The Department of Agriculture Tuesday published the Origin of Livestock final rule for organic dairy. USDA says the change to the USDA organic regulations will promote a fairer and more competitive market for all organic dairy producers. The rule ensures that certified USDA organic dairy products are produced to the same consistent standard. Agriculture Secretary Tom Vilsack says, "The Origin of Livestock final rule provides clear and uniform standards about how and when livestock may be transitioned to organic dairy production, and how transitioned animals are managed within the organic dairy system." USDA's National Organic Program will oversee the new rule, which in general allows a dairy livestock operation transitioning to organic, or starting a new organic farm, to transition non-organic animals one time. The rule prohibits organic dairies from sourcing any transitioned animals. Once a dairy is certified organic, animals must be managed as organic from the last third of gestation. Small businesses may request variances for specific scenarios.

Wednesday Morning Dairy Market Update - Unusual Overnight Activity

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	3 to 7 Higher
Soybean Futures:	4 to 8 Higher
Soybean Meal Futures:	$1 to $2 Higher
Wheat Futures:	6 to 9 Lower

MILK:

Traders will not be too anxious to buy into milk futures unless they see a bottom in spot prices. The market is not expected to continue to fall but it is unclear as to how much prices might retrace. Spring flush is underway but that is not the reason for the recent bearishness. Buyers of the physical commodity have been aggressively purchasing ahead and have reached a point at which they may be comfortable for the time being allowing them to step back from the market due to high prices. Futures prices have fallen significantly over the past two days but continue to remain historically high. However, this is little consolation in light of substantially higher costs of production. USDA will release the March Federal Order class prices Wednesday. Traders anticipate a Class III price of $22.42 and a Class IV price of $24.85.

CHEESE:

The sharp decline of cheese prices this week might entice buyers to step back in to purchase supply for anticipated future demand. Concern remains over milk supply as the year progresses that could impact cheese supply if demand remains strong. Buyers are purchasing earlier than usual to assure supply later.

BUTTER:

Supply and demand seem to be balanced for the time being. Price continues to move within a tight sideways pattern as buyers and sellers accomplish business. Churning remains active, which should provide sufficient supply for demand and allow inventory to increase in the near term. Price is expected to remain choppy.

Tuesday Closing Dairy Market Update - Market Reacts to Internal and External Influences

MILK

Milk futures fell significantly again Tuesday. Monday, the decline was a bit overdone, but cash caught up with the decline of futures coupled with the decline Tuesday, leaving contracts somewhat in line. Some of this might be attributed to the developing situation in Ukraine. There were ceasefire talks Tuesday, but they did not result in a ceasefire. However, it did provide hope that things may settle down and farmers will be able to plant and harvest crops in Ukraine. This took some steam out of the grain markets and indirectly might have had an impact on dairy. All commodity markets are volatile, and any news could have a profound short-term impact on markets. USDA published the final rule for the origin of livestock for organic dairy Tuesday. USDA states, "This change to the USDA organic regulations will promote a fairer and more competitive market for all organic dairy producers, by making sure the certified USDA organic dairy products are produced to the same consistent standard." The new rule allows a dairy operation to transition non-organic animals to organic one time. This prohibits organic dairies from sourcing any transitioned animals. Also, animals must be managed as organic from the last third of gestation. This may not sound like a bid deal, but it clarifies some gray areas that existed.

AVERAGE CLASS III PRICES

3 Month:	$23.44
6 Month:	$23.42
9 Month:	$23.24
12 Month:	$22.82

CHEESE

Block cheese price had the largest one-day decline since July 15, 2021. The proverbial void opened under the market Tuesday. Buyers held back, waiting for lower prices. The market fell more than expected, which may increase the interest of buyers to step back into the market again. After all, overall fundamentals have not changed much over the past few days.

BUTTER

Price has become more entrenched in its sideways pattern, moving toward the lower end of the range. Some of the concern over tight supply has been removed from the market with sufficient supply to meet demand and increase inventory. Buyers have been purchasing supply quite a bit more ahead than usual as a hedge against potential higher prices as the year progresses.

OUTSIDE MARKETS SUMMARY

May corn fell 22.25 cents, ending at $7.2625. May soybeans fell 21.25 cents, closing at $16.43, with May soybean meal down $12.90 per ton, closing at $466. May wheat fell 42.75 cents, closing at $10.1425. April live cattle gained $0.60, ending at $140.90. May crude oil declined $1.72, closing at $104.24 per barrel. The Dow gained 338 points, closing at 35,294, while the NASDAQ gained 265 points, closing at 14,620.

