The WASDE had some good news on the feed front
The Agriculture Department lowered its estimate for 2021 milk production in the latest World Agricultural Supply and Demand Estimates (WASDE) report, fourth month in a row, and lowered its 2022 estimate, citing lower dairy cow numbers and output per cow.
2021 production and marketings were estimated at 227.0 and 226.0 billion pounds respectively, down 800 million pounds on production from last month’s estimates, and 700 million lower on marketings. If realized, 2021 production would still be up 3.8 billion pounds or 1.7% from 2020.
2022 production and marketings were estimated at 229.7 and 228.6 billion pounds respectively, down 900 million pounds on both. If realized, 2022 production would be up 2.7 billion pounds or 1.2% from 2021.
Cheese, nonfat dry milk (NDM), and whey price forecasts for 2021 were raised, based on current prices and lower expected production. The butter price was lowered slightly. All dairy product prices for 2022 were raised, largely on tighter supplies, according to the WASDE.
The 2021 cheese price average was projected at $1.68 per pound, up 40 cents from last month’s estimate, and compares to $1.9236 in 2020 and $1.7586 in 2019. The 2022 average was projected at $1.7150, up 6 cents from last month.
The 2021 butter price average was projected at $1.6850 per pound, down a nickel from a month ago, and compares to $1.5808 in 2020 and $2.2431 in 2019. The 2022 average was put at $1.7550 per pound, up 2.50 cents.
NFDM was projected to average $1.2450 per pound in 2021, up 2 cents from last month’s estimate, and compares to $1.0417 in 2020 and $1.0419 in 2019. The 2022 average will climb to $1.38, up 11 cents from what was expected last month
Whey was projected to average 56.50 cents per pound in 2021, up a penny from last month, and compares to 36.21 cents in 2020 and 37.99 cents in 2019. The 2022 average will slip to 51 cents, up a penny from last month’s estimate.
Look for the 2021 Class III milk price to average $17.05 per hundredweight, up 40 cents from last month’s projection, and compares to $18.16 in 2020 and $16.96 in 2019. The 2022 Average was estimated at $17.10, up 65 cents.
The 2021 Class IV average was pegged at $15.70, up 15 cents from a month ago, and compares to $13.49 in 2020 and $16.30 in 2019. The 2022 average was projected to hit $17.15, up $1.10 from last month’s estimate.
The WASDE had some good news on the feed front. The U.S. corn outlook is for slightly higher production, increased exports, lower feed and residual use, and larger ending stocks. Corn production was forecast to hit 15.02 billion bushels, up 23 million from last month’s forecast and up 6% from 2020, on a marginal increase in yield to 176.5 bushels per acre, up 5.1 bushels from last year. Corn supplies were forecast up 72 million bushels from last month, on slightly higher production and increased beginning stocks.
Corn exports were raised 25 million bushels reflecting larger supplies and expectations of reduced competition from other major exporters. Projected feed and residual use was lowered 50 million bushels. With supply rising and use falling, corn ending stocks were raised 92 million bushels. The season-average corn price received by producers was unchanged at $5.45 per bushel.
Total planted area, at 93.3 million acres, was unchanged from the last estimate, but up 3% from a year ago. Area harvested was forecast at 85.1 million acres, unchanged from the previous forecast, but up 3% from the previous year.
Soybean production was forecast at a record 4.45 billion bushels, up 2% from the previous forecast, and up 74 million or 5% from 2020 on higher yields. Acreage estimates were unchanged from last month. Total planted area, at 87.2 million acres, was unchanged from a month ago but up 5% from the previous year. Harvested area was unchanged at 86.4 million acres, up 5% from 2020.
The soybean yield was projected at 51.5 bushels per acre, up 0.9 bushels from September’s forecast. Soybean supplies were projected at 4.7 billion bushels, up 145 million on higher production and beginning stocks. Ending stocks were projected at 320 million bushels, up 135 million from last month. The season-average soybean price was forecast at $12.35 per bushel, down 55 cents, and soybean meal was forecast at $325.00 per short ton, down $35.00.
