AllBreedsBlog

This Week in Dairy - Lee Mielke

Lee Mielke is a veteran dairy journalist and broadcaster, currently carried in a dozen Ag newspapers nationally. This column is prepared especially for the readers of DairyBusiness. Based in Lynden, Wash., he can be reached by email at lkmielke@juno.com or by phone 360.201.4033.

The Agriculture Department announced the February Federal order (FO) Class III benchmark milk price at $16.88 per hundredweight (cwt.), up 11 cents from January, $3.08 above February 2016, and the highest February Class III price since 2014. The two-month Class III average stands at $16.83, up from $13.76 at this time a year ago and compares to $15.82 in 2015. And, it equates to about $1.45 per gallon, up from $1.44 in January and $1.19 a year ago.

 

Late Friday morning’s Class III futures portended a March Class III at $15.94; April, $15.83; May, $15.95; June, $16.25; with a peak of $16.91 in September.

 

The Class III price is also $1.07 above California’s comparable 4b cheese milk price, the highest gap since September 2016, and comes despite the temporary state mandated whey pricing formula adjustment.

 

The February FO Class IV price is $15.59 per cwt., down 60 cents from January but $2.20 above a year ago. The two-month Class IV average, at $15.89, is up from $13.40 a year ago and $13.53 in 2015.

 

The four-week, USDA-surveyed cheese price used to calculate the month’s Class prices averaged $1.6871 per pound, down 1.4 cents from January. Butter averaged $2.1760, down 8.1 cents, nonfat dry milk averaged 99.26 cents per pound, down 3 cents, but dry whey averaged 48.94 cents per pound, up 4.7 cents from January.

 

California’s comparable Class 4b cheese milk price is $15.81 per cwt., down 18 cents from January, $2.76 above a year ago, and the lowest 4b price since October 2016.

 

The Class 4a butter-powder price is $15.40 per cwt., down 27 cents from January but $2.12 above a year ago.

 

The 4b 2-month average stands at $15.90, up from $13.07 a year ago and $13.77 in 2015. The 4a average now stands at $15.54, up from $13.27 a year ago and $13.28 in 2015.

Cheese fell for the fourth consecutive week. The blocks closed March 3 at $1.48 per pound, down 9 1/2-cents on the week, 4 cents below a year ago, and the lowest price since June 2016. The barrels lost 8 cents and are 2 1/4-cents below a year ago. The blocks have plunged 26 cents since the end of January and the barrels have lost 27 cents. Eight cars of block were traded and 21 of barrel.

 

Milk continues to be abundant for Midwest cheese producers, according to Dairy Market News (DMN). Some expect discounted milk prices in the near term and are buying spot milk when the price is favorable. Cheese production is steady to active while cheesemakers try to maintain production and manage increasing inventory. Demand varied from producer to producer the last week of February but was generally improving this week. DMN says the seasonal lull has begun to fade and orders are slowly trending upward. Pizza cheese producers are also seeing a demand turnaround, with orders edging up compared to the past two to three weeks. The market tone is unsteady but, with block prices back above the barrels, some contacts believe that is a sign of stability.

 

Western cheese makers report cheese is moving well through existing contracts. They are hopeful that softening prices may provide more opportunities for exports. Domestic sales have slowed somewhat and new international sales could be a shot in the arm. Contacts say inventories are long for both barrels and blocks and there’s plenty of milk moving into the cheese vats.

 

The resilient butter closed at $2.1625 per pound, up 3 1/4-cents on the week and 12 1/4-cents above a year ago, with 24 cars trading hands on the week.

 

Cream is plentiful in the Central U.S., according to DMN. Class II producers continue to show interest in cream but some butter makers report the abundant cream supply has not deviated from previous weeks. Demand for butter in the Central region is strengthening and spring holiday orders are in full swing. Some butter producers are beginning to increase bulk inventories for the fall. The market tone is termed “steady. “

 

Western domestic retail demand is starting to ramp up for the spring holidays. Overall demand is steady with current contracted buyers pulling good volumes of butter. Churns are actively processing available cream, which is plentiful. Inventories are building seasonally for late year butter needs.