Improving Child Nutrition Through Dairy

The National Milk Producers Federation and the International Dairy Foods Associated submitted comments to the USDA’s Food and Nutrition Service regarding dairy. The groups want the agency to improve nutrition security by updating school meal nutrition standards to encourage increased dairy consumption. That move would keep nutrition in line with the 2020-2025 Dietary Guidelines for Americans report and with the leading health organizations. In 2020, the federal Dietary Guidelines Advisory Committee report found that more than three-quarters of nine-to-13-year-olds are not meeting the recommended intake of dairy foods. School milk consumption has declined in recent years, particularly after whole milk and low-fat flavored milk options got removed from school meals ten years ago. “USDA can begin to reverse the trend through providing certainty for schools offering flavored milks, which provide the same micronutrients as white milk but with a flavor that many children prefer,” the groups say in their comments.

Tuesday Midday Dairy Market Summary - Futures Fall

OUTSIDE MARKETS SUMMARY:

CORN:	27 Lower
SOYBEANS:	23 Lower
SOYBEAN MEAL:	$10.10 Lower
LIVE CATTLE:	$0.45 Higher
DOW JONES:	94 Points Higher
NASDAQ:	142 Points Higher
CRUDE OIL:	$1.97 Lower

MIDDAY MARKET UPDATE:

Sellers came to the spot market Tuesday unable to find willing buyers unless at lower prices. Block cheese price fell 9 cents, closing at $2.17, with one load traded. Barrel cheese price declined 6 cents, closing at $2.19, with four loads traded. There were no unfilled bids or uncovered offers remaining at the close. Butter declined 2 cents closing at $2.7175 with four loads traded. Grade A nonfat dry milk price declined 1.75 cents, ending at $1.83 with two loads traded. Dry whey price declined 2.75 cents, ending at 69 cents, with four loads traded. Dry whey is down to the lowest level since Dec. 2, 2021. Class III futures are 1 cent higher to 64 cents lower. The gain is in the March contract, which discontinues trading Tuesday. Class IV futures are 18-45 cents lower. Butter futures are 0.17 cent to 2.80 cents lower. Dry whey futures are 1.20 to 3.70 cents lower. March futures and options cease trading Tuesday with April taking over as the front month.

Tuesday Morning Dairy Market Update - Milk Futures May Regain Some Loss

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 5 Lower
Soybean Futures:	2 to 4 Higher
Soybean Meal Futures:	$2 to $3 Lower
Wheat Futures:	12 to 14 Lower

MILK:

Class III milk futures fell further than the weakness of underlying cash would have suggested. However, such has been the nature of the market this year. Even minor increases or decreases of underlying cash prices have had a significant impact on futures. Even the decline Monday leaves both Class III and IV futures at very high levels, but it is always concerning to see price declines in light of high input costs. It is not expected that milk futures will decline very much but that will be determined by underlying cash prices which will be determined by demand. Demand is strong both domestically and internationally and not expected to fall anytime soon, but even if we do see lower demand, lower milk production would keep prices higher. Milk futures are expected to rebound somewhat due to it overreacting Monday.

CHEESE:

The weakness of blocks Monday could result in buyers pulling back a little as they wait for sellers to become more aggressive. If not, cheese prices should hold. There is the potential that cheese has reached a level at which with may hold for a period of time. Spring flush has begun, and more milk will be available for manufacturing over the next few months.

BUTTER:

Buyers and sellers are content to do business within the current price range. Churning is active allowing for demand to be met as well as inventory to increase. Cream remains well-priced even though there is greater demand from ice cream manufacturers. Orders for the Easter season have been filled and shipped. Price should remain choppy.

Monday Closing Dairy Market Update - Milk Futures Take a Large Hit

MILK

Milk futures took a big hit Monday with contracts posting large losses in Class III futures with moderate losses in Class IV contracts. May Class III closed the 85-cent limit down, ending at $24.16 and a long way from the high of $25.55 it reached just two days ago. A huge element prevalent in this market is emotion. Traders are wound up, and any movement, even if it is minor, garners substantial volatility. The overall bias of traders is bullish, which creates heightened volatility on any price weakness. The weakness in not expected to last very long, but it could indicate price may have found a level of resistance for the time being. Class III milk futures may have a difficult time moving back above $25 over the near term. Class IV futures are not quite as bearish and have less price swings, but underlying cash may keep price potential confined unless butter and nonfat dry milk can resume an uptrend.