Interesting footnote; StoneX reports that Mexican regulators last week rejected a new genetically modified corn variety for the first time, with seven other GMO corn seed permits waiting long-term for a resolution.
Meanwhile, the U.S. corn harvest was 41% complete, as of the week ending Oct. 10, according to this week’s Crop Progress report. That’s 2% ahead of a year ago and 10% ahead of the five year average. 60% of the corn crop is rated good to excellent, 1% behind a year ago.
The soybean harvest is 49% complete, 9% behind a year ago, but 9% ahead of the five year average. 59% was rated good to excellent, 4% behind a year ago.
In the week ending Oct. 2, 60,700 dairy cows were sent to slaughter, up 300 from the previous week, and 2,900 or 5.0% above that week a year ago. The 4-week rolling total is up 4.53% from a year ago, according to StoneX, as cull prices continue to hold a premium over last year's levels.
Analyst and editor of the Dairy and Food Market Analyst newsletter, Matt Gould, said in the Oct. 18 ‘Dairy Radio Now’ broadcast that the WASDE recognized the tight margins on dairy farms where either the milk price hasn’t been high enough or feed prices haven’t been low enough and the breakeven level is not being met.
He said New Mexico was hit the hardest and where, in the past 100 days or so, 15,000 cows came up for auction. He concluded saying the report had good news on feed but “We’re far from a world where we’re talking about cheap feed. With corn at $5 per bushel and higher, it costs significantly more to feed a cow this year than it did last year,” and farmers tell him, their break evens are $2-3 higher this year than they were a year ago, and run around $18.80 per cwt.
CME Cheddar block cheese fell to $1.76 per pound Wednesday but closed Friday at $1.78, down 3 cents on the week and 94 cents below a year ago. The barrels closed at $1.79, unchanged, after five consecutive weeks of gain, but are 41.50 cents below a year ago and an inverted penny above the blocks. First inversion since June 24. There were 9 sales of block on the week at the CME and 8 of barrel.
Central cheesemakers tell Dairy Market News there is plenty of milk available and was being offered from $1 under Class to just over. Labor shortages remain. Cheese demand for many varieties is “seasonally healthy,” and curd and barrel producers report not being able to produce enough, due to staffing shortages.
Western food service and retail cheese demand is holding steady. International demand is increasing as contacts note stronger interest from Mexico and Asia. Port congestion and a shortage of truck drivers continues to cause delays. Delivery delays are, reportedly, causing warehouse inventories to build. Cheese production is mixed but milk supplies are available. Some producers are running full schedules while others are below capacity due to labor shortages, says DMN.
Food service cheese sales have done well most of the year, says StoneX. “From a dollars perspective, food service sales were up 27.6% YOY in August. It’s pretty clear that these sales have been the driving force behind the recent gains in U.S. dairy consumption. That said, we did see a small slowdown in September as additional COVID restrictions were put in place.”
Butter climbed to $1.82 per pound Wednesday but closed Friday at $1.7750, up 5.50 cents on the week and 26.50 cents above a year ago, on 30 sales.
Midwest butter demand is strong but timing could be better. Cream is relatively pricey, according to producers, and labor shortages continue to beleaguer plants. Contacts say they are having to allocate inventories to assure each customer has an opportunity to purchase. Concerns remain regarding transportation and hauling. Deliveries are not as assured as they were a couple months ago, and there is no short-term clarity regarding the growing amount of logistical issues.
The Pacific Northwest and northern mountain states are heavy with cream following a fire at a Caldwell, Idaho Darigold butter plant this week. The plant also produces nonfat dry milk. The Nothwest’s largest dairy cooperative suffered a fire at its Lynden, Washington plant in Feb. 2012.
Cream destined for the Caldwell plant was looking for a home but sources say most local churns are already full as holiday butter production is underway. Cream supplies throughout the rest of the West are reportedly near normal for this point in the year, and butter production is steady. As the fall baking and holiday season begins, some contacts expect typical holiday butter demand, while others anticipate banner year celebrations and a stronger holiday pull than usual. Either way inventories are abundant and there is plenty in coolers. Retail sales continue to increase, while food service demand remains level to lower.
