The Farmer's Exchange Online Home
Friday, October 23, 2020
Michiana's Popular Farm Paper Since 1926
Click here to subscribe today

Dairy Markets Get Support from Higher Exports, Food Box Program


by Lee Mielke

Published: Friday, September 11, 2020

The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."

July U.S. dairy exports topped year-ago levels on almost all products. Nonfat dry milk exports were the highest for the month on record, according to HighGround Dairy. Year-to-date exports are the strongest on record, says HGD, with 2020 poised to be a record export year as global skim milk powder demand persists.

Cheese exports dropped seasonally from the record June high but were up 5.4 percent from a year ago. Exports to Mexico were down, but South Korea took up the slack.

Whey exports were up 65.1 percent, strongest volume for the month since 2013, according to HGD, with volumes to China up 14.3 million pounds from 2019.

CME block Cheddar topped $2 per pound ahead of the Dairy Products report and the Labor Day weekend and closed last Friday at $2.1250, up 29.75 cents on the week, highest since July 31, and 12.75 cents above a year ago. The barrels closed at $1.70, 27 cents higher on the week, 4.25 cents below a year ago, and 42.50 cents below the blocks. Seventeen cars of block sold on the week and 14 of barrel.

As I reported last week, Uncle Sam chipped in another $1 billion in food aid due to the COVID pandemic. StoneX said, "Round 2 of the food box program has been very positive, but the total program is expected to conclude soon as the bid deadline for Round 3 is Sept. 30 and deliveries must be completed within 30 days after that. If this program is to continue, Congress will have to allocate funding for the next fiscal year."

"The main point," said StoneX, "is that the U.S. government will be buying cheese in September and that, along with what we expect will be some additional 'value' buying from commercial interests."

Dairy broker Dave Kurzawski stated in the Sept. 7 "Dairy Radio Now" broadcast that there's plenty of uncertainty in the markets and when asked about the significance of many schools not returning to the classroom, said he believes it will be significant. We also have to consider the impact of holiday parties and gatherings not occurring because of COVID. Plus, the weather right now is great and people are eating outside at restaurants, but what is that going to look like in Boston, Chicago, New York and others Nov. 1?

Midwest cheese output remains busy, according to Dairy Market News, and orders have been robust on the retail side. Continued governmental assistance has spurred customers to get ahead of potential price increases but the wide spread between blocks and barrels is viewed as a sign of uncertainty, says DMN. Anything less than 10 cents is indicative of "healthier market tones."

The Western market is volatile and impacted by the effects of COVID. USDA's additional Food Box purchases has some contacts believing this will continue to help clear cheese while others fear it might bring more volatility to the market. Retail cheese sales are strong but orders from the food service are still down. International sales are active with the lower prices. Some manufacturers are preparing for the expected growth in year-end holiday demand but difficulties finding qualified staff at a few plants has disrupted output, says DMN.

Cash butter closed the week at $1.4925 per pound, up 4.50 cents but 68 cents below a year ago, with 58 sales reported at the CME.

Bulk butter is reportedly available in and outside the Midwest though, for most of the summer, cream has been up and down. Unsurprisingly, as the holiday weekend approached, cream was more available though some suggest it may lighten near term because less cream will be spun off from bottlers due to lighter school demand. DMN said "Butter market tones are trying, but struggling, to find any bullish notes."

Western butter makers were preparing for a surge of cream over the weekend. Ice cream production is slowing. Some schools have reopened or are planning to soon, engaging school milk bottling so that is adding more cream. Butter stocks are heavy. Retail orders have cooled but manufacturers expect more demand closer to the holiday baking season. DMN says it's difficult to assess what impacts the mix of virtual, hybrid and in-person classrooms will have on near-term butter needs for food service, baking and at-home family meal preparations. Regional dining out is improving but food service demand is still languishing.

Grade A nonfat dry milk finished last Friday at $1.03 per pound, a penny higher on the week, but 1.75 cents below a year ago, on 13 sales for the week.

StoneX says U.S. powder holds a steep discount to world prices and with EU prices generally higher demand for U.S. product should be keen.

CME dry whey closed last Friday at 33.25 cents per pound, down .75 cents on the week and 6.25 cents below a year ago, with four carloads finding new homes.

A higher All-Milk price more than offset higher feed prices and shot the July milk feed price ratio higher for the second month in a row, reaching the highest level so far this year. The USDA's latest Ag Prices report put the ratio at 2.69, up from 2.36 in May, and compares to 2.16 in July 2019.

The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. One pound of milk could purchase 2.69 pounds of dairy feed of that blend in July.

The U.S. All-Milk price averaged $20.50 per hundredweight, up $2.40 from June and $1.80 above July 2019.

Feed prices crept higher. The national average corn price averaged $3.21 per bushel, up 5 cents per bushel from June but 95 cents per bushel below July 2019. Soybeans averaged $8.51 per bushel, up 17 cents from June and 13 cents per bushel above a year ago. Alfalfa hay averaged $174 per ton, down $5 from June and $9 per ton below a year ago.

Looking at the cow side of the ledger, the July cull price for beef and dairy combined averaged $70.50 per hundredweight, down 50 cents from June, $3.50 above July 2019, but was $1.10 below the 2011 base average of $71.60 per hundredweight.

U.S. dairy cow slaughter for the week ending Aug. 22 totaled 54,600 head, up 1100 head, or 2.1 percent, from the previous week, but 5,400, or 9 percent, below a year ago.

Return to Top of Page