AVERAGE CLASS III PRICES

3 Month:	$23.37
6 Month:	$23.64
9 Month:	$23.55
12 Month:	$23.18

CHEESE

Cheese prices really were not that weak Monday with only blocks closing lower. Yet, the market reacted violently to the downside. Spot trading activity was likely just buyers and sellers taking care of business and likely not an indication of trend. Cheese production remains strong with plants welcoming more milk due to schools closing down for spring break. Spring flush is beginning with no concern from manufacturers over handling the volume of milk that will be available.

BUTTER

Price seems to be content to remain in a range. Supply is available and inventory is growing from month to month. However, little progress is being made to build inventory in relation with a year ago. Export demand is expected to remain strong. Domestic demand is steady with food service demand slowing a little.

OUTSIDE MARKETS SUMMARY

May corn declined 5.50 cents, closing at $7.4850. May soybeans fell 46 cents, closing at $16.6425, with May soybean meal down $9 per ton, closing at $478.90. May wheat fell 45.25 cents, closing at $10.57. April live cattle closed $0.17 lower, ending at $140.30. May crude oil fell $7.94, closing at $105.94 per barrel. The Dow gained 95 points, closing at 34,956, while the NASDAQ gained 186 points, closing at 14,355.

Monday Midday Dairy Market Summary - Milk Futures Fall

OUTSIDE MARKETS SUMMARY:

CORN:	9 Lower
SOYBEANS:	43 Lower
SOYBEAN MEAL:	$7.50 Lower
LIVE CATTLE:	$0.55 Lower
DOW JONES:	171 Points Lower
NASDAQ:	46 Points Higher
CRUDE OIL:	$7.47 Lower

MIDDAY MARKET UPDATE:

Block cheese price declined 1.50 cents, closing at $2.26 with one load traded. Barrel cheese price remained unchanged at $2.25 with four loads traded. There were no unfilled bids or uncovered offers remaining at the close. Buyers and sellers went home satisfied. Butter price declined 5.75 cents, closing at $2.7375 with eight loads traded. Grade A nonfat dry milk price slipped 0.50 cent, closing at $1.8475 with six loads traded. Class III futures are unchanged to 61 cents lower with June showing the greatest loss. Front-month March is unchanged with Tuesday being the final day to trade March futures and options. Class IV futures have not traded. Butter futures are unchanged to 1.50 cents lower. Dry whey futures are 0.22 to 0.50 cent higher.

Cheese demand remains steady in Midwest

    Dairy trade got a little jolt this week following five consecutive sessions of gain in the Global Dairy Trade auction. This week’s weighted average slipped 0.9%. Traders brought 51.5 million pounds of product to the market, down from 55.6 million on March 1. The average metric ton price slipped to $5,039 U.S., down from the record high $5,065 of the last event.

    Whole milk powder (WMP) led the descent, down 2.1%, after jumping 5.7% on March 1.Butter was down 1.8%, following a 5.9% increase, while anhydrous milkfat inched up 0.4%, following a 2.1% rise. Lactose was off 0.6%.

    Skim milk powder led the gains, up 1.6%, after a 4.7% increase, and Cheddar was up 0.3% after leading the gains last time, with a 10.9% surge.

    StoneX Dairy Group says the GDT 80% butterfat butter price equates to $3.0791 per pound U.S., down 5.7 cents, after jumping 17.7 cents on Mar. 1, and compares to CME butter which closed Friday at $2.7250. GDT Cheddar, at $2.9083, was up slightly after jumping 23.3 cents on Mar. 1, and compares to Friday’s CME block Cheddar at $2.13. GDT skim milk powder averaged $2.0615 per pound, up from $2.0328. Whole milk powder averaged $2.0849 per pound, down from $2.1578. CME Grade A nonfat dry milk closed Friday at $1.86.

    The biggest surprise was in WMP prices, according to Chicago-based StoneX Dairy Group, which was expecting a 7% increase. “Buyers could very well be reacting to higher prices and the news about shutdown’s in China are bringing up concerns about demand in the near term.” A new COVID outbreak has appeared.

    CME cheese headed south as well but recovered some as the industry awaited the February Milk Production report on Mar. 21. The Cheddar blocks fell to $2.05 per pound Wednesday, but closed Friday at $2.13, still down 6 cents on the week while 34 cents above a year ago.

    The barrels finished the week at $2.03, up 2 cents, 57.75 cents above a year ago, and 10 cents below the blocks. CME sales totaled 10 loads of block and 18 of barrel.