 

Why is butter so strong? The Daily Dairy Report pointed out that March 1 marked the start of new-crop butter; “That is, only butter produced on or after December 1, 2016, is eligible for sale at the CME cash market after March 1, 2017.”

 

Another possible factor; while it took a while to follow McDonald’s lead, Burger King announced that it has reformulated its breakfast sandwiches to include real butter. The February 24 Dairy and Food Market Analyst (DFMA) estimates that will absorb another 4.0 million pounds of butter annually. I think more will follow.

 

Cash Grade A nonfat dry milk saw some ups and downs on the week but closed at 80 1/2-cents per pound, down 1 3/4-cents but 2 1/2-cents above a year ago. Eight cars found new homes on the week at the CME.

 

One factor influencing powder was last week’s announcement that the EU’s skim milk powder intervention tender closed yet again (5th time) with no product sold.  

 

Add to that, the DFMA reports that new data shows Chinese buyers have “stepped back from the market, while milk production is again growing in New Zealand.” The DFMA warned; “Less demand and more supply is a recipe for lower prices,” adding that “By a longshot, the USA is the cheapest origin for milk powder. But with Mexican demand still stagnant, prices may have to dip further to stimulate buying interest from other parts of the world.” 

 

The February 27 DDR reported that, while New Zealand moved massive volumes of milk powder to China in January, the third largest on record, “China brought in 72.3 million pounds of skim milk powder (SMP) and 238.4 million pounds of whole milk powder (WMP) in January.” But added; “Despite that good news, however, the combined total of 310.7 million pounds of milk powder was 8 percent lower than the previous year.”

 

New Zealand accounted for 96 percent of China’s WMP imports and 76 percent of the country’s SMP shipments, according to the DDR, “underscoring the advantage that lower tariffs can provide.” China’s imports of cheese, whey, and ultra-high temperature (UHT) milk were “a bit disappointing,” the DDR stated.

 

Preliminary data put January 50-State milk output at 17.9 billion pounds, up 2.5 percent from January 2016. USDA’s Dairy Products report shows where it went.

 

January cheese output totaled 1.04 billion pounds, down 1.2 percent from December but 3.7 percent above January 2016.

 

California produced 211 million pounds of that cheese, down 2.8 percent from December but 2.5 above a year ago. Wisconsin produced 268.2 million pounds, down 1.8 percent from December but 1.9 percent above a year ago. Idaho was up 0.8 percent from a year ago while Minnesota was off 0.8 percent.

 

Italian cheese totaled 451.9 million pounds, down 1.5 percent from December but 3.8 percent above a year ago. Mozzarella, at 352.2 million, was up 4.5 percent.

Total American type cheese hit 412.9 million pounds, down 1.2 percent from December but up 3 percent from a year ago. Cheddar output, the kind traded at the CME, amounted to 306.8 million pounds, up 3.5 percent from 2016.


Butter churns produced 177.8 million pounds, up 8.5 percent from December and 1.2 percent above a year ago.

California butter amounted to 51.6 million pounds, up 2.2 percent from December but 2.3 percent below a year ago. New York output was up 14.7 percent from December and 8.2 percent above a year ago, while Pennsylvania was up 2.6 percent from December and 5 percent above a year ago.

 

Yogurt output hit 375.4 million pounds, down 4.9 percent from a year ago and dry whey output totaled 82.2 million pounds, down 1.3 percent.

Nonfat dry milk production totaled 155 million pounds, unchanged from December but up 13.1 percent from a year ago. Skim milk powder, at 50.5 million pounds, was down 1.4 percent from a year ago.

The report also showed January nonfat dry milk stocks at 229 million pounds, up 0.5 percent from December and just 1.1 percent above those a year ago.

 

Higher corn and soybean prices offset a slightly higher All-Milk price to pull the latest milk feed price ratio a little lower. The January ratio slipped to 2.69, down from 2.70 in December, but is up from 2.18 in January 2016, according to the Agriculture Department’s latest Ag Prices report.

