NEWS

Stray missiles, thought to be from Russia, had hit Poland

Lee Mielke

Americans chewed through a lot of cheese in September, says the United States Department of Agriculture’s latest dairy supply and utilization report. Total consumption hit 1.18 billion pounds, up 3.6% from September 2021, second consecutive month to top year ago levels and the strongest year over year gain since March, according to HighGround Dairy. 

Domestic consumption hit 1.1 billion pounds, up 3.5%. Exports totaled 78.8 million, up 5.1%, and up 12.5% year to date, thanks to low U.S. prices.

Butter usage totaled 162 million pounds, 151.3 million of that in domestic use, down 18.4% from a year ago, lowest volume since June, due to the high prices no doubt. Exports totaled 10.7 million, up a whopping 48.6% and up 40.9% year to date.

Nonfat skim milk powder totaled 219 million pounds, down 6.2%, with exports down 7.1%. Total utilization remained below prior year levels for the fourth consecutive month, says HighGround Dairy, negatively impacted by both domestic and export demand. 

Dry whey utilization totaled 79.5 million pounds, off 0.3% from 2021, and while domestic usage was down 23.8%, exports were up 22.4%, much of that thanks to China’s increased purchases for its rebounding hog herd.

It was powder that reversed the November 8 Global Dairy Trade. The weighted average climbed 2.4%, biggest gain since September 6 and followed a 3.9% decline on November 1, 4.6% decline on October 18 and 3.5% drop on October 4. Traders brought 63.9 million pounds of product to market, up from 63.6 million on November 1. The average metric ton price crept to $3,623.00 U.S., up from $3,537.00 last time.

Powders led the gains after leading the declines on November 1. Skim milk and whole milk powder were both up 3.1%, following an 8.5% plunge on skim milk powder and a 3.4% decline on whole milk powder last time. Anhydrous milkfat was up 2.7% after falling 1.7%, but butter was down 0.8%, following a 0.2% rise last time. Global Dairy Trade cheddar was down 1.3%, after a 0.9% gain and lactose was down 4.6% after dropping 1%. 

StoneX Dairy Group says the Global Dairy Trade 80% butterfat butter price equates to $2.1371 per pound U.S., down 1.7 cents after dropping 5.8 cents in the last event and compares to CME butter which closed Friday at $2.81. Global Dairy Trade cheddar, at $2.1527, was down 2.5 cents after losing nine cents last time and compares to Friday’s CME block cheddar at $2.2325. Global Dairy Trade skim milk powder averaged $1.3864 per pound, up from $1.3479. Whole milk powder averaged $1.541 per pound, up from $1.4875. CME grade A nonfat dry milk closed Friday at $1.4275 per pound. 

European purchases more than doubled from the last event, says analyst Dustin Winston, as buyers tripled their market share. North Asia purchases, which includes China, decreased from the last event and last year, says Winston. 

Broker Dave Kurzawski stated in the November 21 Dairy Radio Now broadcast that dairy demand is typically strong this time of the year, but the question becomes “Is it sustainable?” He said the economy appears strong and the labor market is tight, but the inflationary environment is yet to be slowed by the Fed increasing interest rates. Government spending needs to be cut, he said, but he warned that “Holiday demand will dry up, orders will drop off and speculators will take their ball and go home.” 

Regarding the Global Dairy Trade, Kurzawski said China will be back but it’s going to take time. Americans were “chomping at the bit to get out from under COVID,” he explained, but “People are more fearful in China. It’s a different culture, plus China seems to change its tune week to week on this matter.” He said the Global Dairy Trade was up because the prior three events were down; the lower prices attracted buyers. “Is that a sustainable change in trend? Not yet,” he concluded. 

The Wall Street Journal reported, “China’s economy sank into a deeper funk last month as the weight of strict zero COVID measures, a real estate downturn and sinking export demand underscored the difficulties of rekindling growth.” I believe the takeaway here is that the Global Dairy Trade won’t be bailed out by China any time soon.