    Cheese demand is steady to higher in Midwest retail and food service markets, according to Dairy Market News, but outlooks are mixed. Some traders remain bearish as U.S. cheese prices remain competitive on the global market, while others believe recent price increases will slow consumer purchasing. Spot cheese availability was unchanged this week. Contacts report that milk availability varies throughout the Midwest. Down time, at some plants in the region, has caused some milk to be available to purchasers nearby.

Others are experiencing some tightness as production facilities are making use of milk supplies internally. Cheese production is steady.

    Food service customers in the west have been more active recently as warmer weather and loosening COVID restrictions are having a positive impact on cheese demand. Retail is steady and export demand is strengthening, driven largely by lower U.S. prices however port congestion and truck driver shortages continues to be an issue. Cheesemakers are pulling heavily on milk supplies in the region, running busy schedules but labor shortages and delayed deliveries of production supplies continues to prevent running at capacity.

    Butter climbed to $2.7350 per pound on Monday, fell to $2.70 Thursday but closed Friday at $2.7250, up 1.50 cents on the week and $1.06 above a year ago, with 17 sales on the week.

    Demand for cream in the Central region is trending higher, according to DMN. Ice cream makers are pulling more cream as they ramp up production for the spring holidays and warmer weather. Butter makers are running busy schedules, utilizing available loads of cream. Some plants are running below capacity due to labor shortages. Butter demand is steady to higher in food service and unchanged in retail. Inventories are mixed. Some have sufficient stocks for the coming months, while others are working to increase their inventories.

    Demand for cream is picking up in the West, with customers also reporting more interest from ice cream makers. Cream inventories are available but continue to tighten. Some regional butter makers are working to rebuild inventories and utilizing their cream internally, rather than selling any on the spot market. Butter makers are running busy schedules though some report the ongoing shortage of tankers and truck drivers is causing them to discard a few loads of liquid buttermilk. Retailers are increasing orders of butter in preparation for the spring holidays and food service demand is strengthening as warmer weather and loosening COVID restrictions draw more customers. Butter inventories are tight.

    Grade A nonfat dry milk closed Friday at $1.86 per pound, up 2 cents on the week and 70.75 cents above a year ago, with 14 sales reported for the week.

    Dry whey, which stalled at 75.75 cents per pound for seven consecutive sessions, closed Friday at 76 cents, up 0.25 cents on the week and 14.75 cents above a year ago. There was only 1 sale reported for the week at the CME.

    There are plenty of clouds on the horizon; the war in Ukraine and rising inflation to name a couple. The Fed approved a 0.25% percentage point rate hike this week, first increase since Dec. 2018, meanwhile dairy margins strengthened the first half of March, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC., as a “continued advance in milk prices more than offset the impact from higher projected feed costs.”

    “Milk prices continue to be supported by strong export demand for U.S. dairy products which are competitive as global milk production remains constrained,” the MW explained. “Supply shortfalls in Oceania have fueled the global decline in milk production. January milk collections in Australia dropped 6.3% from last year to 714 million liters as hot, humid weather lowered milk yields resulting in the lowest January output in decades. For the season which began in July, Australia’s milk collections have lagged the prior season by 2.6% for the first seven months of the year.”

    “The U.S. exported 64.9 million pounds of cheese in January, up 16.7% from last year and the largest January volume since 2014. Strong sales to Mexico which were up 74% from last year fueled the increase, and U.S. cheese remains a value relative to supplies from both the EU and Oceania which should help to support export demand for the near term. January’s butter and milkfat exports were 53.1% higher than last year although nonfat dry milk and whey powder exports were lower than last year in January by 5.5% and 34%, respectively.”

    “Plunging feed demand from China has weighed heavily on whey exports to that country which declined 41% in January following a 52% year-over-year drop in December,” according to the MW. “Feed prices meanwhile continued their advance as the USDA lowered Ukrainian corn exports by 6 MMT in the March WASDE, while soybean production in South America dropped by a cumulative 9.5 MMT from the February forecast,”the MW concluded.

    In the week ending Mar. 5, 67,500 dairy cows were sent to slaughter, up 2,300 from the previous week, but 3,000 head or 4.3% below a year ago.

    The March 11 Dairy and Food Market Analyst says new data from the National Association of Animal Breeders (NAAB) suggests there’s a lack of herd replacements in the U.S. Sales of beef semen surged by 21% last year, according to the NAAB, as the beef-on-dairy trend took off. In 2021, beef semen sales represented more than one-third of all semen sales, up from 28% in 2020 and 10% in 2017. “Furthermore, total dairy semen sales decreased by 6.7% last year, reaching the lowest level in 17 years,” the DFMA stated.