Grade A nonfat dry milk is basking in popularity as cheesemakers use it to fortify vats and exports are good. The powder reached $1.5375 per pound Thursday, highest since Aug. 2014, but finished Friday at $1.5325, up 7.25 cents on the week and 39.25 cents above a year ago, with 13 carloads sold on the week.
CME dry whey climbed to 60.50 cents per pound Thursday, highest since June 21, but finished Friday at 60.25, 0.75 cents higher on the week, and 21.50 cents above a year ago. There 7 sales on the week at the CME.
Whey is doing a lot of heavy lifting to boost the Class III milk price, says the Daily Dairy Report’s Sarina Sharp in the Oct. 8 Milk Producers Council newsletter. “So far this year, spot whey has averaged 57 cents, compared to 37 cents in 2020 and 35 cents in 2019,” says Sharp. “If whey values were at 2020 levels, the Class III price would be roughly $1.23 lower than it has been this year.”
Contacts tell the Dairy and Food Market Analyst they are seeing a surge in inquiries from international customers for milk powder, butter, and cheese. Editor and analyst Matt Gould wrote in his Oct. 8 edition; “We continue to believe that the dairy industry is managing thru the congestion, which is producing greater exports. Contacts are not reporting a significant worsening in access to sea freight. This despite, ridiculous conditions at our ports. At the moment, there are two ships that have been waiting more than 20 days to dock at the Port of Los Angeles and 75 that are waiting to dock outside of Los Angeles/Long Beach. Congestion has also increased in the Gulf and the East,” says Gould.
“Even still, shipping costs may finally be leveling out,” he write. “Spot rates from Los Angeles, California to Shanghai, China decreased by 5.0% this week and have fallen by 8.8% in the last month.”
Final 2020 consumption data confirms Americans love dairy. For the third consecutive year, per-capita dairy consumption increased, jumping to 655 pounds per person, up from 653 pounds in 2019, “showing a resilience,” says the National Milk Producers Federation.
NMPF stated that “A small uptick in yogurt, a gain in butter consumption, as it marches back to 1960’s-level consumption, increased buying of both full-fat and lower-fat ice cream, because what’s a lockdown without ice cream? And fluid milk consumption held steady, belying the haters who always use receding prominence as fake evidence of the ‘death of dairy’ even as gains among other dairy products more than outpace any fluid losses.”
“Steady is what dairy’s been all about,” says NMPF. “At a time when everything from public health to supply chains have been in upheaval, consumers can count on dairy, for quality, nutrition, affordability, and for care in its creation. 2020 is over, and 2021 hasn’t been a picnic either. But we do know, and the data does show, what consumers have counted on throughout. Dairy farmers are proud to provide products that keep the country nourished. They will continue to meet that steadily growing need until current challenges have passed and far, far beyond.”
Sad to say, fluid milk consumption continues to struggle, though it improved some from the previous month. USDA’s latest data shows August sales of packaged fluid milk products totaled 3.6 billion pounds, down 1.7% from Aug.2020, after plummeting 6.3% in July.
Conventional product sales totaled 3.4 billion pounds, down 1.7% from a year ago. Organic products, at 228 million pounds, were also down 1.7%, and represented 6.3% of total sales for the month.
Whole milk sales totaled 1.2 billion pounds, down 2.8% from a year ago, with year to date consumption down 6.9%. Whole milk represented 33.2% of total milk sales for the eight month period.
August skim milk sales, at 205 million pounds, were down 10.2% from a year ago and down 13.6% year to date.
Total packaged fluid milk sales for the eight months amounted to 29.2 billion pounds, down 4.8% from 2020. Conventional product sales totaled 27.3 billion pounds, down 5.0%. Organic products, at 1.9 billion, were down 2.0%, and represented 6.4% of total milk sales for the period.
The figures represent consumption in Federal milk marketing order areas, which account for approximately 92% of total fluid milk sales in the U.S.
Lee Mielke is a graduate of Brown Institute in Minneapolis, MN. He’s formerly the voice of the radio show “DairyLine,” and his column appears in agricultural papers across the U.S. Contact him at lkmielke@juno.com.