Following last week’s feeding frenzy of USDA reports and the GDT, dairy markets were somewhat starved this week. The good news from the previous week was USDA’s announcement extending the Farmers to Families Food Box program through Dec. 31, though Congressional agreement on another stimulus package had not materialized. Meanwhile, the third quarter U.S. gross domestic product was up an astounding and more than expected 33.1 percent.
The Oct. 23 Dairy and Food Market Analyst (DFMA) broke down the food box specifics, reporting “USDA will spend $500 million on ‘combination boxes,’ which include meat and produce, one gallon of milk, and require five to six pounds of at least 2 dairy items, cheese and either butter or a cultured dairy product.
“In the previous rounds, USDA spent $51.73 per combination box. Using that cost, USDA will purchase total of about 9.7 million boxes in this latest round. That translates into approximately 83 million pounds of fluid milk and about 53 million pounds of other dairy products (cheese, butter and cultured products),” the DFMA said. “In total, we estimate USDA will purchase about 1.5 percent of U.S. milk supplies in November and December, down from the current rate of about 4 percent.”
DFMA analyst and editor Matt Gould discussed the September Milk Production report in the Nov. 2 ‘Dairy Radio Now’ broadcast and said the 2.3 percent growth was more than expected; however most of the milk will go into cheese production, good news for consumers eating pizza and cheeseburgers, but likely means lower cheese prices ahead and lower milk prices for farmers in 2021.
Looking at the election, Gould said House and Senate races are more important to the dairy industry and policy priorities may be in for a change. He said it will be several months into the new-year before we know what “the new norm will be.”
Dairy prices remained firm the week before the election except on butter. The Cheddar blocks saw a Halloween finish at $2.7825 per pound, up a penny on the week, 5th week of gain, highest since July 15, and 62.75 cents above a year ago.
The barrels set a new record high Friday, closing at $2.53 per pound, up 7.50 cents on the week. That was the 7th consecutive week of gain, besting the Sept. 22, 2014, record by 4 cents, and are 20.50 cents above a year ago. They narrowed the gap but are at a still too high 25.25 cents below the blocks. Only 2 cars of block exchanged hands on the week at the CME and 6 of barrel.
Cheesemakers reported skittishness on the buyer side this week to Dairy Market News, as buyers don’t want to get caught on the wrong end of a potential market drop. Plant managers are running busy schedules but reports continue of employees quarantining due to COVID-19 outbreaks. Spot milk trading was very slow and spot prices continued to hover around Class. Cheese market tones have steadied but, as mentioned, there are questions as to when they will face downward
Butter continued its meltdown, falling to $1.3825 per pound Wednesday, lowest since May 12, rallied some Thursday, but slipped back Friday to $1.39, 4.50 cents lower on the week and 69 cents below a year ago. 29 sales were reported.
Lockdowns, due to increasing COVID cases, are feared in the United States. France and Germany announced new lockdowns and StoneX reports that Chicago shuttered restaurants and bars starting Oct. 29 for the next few weeks. In dining restaurants use a lot of butter so those sales are now threatened and it’s doubtful that retail sales will make up the difference.
Cream remains widely available for Midwest butter producers who report competitive cream prices from both local and Western sources. Butter demand is seasonally hearty. Grocers are stocking shelves and plant managers are working to keep up. But, like cheesemakers in the region, there are COVID-related setbacks regarding working staff. Expectations are for strong ordering for the next two weeks but butter market tones remain soft. Contacts also expect upticks in export markets, with domestic butter prices becoming competitive globally.
DMN reports there is chatter in the west that machine time is tight and is sidetracking butter production. Contacts were surprised by the drops in the CME butter price so there is uncertainty as to where prices will stabilize. Inventory drawdowns are occurring, which supports price, but some manufacturers note that pulls need to occur continuously. Production rates vary, but are generally higher as manufacturers look to fill seasonally increasing sales.
Restaurant and foodservice outlets would typically be experiencing increased traffic flows at this time of year but distributors are not quite sure how much to purchase for the remainder of the year. Cream for churning is readily available, with loads moving across regions but the butter market undertone is unsettled, says DMN.
Looking globally, China’s dairy imports were up in September, most coming from New Zealand and the EU. HighGround Dairy (HGD) says “Increases over prior year were recorded on every commodity except anhydrous milkfat and even then, losses were minimal. Most notably, fluid milk and cream reached an all-time high last month as dairy consumption in the form of milk drinks increased during the pandemic, paired with rising domestic milk prices.”
HGD says China has attempted to increase domestic production but “high domestic milk prices and a protein shortage will lead to persistent stronger imports in the near term as dairy consumption increases,” but warned “This higher Chinese demand will be necessary to balance climbing global milk production.”
A virtual joint annual meeting of the National Milk Producers Federation, United Dairy Industry Association and Dairy Management Incorporated was held this week. One of the take-aways was a call by NMPF on the Food and Drug Administration to enforce rules on proper labeling of imitation dairy products.
“Allowing unlawfully labeled ‘plant-based’ imitation dairy foods to proliferate poses an immediate and growing risk to public health; it is a clear dereliction of the FDA’s duty to enforce federal law and agency regulations,” says NMPF President Jim Mulhern in a letter to Dr. Laurie Lenkel, FDA ombudsman.
Mulhern charged that “FDA must intervene to break the bureaucratic logjam that is adversely affecting consumers. Doing so would fit squarely within the Office’s own mission to ensure even-handed application of FDA policy and procedures.”
Meanwhile, Western United Dairies warned in its member newsletter this week that animal rights activists have “turned to impersonating federal employees and job applicants, theft, and even violence.”
It reported that “In Wasco, California, two activists flying a drone near a dairy wore vests indicating they were from the Federal Aviation Administration, the FAA. In Wisconsin, an activist identified herself to dairy workers as a USDA employee conducting a welfare audit. In both Indiana and Oklahoma, activists gained entry to poultry farms claiming to be from the Census Bureau. It’s worth noting that impersonating a federal employee is a federal crime punishable by up to $10,000 in fines and five years’ imprisonment.”
WUD says “Activists have not limited themselves to impersonating federal employees. In April of this year, an activist posing as a technician entered a Central Valley pork processing plant, concealing a camera to record plant activities. Activists have requested producer farm tours and ride-alongs with large animal veterinarians as a ‘learning experience.’ At least one activist boasted online of becoming a member of a County Farm Bureau in order to pass on farmer security information to her group.”
A word to the wise; be suspicious!