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

    The Outlook reported that milk cows numbered 9.368 million in January, 5,000 below December and 82,000 lower than January 2021. Average milk per cow in January was 2,034 pounds per head, 15 pounds lower than January 2021.

    “Relatively high costs of feed and other inputs probably dampened milk yields in January 2022,” according to the Outlook, “and corn-silage quality issues in the Midwestern and Eastern areas of the country may have also played a role. Milk per cow in January 2021 was quite strong, up 1.7% from January 2020.”

    The corn price projection was $5.65 per bushel, up 20 cents from last month’s projection. Soybean meal was projected at $420 per short ton, $10 higher than last month’s forecast.
    The alfalfa hay price in January was $211 per short ton, $2 lower than December 2021 and $43 higher than January 2021. The 5-State weighted-average price for premium alfalfa hay in January was $262 per short ton, $9 higher than December 2021 and $56 higher than January 2021,” the Outlook stated.

    “The Russian invasion of Ukraine has added uncertainty to the global dairy outlook,” however “the effects for the U.S. dairy industry are mostly indirect,” the Outlook says. “U.S. dairy trade with both countries has been very small. Neither Russia nor Ukraine are major global dairy exporters. Russia imports substantial quantities of dairy products, mostly from Belarus. In 2021, Argentina and New Zealand were distant second and third suppliers of dairy products to Russia. Fonterra, the leading dairy supplier from New Zealand, has suspended shipments of dairy products (mostly butter) to Russia.”

    Ukraine is a major exporter of corn and wheat. Russia is a major exporter of oil, natural gas, wheat, and fertilizer. Disruptions in exports from these countries could contribute to higher costs of these commodities, with both supply and demand implications for the U.S. dairy industry,” the Outlook warned.

    “On the supply side, higher feed, fuel, energy, and fertilizer prices obviously increase costs of dairy production. Other input costs could also rise since virtually all sectors supplying the industry are affected by costs of fuel and energy. On the demand side (both domestic and foreign), to the extent that costs of dairy production are passed on to consumers in the form of higher dairy product prices, smaller quantities of dairy products may be consumed. Also, demand for dairy products could be reduced as inflation reduces consumer purchasing power. The gravity of these effects will depend upon the severity and duration of the crisis, global response to it, and many other factors that impact global dairy markets,” the Outlook concluded.

    The February CPI for all food is 292.8, up 7.9% from 2021, according to DMN. The dairy products index is 242.4, up 5.2%, with fresh whole milk up 12.4%; cheese, up 1.9%; and butter, up 5.5%.

    The March 11 Dairy and Food Market Analyst says “Retailers have been slow to raise dairy product prices, and the Bureau of Labor Statistics data shows prices were up just 1.2% versus two years ago. Broader grocery store prices were up 8.6%,” according to the DFMA.

    Fluid milk sales started 2022 with continued slippage. The USDA’s latest data shows January sales of packaged fluid products at 3.8 billion pounds, down 1.7% from Jan. 2021.

    Conventional product sales totaled 3.6 billion pounds, down 1.5% from a year ago. Organic products, at 246 million pounds, were down 3.3%, and represented 6.5% of total sales for the month.

    Whole milk sales totaled 1.3 billion pounds, off 0.9% from a year ago and represented 33.6% of total milk sales for the month.

    Skim milk sales, at 206 million pounds were down 8.5% from a year ago.

    The figures represent consumption in Federal milk marketing order areas, which account for approximately 92% of total fluid milk sales in the U.S.

    With school’s summer break not too far away, there’ll be additional milk moving into manufacturing. Farm level milk output is generally trending higher, according to DMN, although reports vary somewhat.

     “Some educational institutions are cycling through spring recesses, but retail orders are keeping bottlers active. Some dairy processors are unable to handle additional milk loads at this time as labor pool issues and delivery delays continue to curtail operating capacity at some plants.”

    In politics; The National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) joined the U.S. House of Representatives’ bipartisan “Problem Solvers Caucus” in a roundtable this week to “discuss additional steps Congress could take to address the ongoing export supply chain crisis facing American exports, including dairy,” according to a joint press release.