CME prices were mixed the week before Thanksgiving. After jumping 19 cents the previous week, the cheddar blocks closed Friday at $2.2325 per pound, up 3.25 cents on the week, highest since June 10 and 3.75 cents above a year ago. 

The barrels finished at $1.9275, 13.50 cents lower on the week, 40.75 cents above a year ago, and a whopping 30.50 cents below the blocks. There were no sales of block on the week, the gains were on unfilled bids, with eight sales of barrel.

Midwestern cheesemakers are running full or close to full production, according to Dairy Market News, alongside steady demand. Milk availability has stayed in a similar range to previous weeks, not straying far from class in either direction. Some cheese producers already locked in milk pricing for Thanksgiving week.

Demand for cheese is mixed in the West. Contacts reported strengthening food service demand while retail is softening. International purchasers continue to buy cheese, thanks to U.S. competitive prices. Milk production is trending higher in the region and cheesemakers are utilizing the milk to run busy schedules. Labor shortages and delayed deliveries of supplies however continues to prevent operating full schedules, according to Dairy Market News.

CME butter, with one exception, saw six consecutive sessions of gain until losing 1.25 cents Thursday and then suffered a 13 cent meltdown Friday, closing at $2.81 per pound, down 9.5 cents on the week. That’s still 76.25 cents above a year ago when it topped $2 per pound for the first time since June 4, 2020. There were seven sales reported at the CME this week, five on Friday. 

Butter producers say demand has not shifted much the past two weeks. Sales are meeting or beating expectations and on par with pre-COVID years. Churning is at the max and butter inventories are available but are newer production. As cream access continues to grow, butter makers are taking more of it, but expectations are that cream will tighten following the holiday. 

Western cream volumes are available amid strengthening milk output and cream demand is steady. Butter makers ran busier schedules this week, though some are below capacity due to continued labor shortages. Retail butter demand is steady to higher as some grocers are looking past Thanksgiving to stock butter for end of year holidays. Food service and bulk demands are unchanged. 

Grade A nonfat dry milk climbed to $1.465 per pound Tuesday, highest since October 18, then gave back 2.5 cents Wednesday and closed Friday at $1.4275, down 0.25 cents on the week and 12.75 cents below a year ago, on 16 sales.

Whey held all week 44 cents per pound, 26 cents below a year ago, on two trades.

Dairy margins strengthened the first half of November on a recovery in milk prices while feed costs moved lower, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.

“Continued strong demand for cheese in both the U.S. domestic and export markets is helping to support class III prices,” the Margin Watch stated and detailed U.S. September dairy exports and dairy product production. The Margin Watch also expressed concern over the health of the Chinese economy and uncertainty about the extent to which the government will relax its zero COVID policy.  

The USDA’s latest crop progress report shows the U.S. corn harvest is 93% completed, as of the week ending November 13, up from 87% the previous week, 3% ahead of a year ago and 8% ahead of the five-year average. Soybeans were at 96%, up from 94% the previous week, 5% ahead of a year ago and 5% ahead of the five-year average. 

Russia agreed to extend the Black Sea grain export agreement, an extension that came under question this week when stray missiles, thought to be from Russia, had hit Poland. It appears they were an accident from Ukraine.

Culling in the week ending November 5, totaled 60,000 dairy cows, up 600 from the previous week and 100 or 0.17% above a year ago. Year to date is up 2.5%. 

The USDA’s monthly Livestock, Dairy and Poultry Outlook, issued November 16, mirrored milk price and production projections in the November 9 World Agricultural Supply and Demand Estimates.

The Outlook also stated that, based on recent milk production data for third quarter, the dairy herd size forecast for fourth quarter was adjusted downward, but output per cow was raised. Milk cows for 2022 are projected to average 9.405 million head, 5,000 cows fewer. The average milk output per cow was projected at 24,130 pounds per head, up 20 pounds from a month ago.

The herd was projected 10,000 cows fewer in 2023 at 9.415 million. Output per cow was 24,350 pounds, up 30 pounds from last month’s report. 