 

The index is based on the current milk price in relationship to feed prices for a dairy ration of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. In other words, one pound of milk today purchases 2.69 pounds of dairy feed containing that blend.

The January U.S. average All-Milk price was $18.90 per cwt., up a dime from December and $2.80 above January 2016. California had the lowest at $17.54, unchanged from December, $2.42 above a year ago, and $1.76 below the Wisconsin price. Wisconsin averaged $19.30 per cwt., down 40 cents from December but $3.30 above a year ago. New Mexico had the second lowest price, at $17.90, up $1.80 from December and $2.90 above a year ago.

January corn averaged $3.40 per bushel, up 7 cents from December but 26 cents per bushel below January 2016. Soybeans averaged $9.71 per bushel, up 7 cents from December and $1.00 per bushel above January 2016. Alfalfa hay averaged $128 per ton, down $1 from December, and $13 below a year ago.

Looking at the cow side; the report shows the January cull price for beef and dairy combined averaged $64 per cwt., up $2.90 from December, $10.20 per cwt. below January 2016, and $7.60 below the 2011 base average of $71.60 per cwt.

 

Prices received for milk cows in 2016 averaged $1,760.00 per head, down $230 from 2015. Wisconsin averaged $1850 per head, down $250 from 2015. The California average, at $1750, was down $280 from 2015.

In politics, livestock producers will surely welcome one of President Trump’s latest Executive Orders. A roll back of the controversial Waters of the U.S. regulation was announced February 28.

 

The National Milk Producers Federation called the decision “a welcome development for the nation’s dairy farmers, who have been concerned by the continuing lack of clarity and certainty generated by this policy.”

 

A NMPF press release stated that the action signals that the Administration recognizes that we need to “go back and rethink the entire process.”

 

“The Waters of the U.S. rule was finalized by the Environmental Protection Agency (EPA) and the Army Corps of Engineers in 2015, but was subsequently blocked by a federal appeals court, which suspended nationwide implementation of the regulation. Today’s decision directs EPA to revise or rescind the rule that expanded the number of waterways regulated under the Clean Water Act.”

 

NMPF stated that it and its members are “committed to protecting U.S. waterways through voluntary efforts, as well as regulatory compliance with the Clean Water Act. Clean water is central to healthy ecosystems, secure water supplies for human and animal consumption, and to the production of milk and other dairy products. The dairy industry will continue working with EPA and Army Corps of Engineers to find effective ways to achieve these important goals.”

 

Meanwhile; Darci Vetter, former chief agricultural negotiator for the U.S. Trade Representative, speaking at this week’s International Sweetener Colloquium, urged food and beverage companies that use sugar and sweeteners in their products and sugar providers to “demand a seat at the table on trade negotiations in the new administration,” according to a press release from the International Dairy Foods Association (IDFA), co-sponsor of the event.

                            

“Communicate clearly to your government leaders your desire to help shape strong outcomes but also that you have an expectation that you will be part of an iterative process to shape those outcomes from the get-go,” Vetter said.

 

Bob Gray, editor of the Northeast Dairy Farmers Cooperative’s newsletter, reports that “Since the 2018 Farm Bill hearings started a couple of weeks ago, farm state lawmakers are looking to enhance farm programs next year as the bill is debated and passed. However, a number of other groups are arguing that farm programs need to be cut even though they make up a very small percentage of the annual cost of the Farm Bill; just 9 percent for crop insurance and 5 percent for risk management programs, compared to the 80 percent for SNAP and other nutrition programs.”

 

“The Heritage Foundation, a conservative think tank here in D.C., argues that the current downturn in farm commodity prices are inherently cyclical and therefore shouldn't be used as a barometer in determining future farm policy.”

 

Cooperatives Working Together (CWT) accepted 19 requests for export assistance the week of February 27 to sell 2.59 million pounds of cheese and 52,360 pounds of butter to customers in Asia, Central America, the Middle East and Oceania. The product has been contracted for delivery through May and raised CWT’s 2017 exports to 10.96 million pounds of American-type cheeses and 1.38 million pounds of butter (82 percent milkfat) to 11 countries.

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