    Jaime Castaneda, executive vice president for policy development and strategy for USDEC and NMPF, spoke during a panel discussion moderated by Reps. Jim Costa (D-CA) and Dusty Johnson (R-SD) to “identify the challenges exporters are facing in securing container and vessel space, unprecedented congestion, and record fees to ship products to international customers.”

    “A conservative estimate of the supply chain challenges for dairy exporters in 2021 is over $1.5 billion in higher direct costs, reduced value, and lost sales,” Castaneda noted. “If this continues, we risk losing ground to our competitors in highly competitive foreign markets, which has ripple effects on the paychecks of American dairy farmers and the thousands of workers who support the export supply chain.”

Monday Morning Dairy Market Update - Mixed Futures Expected Prior to Cash

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	Steady to 5 Lower
Butter Futures:	1 to 2 Lower

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	5 to 10 Lower
Soybean Futures:	10 to 15 Lower
Soybean Meal Futures:	$2 to $4 Lower
Wheat Futures:	30 to 35 Lower

MILK:

Milk futures took a little breather Friday and point to potential weakness Monday morning. However, that changes as more traders look at the market as the morning progresses. The strength of cheese prices Friday would indicate futures should move higher. However, there is concern cheese prices may be ready to retrace. Buyers may have sufficient supply for the time being and may step back from the market briefly. There has been no new news in the dairy industry over the weekend, leaving the market with the same fundamentals. Milk futures could find a level at which they will move sideways for a time.

CHEESE:

Buyers have been actively purchasing supplies, not only to fill orders but to increase ownership for expected later demand. The uncertainty of the market leaves buyers willing to purchase earlier and pay for storage rather than wait to purchase in anticipation of lower prices that may never materialize. The strength of spot prices on Friday would suggest further strength Monday, but it all depends on who is in the market wanting to do business.

BUTTER:

Price is expected to continue to chop around but slowly work higher. Supply is sufficient for demand, leaving little reason for buyers to become more aggressive. Buyers already have been purchasing ahead for third and fourth quarter potential demand which may leave them less aggressive as the year progresses.

Friday Closing Dairy Market Update - Strong Week for Cheese Prices

MILK

The May Class IIII contract closed above $25. June could not hold at that level, as selling pressure permeated the market despite the increase of cheese prices. The market needed to correct to move back in line. However, the dry whey price declining and moving back to the lowest level in over three months seemed to garner some attention by the trade. Dry whey has declined 14.50 cents since the high, which equates to a decrease of 87 cents in the calculation of the Class III price. However, the focus has been on cheese, leaving limited attention on dry whey. Milk futures closed higher for the week, improving the outlook for milk prices significantly. There are only two days remaining to trade March milk futures and options, with the March Federal Order prices announced next week Wednesday. Traders anticipate a March Class III price of $22.42 and a Class IV price of $24.85.

AVERAGE CLASS III PRICES

3 Month:	$23.91
6 Month:	$24.19
9 Month:	$24.01
12 Month:	$23.55

CHEESE

For the week, blocks increased 14.50 cents with eight loads traded. Barrels increased 22 cents with 27 loads traded. Dry whey declined 4 cents with three loads traded. Buyers were aggressive this week as continued increasing prices brought buyers into the market in the attempt to gain ownership of cheese before prices moved higher. The result is that buyers leapfrog over each other, which in turn drives prices higher. However, the rise seems to be solid without any void developing under the market.

BUTTER

For the week, butter increased 7 cents with seven loads traded. Grade A nonfat dry milk price declined 0.75 cent with 24 loads traded. Nonfat dry milk price has traded in a range for a little more than the past month. Demand is strong enough to keep price elevated which will in turn keep Class IV futures supported. Churning is active and supply is sufficient.

OUTSIDE MARKETS SUMMARY

May corn gained 5.75 cents, closing at $7.54. May soybeans gained 9.50 cents, ending at $17.1025, with May soybean meal up $2.00 per ton, closing at $487.90. May wheat gained 16.50 cents, ending at $11.0225. April live cattle gained $0.80, ending at $140.47. May crude oil gained $1.56, closing at $113.90 per barrel. The Dow closed 153 points higher at 34,861, while the NASDAQ declined 23 points, closing at 14,169.