In politics, the USDA’s Food and Nutrition Service announced proposed changes to the foods prescribed to participants in the special supplemental nutrition program for women, infants and children (WIC). The revisions incorporated recommendations from the National Academies of Science, Engineering and Medicine and the Dietary Guidelines for Americans, 2020 through 2025.

The announcement drew fire from the National Milk Producers Federation and the International Dairy Foods Association. A joint press release stated, “It is unfortunate for WIC participants that the proposed rule would decrease access to dairy products and the unique nutrient profile they provide, especially considering the current Dietary Guidelines for Americans (DGA) note that a staggering nearly 90% of the U.S. population does not consume enough dairy to meet dietary recommendations. At a time of rising food costs and high food insecurity, we should focus on increasing access to a wide variety of healthful, nutrient dense and affordable foods including both fresh produce and dairy products. It’s disappointing that the proposed rule would limit WIC family purchasing power for nutritious dairy foods, particularly at a time like this.”

Meanwhile, National Milk also called on the U.S. Food and Drug Administration this week to “use existing legal authority to modernize its regulations allowing faster approval of animal feed additives that reduce greenhouse gas emissions,” “enhancing dairy’s role as a climate solution.”  

“Innovative and voluntary solutions are needed to reduce greenhouse gas (GHG) emissions, including methane,” said Dr. Jamie Jonker, National Milk Producers Federation’s chief science officer. “Enteric emissions directly from cows currently account for roughly one third of all GHG emissions from dairy farms and present an important area of opportunity for methane reductions. Feed composition changes can directly or indirectly reduce enteric emissions resulting from livestock,” says Jonker.

The October CPI for all food was 315.3, up 10.9% from 2021. The dairy products index was 269.4, up 15.5% from a year ago. Fresh whole milk was up 13.2%, cheese was up 12.4% and butter was up 26.7%.

U.S. milk production is mostly steady throughout the country, according to the USDA’s weekly update, as pockets of higher output show up in some areas. Class I milk sales are steady to higher with the addition of seasonal eggnog purchases. The Florida market was preparing for another hurricane.

European milk output is at or near its low point for the typical milk production season, says Dairy Market News. “But as the continental milk output approaches the low point, typically in mid-November, farmers are pushing their cows to produce more milk. Milk buyers have kept pay prices at high levels in efforts to keep their farmers under contract. Inflation is taking a bite of dairy and food sales. Food and beverage prices in the UK jumped 14.6% in September from September 2021.” 

Eastern European milk output is nearing its low point for the year, says Dairy Market News, “but has maintained a year over year increase for much of the year. So far, Ukraine has been able to export approximately 14.3 million tons of grain, down 30.7% from the amount exported at this point in the last grain season.”   

Dairy Market News reports that Australia's farmers continue to wrestle with extensive flooding in the midst of labor issues and production costs. Market analysts see these as significant obstacles that affect increases in Australia's near-term milk production and dairy export volumes. The recent milk production report shows output fell 5.9% in August, compared to 2021. “Sources report that cheese production, currently Australia's primary export focus, is pressured by low milk output. Meanwhile, butter, skim milk and whole milk powder are expected to suffer reductions in the country's 2023 export market,” according to Dairy Market News. 

New Zealand’s dairy industry has “sprinted into November,” according to Dairy Market News, and “indications are for an optimistic trend.” “Warmer than average conditions and periods of dry spells are forecasted for the month, across the country, which some say could be another La Nina weather pattern in development. Meanwhile, market demand is a growing concern with the declines in dairy commodity spot prices,” warned Dairy Market News. “Sources note that the reductions in China’s imports drives the lower prices but the least uptick in demand may sway the current bearish sentiment.”  

Last but not least of all, a HAPPY THANKSGIVING to one and all. We indeed have much to be thankful for and praise and thank the God Who has given it!

Lee Mielke is a graduate of Brown Institute in Minneapolis, Minnesota. 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.