Market Expects USDA to Continue Funding Food Box Program
Published: Friday, February 26, 2021
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Uncertainty surrounds the dairy markets, which are waiting to see what will happen to government assistance. StoneX Dairy broker Dave Kurzawski said in the Feb. 22 "Dairy Radio Now" broadcast that, word on the street at week's end was that the food box program would continue in March, with funding close to what was spent in February, or about $350 million. Bottom line, he says, the food box program, Section 32 funds for commodity purchases, and all of the other government programs on the table combined could potentially mean Uncle Sam will spend more money on food in 2021 than it did in 2020.
As to the impact on cheese prices, Kurzawski cautioned that we have a lot more milk to deal with right now, especially as we come into the spring flush, plus cheese demand has slowed throughout the pandemic. Retail sales may be up 10 percent to 15 percent, he said, but hasn't offset the loss is restaurant and foodservice demand.
The government has made up a lot of that difference, he said in closing, but U.S. cheese manufacturing has been somewhat constrained through the end of last year and if that changes this year, we could see additional pressure on prices.
The Agriculture Department's monthly Livestock, Dairy, and Poultry Outlook, issued Feb. 16, mirrored milk price and production projections in the Feb. 9 World Agricultural Supply and Demand Estimates report. It also stated that the recent NASS Cattle report shows that milk cows numbered 9.44 million head on Jan. 1, 2021, about 3,000 fewer than the December average reported in the Milk Production report. Milk replacement heifers totaled 4.605 million head on Jan. 1, about 48.8 percent of the milking herd, lowest percentage since Jan. 1, 2009, says USDA.
Milk cow numbers in 2021 are projected to average 9.435 million, up 5,000 from last month's forecast but numbers are expected to decline from the first quarter to the third quarter due to "relatively low milk prices, relatively high feed prices, and a relatively low number of replacement heifers." Milk per cow was projected to average 24,100 pounds per head in 2021, up 5 from last month's forecast.
In the week ending Feb. 6, 67,600 dairy cows were sent to slaughter, down 1,900 from the previous week but 100 head more than that week a year ago.
Dairy farm margins were mixed over the first half of February, though trending firmer on higher milk prices with feed costs largely unchanged over the past couple weeks, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.
The MW stated, "There is growing optimism that part of the new stimulus package being put together by Congress will include another round of food box purchases which would be supportive for dairy prices while continued vaccine distribution and declining COVID caseloads are allowing restaurants to restore and expand indoor dining, which should likewise help to increase dairy demand."
The March federal order Class I base milk price was announced by the USDA at $15.20 per hundredweight, down 34 cents from February, $2.26 below March 2020, and equates to $1.34 per gallon, down from $1.50 a year ago. The three-month Class I average stands at $15.29, down from $18.01 a year ago.
Speaking of Class I, the plunge in fluid sales reversed direction in December. USDA's data shows 4.0 billion pounds of packaged fluid products were sold, up 1.5 percent from December 2019, and followed a 4.4 percent drop in November.
Conventional product sales totaled 3.8 billion pounds, up 1.1 percent from a year ago.
Organic products, at 253 million pounds, were up 8.9 percent, and represented 6.3 percent of total sales for the month.
Whole milk sales totaled 1.3 billion pounds, up 1.4 percent from a year ago. Sales for the year totaled 15.5 billion pounds, up 2.6 percent from 2019, and made up 33.5 percent of total milk sales for December and 33.6 percent for the year.
Skim milk sales, at 234 million pounds, were down 11 percent from a year ago and down 14.6 percent for the year.
Total packaged fluid milk sales, January through December, amounted to 46.2 billion pounds, down just .1 percent from 2019. Conventional product sales totaled 43.3 billion pounds, down .7 percent. Organic products, at 2.9 billion pounds, were up 10.4 percent and represented 6.2 percent of total fluid milk sales in 2020.
Return to Top of Page