Friday Midday Dairy Market Update - Cheese Increased While Butter and Powder Declined

OUTSIDE MARKETS SUMMARY:

CORN:	6 Higher
SOYBEANS:	12 Higher
SOYBEAN MEAL:	$3.00 Higher
LIVE CATTLE:	$0.60 Higher
DOW JONES:	16 Points Lower
NASDAQ:	107 Points Lower
CRUDE OIL:	$0.44 Higher

MIDDAY MARKET UPDATE:

Class III futures were under pressure prior to spot trading with some traders anticipating a retracement of spot prices. Initial pressure stemmed from dry whey price declining 2.50 cents closing at 72 cents with one load traded. This is the lowest price since Dec. 16, 2021. Block cheese then traded lower initially posting a loss of 1.50 cents before buyers turned more aggressive pushed price to $2.2750, up 3.50 cents with two loads traded. Barrel cheese price increased 4 cents, closing at $2.25 with 13 loads traded. This resulted in significant price swings over a brief period of time. Class III futures are unchanged to 26 cents lower. Butter price slipped 0.75 cent, closing at $2.7950 with no loads traded. Grade A nonfat dry milk price declined 2.75 cents, ending at $1.8525 with eight loads traded. Class IV futures are 12 to 29 cents lower. Butter futures are 3.75 cents lower to 0.25 cent higher. Dry whey futures are 1.65 to 3.24 cents lower.

Friday Morning Dairy Market Update - Overnight Pressure on Light Trade

OPENING CALLS:

Class III Milk Futures:	8 to 15 Lower
Class IV Milk Futures:	5 to 10 Lower
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 4 Lower
Soybean Futures:	5 to 9 Lower
Soybean Meal Futures:	Mixed
Wheat Futures:	4 to 8 Lower

MILK:

Milk production is slowly improving but running below year-ago levels. Currently there is sufficient supply for demand. However, the industry is concerned over milk supply later in the year when demand generally increases. Buyers of cheese and butter have been looking ahead and purchasing accordingly to ensure supply if milk tightens. Higher milk prices have not yet resulted in the expansion of cow numbers. The shifting of cows continues as farms go out of business with those cows moving to larger farms. Some dairy farm expansions are taking place, but it not increasing overall cow numbers. The trend for larger farms continues and will continue.

CHEESE:

Cheese prices show no sign of slowing down. Higher prices have not resulted in price resistance but only seems to make buyers more aggressive. Continued strength brings buyers into the spot market wanting to purchase supply before price moves higher. Prices are moving contra seasonal with cheese futures showing the highest prices in summer months.

BUTTER:

Churning is active and sufficient to satisfy demand as well as build inventory from month to month but not year over year. Both domestic and international business remains strong. Easter demand has been met with most turning their attention to later demand. Price is expected to remain supported but choppy.

 

Thursday Closing Dairy Market Update - Cattle Slaughter Increases

MILK

June Class III futures joined the May contract, closing above $25. There was good trading volume in closer futures contracts with sellers taking advantage of these higher prices. The action of the market over the past few weeks would seem as if there were a shortage of milk, but that is not the case. Milk is available and milk production is increasing seasonally. The strength stems for the desire of buyers to purchase supply in the event of tighter milk production as the year progresses. Buying of supply is taking place earlier than usual rather than later, as the just-in-time mentality has changed over the past two years. There is a desire of have more than enough this year and obtain it earlier rather than clamor for supply later when supply is tighter. Dairy cattle slaughter increased in February, according to the Livestock Slaughter report released Thursday. Dairy cattle slaughter for the month totaled 265,5000 head. This was 4,700 head higher than January and 1,300 head more than a year ago. This was a little surprising due to the milk production report showing an increase of 3,000 cows since January. More heifers must have come into the dairy herd.

AVERAGE CLASS III PRICES

3 Month:	$24.06
6 Month:	$24.37
9 Month:	$24.17
12 Month:	$23.68

CHEESE

Export demand is termed as strong with international buyers already purchasing supply for fourth-quarter needs. Domestic buyers are looking at purchasing for third-quarter needs. This is a big reason why prices are strong now. Buyers are not following the usual patterns due to the change in the marketplace and the difficulties being faced with hauling and exporting. Market participants are looking further ahead than usual and preparing accordingly.

BUTTER

Increasing demand for cream from ice cream manufacturers as well as other products is increasing the cost of cream. Butter churning remains active and sufficient to meet demand as well as build inventory. The growth of inventory was a little surprising during February, but even with that, it did little to close the gap between current supply and the level it was a year ago.

OUTSIDE MARKETS SUMMARY

May corn declined 9.50 cents, closing at $7.4825. May soybeans fell 18 cents, ending at $17.0075, with May soybean meal up $0.80 per ton, ending at $485.90. May wheat fell 20 cents, closing at $10.8575. April live cattle gained $0.25, ending at $139.67. May crude oil fell $3.46 per barrel, closing at $111.47. The Dow gained 349 points, closing at 34,708, while the NASDAQ gained 269 points, closing at 14,192.

