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'Unconscionable' COVID-Relief Bill Adds to Growing National Debt

Published: Friday, January 8, 2021

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

Welcome to 2021. One would think, or at least hope, that things won't get any worse than what we experienced in 2020. As American taxpayers examine the millions of their hard-earned dollars going overseas to benefit other countries and the many "non-essential" items funded here at home by the so-called COVID-relief bill, they can try and decide what bills their $600 "benefit" will go toward.

With a national debt now over $27 trillion, it is unconscionable that House and Senate lawmakers would spend anything more than absolutely necessary but rather work on helping their constituents endure. How sad that President Trump caved in and signed the measure.

Specifically to dairy, StoneX Dairy broker Dave Kurzawski looked back in the Jan. 4 "Dairy Radio Now" broadcast, stating that 2020 "redefined what we thought could happen in the dairy market and what is normal." He quickly added that "we are still in the pandemic as we walk into 2021 and just because we're changing the year, I don't think the world is going to be a whole lot different, not at least early in 2021."

Volatility will remain in the market, according to Kurzawski, and "while rising U.S. milk production takes a back seat to other things like the government buy programs, there's going to be a lot of forces at play in the first part of the year and probably throughout much of 2021. I think that will keep markets quite volatile as we go forward," he concluded, "but the world still needs food."

He wrote in his Dec. 31 "Early Morning Update," "The key issue on the table is the growing availability of fresh cheese in the country right now. Ultimately, we expect the government to fire up their buying programs, which will likely be supportive to cheese. In the interim, however, fresh cheese supplies are growing and we expect this could put some pressure on futures as we roll into next year."

Writing in a special edition of California's Milk Producers Council newsletter, the Daily Dairy Report's Sarina Sharp reported that "Congress allocated more money for the Supplemental Nutrition Assistance Program (SNAP) and other food aid programs, which will presumably allow those who are struggling financially to put a bit more dairy in their grocery carts."

"The bill provided $400 million for The Emergency Food Assistance Program (TEFAP), a small, unspecified portion of which USDA will spend procuring American-style cheeses and low-fat ultra-high temperature milk."

USDA also received $400 million for the Dairy Donation Program to reimburse dairy processors for donations to food banks and $1.5 billion to buy commodities, including seafood, fresh produce, dairy and meat products, and donate them to food banks," according to Sharp.

"The total for dairy is likely to be noticeably less than the massive government expenditures this year," she said, "but it is still significant," and "There is no word yet on when USDA will begin to spend this money, which makes it difficult to assess the repercussions for the dairy markets."

Meanwhile, the Federal order benchmark Class III milk price ended 2020 sharply lower and well below a year ago. The Agriculture Department announced the December Class III at $15.72 per hundredweight, down $7.62 from November, $3.65 below a year ago, and the lowest Class III price since May. That put the 2020 average at $18.16, up from $16.96 in 2019 and $14.61 in 2018.

Last Wednesday's Class III futures settlements had the January contract at $16.06; February, $17.91; March, $17.79; April $17.54; May, $17.50; June, $17.33; July, $17.37; August, $17.39; September, $17.56; October, $17.32; November, $17.17; and December at $17.13. That would portend a $17.34 average in 2021. The USDA's latest prediction for 2021 was for a $15.60 average. The Class III price saw a low of $12.14 in May and a high of $24.54 in July.

The December Class IV price is $13.36, up 6 cents from November, $3.34 below a year ago, and the lowest December Class IV price since 2008. Its 2020 average is $13.49, down from $16.30 in 2019 and $14.23 in 2018. The USDA is projecting a 2021 Class IV average of $13.60. The 2020 Class IV low was $10.67 in May and a high of $16.65 in January.

Cash dairy prices ended 2020 below where they were a year ago, but what a roller coaster ride they had. The 40-pound Cheddar block cheese saw a COVID-pandemic-driven bottom of $1 per pound on April 15, then soared to a $3 peak on July 13, and closed New Year's Eve at $1.65, up 5.25 cents on the New Year's holiday-shortened week but 24 cents below a year ago.

The 500-pound Cheddar barrels bottomed out April 9 at $1 per pound, peaked at $2.53 on Oct. 30, and closed Dec. 31 at $1.5425, up 7.75 cents on the week, 10 cents below a year ago, and 10.75 cents below the blocks. Thirty-three cars of block traded hands on the week at the CME and 19 of barrel.

Dairy Market News says the markets have begun to show some stability, at least in the near term. Some Midwestern cheese plants are running full schedules while others are allotting days off, but "there is ample milk available."

Spot milk prices had already been reported at lower discounts than previous weeks. Demand notes are mostly unchanged, according to DMN, but "there are more questions regarding potential governmental bids and food service demand moving into the first quarter of 2021." Some contacts are concerned about growing cheese inventories, but not overly concerned, at least in the near term, according to DMN.

Ample milk flows are keeping Western cheese plants busy and most are running at capacity. Customers are taking regular shipments, says DMN, but predicting demand has been a moving target throughout the year as purchase tendencies are somewhat erratic. Retail demand is steady and strong while food service demand has been weak, though there are exceptions. Sales of snack items that would go into bag lunches are weaker than the rest of retail items. Pizza cheese and process cheese for fast food burgers are stronger than the rest of food service items. Western cheese inventories are balanced to long, says DMN.

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