Thursday Midday Dairy Market Summary - Barrel Cheese Gains

OUTSIDE MARKETS SUMMARY:

CORN:	12 Lower
SOYBEANS:	20 Lower
SOYBEAN MEAL:	$0.70 Lower
LIVE CATTLE:	Unchanged
DOW JONES:	225 Points Higher
NASDAQ:	159 Points Higher
CRUDE OIL:	$2.33 Lower

MIDDAY MARKET UPDATE:

Block cheese price remained steady at $2.24 with no loads traded. Barrel cheese price increased 2 cents, closing at $2.21 with no loads traded. Dry whey price declined a penny closing at 74.50 with one load traded. The block barrel spread is back within 3 cents and a spread difference that has been rarely seen over the past years. Butter price remained unchanged at $2.8025 with no loads traded. Grade A nonfat dry milk price increased a penny ending at $1.88 with 11 loads traded. Class III futures are 10 cents lower to 43 cents higher. Class IV futures are 4 to 10 higher. Butter futures are 0.52 cent lower to 5.50 cents higher. Dry whey futures are steady to 0.50 cent lower. USDA will release the February Livestock Slaughter report Thursday, providing the numbers for dairy cattle slaughtered during the month.

Fluid Milk and Cream - Western U.S. Report 12

Milk production is increasing, though contacts report that production is flat when compared     to this time last year. Unplanned downtime and labor shortages are causing some production     facilities in the area to sell available loads of milk at a discount. Contacts report that     the truck driver shortage is limiting their ability to move loads of milk. Steady demand is     present for Class I and II. 

Arizona milk production is trending higher, seasonally. Milk is available, and some processors in the state say that they are taking in additional loads from nearby states to satisfy current production demand. Class I demand is steady to lower, as some educational facilities are on spring break. Demand for Class IV is unchanged. 

Milk production is increasing in New Mexico, but down year over year. Plant managers say that     milk is available to meet current production demand. Bottling demand has declined as spring     break season has begun for some educational institutions. Class II demand is steady. 

Milk production is increasing in the Pacific Northwest, though some producers say that output is below previously forecasted levels. Some educational institutions in the area are closed for     spring break in the coming weeks, decreasing bottling demand. Contacts report that they are     rerouting milk loads to balancing plants in the area. Labor shortages continue to prevent     processing plants from running at capacity. Class IV demand is steady. 

In the mountain states of Idaho, Utah, and Colorado, milk production is increasing seasonally. Milk is available, but some producers report that the shortage of truck drivers is limiting their ability to move loads outside of the local area. Demand is steady across all Classes.     

Contacts report that condensed skim contracts are steady. Cream demand is strengthening in     the West. Stakeholders say that ice cream makers are purchasing more cream as they are     increasing production in preparation for warmer weather. Cream availability is tightening in     the region. Butter makers report that they are running busy schedules and using available     loads of cream internally rather than selling spot loads. Cream multiples are unchanged at     the top, while the bottom moved higher.

     Western U.S., F.O.B. Cream
     Multiples Range - All Classes:               1.0500 - 1.2800

Thursday Morning Dairy Market Update - Futures Point Higher

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	3 to 6 Lower
Soybean Futures:	10 to 12 Lower
Soybean Meal Futures:	$1 to $2 Lower
Wheat Futures:	7 to 12 Lower

MILK:

The trend remains higher supported by underlying cash and the outlook for tighter milk supply both in the U.S. and the World. Milk production is improving as spring flush gets under way, but production will not overwhelm the market this year. Plants have sufficient capacity to handle increased milk production due to overall production being lower than a year ago. There are no indications milk prices will fall apart anytime soon. Stabilizing corn prices may temper price increases with some farms looking to add cows again. Cost of production is high, but adjustments are being made resulting in renewed interest in increasing production. USDA will release the February Livestock slaughter report providing the number of dairy cattle slaughtered during the month.

CHEESE:

Block cheese moved to a new recent high and the highest it has been since Nov. 10, 2020. There is no shortage of cheese, but buyers are looking ahead to potentially tighter supply and are increasing ownership sooner rather than later. Prices may retrace but will not fall apart.

BUTTER:

Butter retains strong support under the market. However, price gains are more calculated as if buyers and sellers feel it is well-priced for the time being. The increase of supply in storage in February was a bit of a surprise, which may temper the market a little.