The USDA announced the February Federal order Class III benchmark milk price at $15.75 per hundredweight (cwt.), down 29 cents from January and $1.25 below February 2020.

Late Friday morning Class III futures portended a March price at $16.34; April, $17.56; May, $18.07; June, $18.16; July, $18.25; August, $18.25; September, $18.30; October, $18.25; November, $18.07; and December at $17.79.

The February Class IV price is $13.19 per cwt., down 56 cents from January, $3.01 below a year ago, and the lowest Class IV price since September 2020.

In politics, the House passed a $1.9 trillion stimulus bill on Feb. 27, sending it on to the Senate for passage. HighGround Dairy said Congress is expected to approve the bill for the president’s signature by March 14, when current jobless benefits expire. The package includes funds for additional stimulus checks and extends the bolstered unemployment benefits through August. The 15 percent increase in food stamp benefits will be extended through September.

Global dairy traders triggered some shock waves Tuesday as the morning’s Global Dairy Trade auction’s weighted average skyrocketed 15 percent, biggest increase since September 2015 and the eighth consecutive session of gain. All products offered were in the black except buttermilk powder, which was off 0.3 percent. The average winning price was $4,231 U.S., up from $3,746 on Feb. 16.

Gains were again led by whole milk powder, up 21 percent, following a 4.3 percent rise last time. Skim milk powder was up 3.5 percent, after inching up 0.3 percent on Feb. 16. GDT butter was up 13.7 percent, after a 2 percent gain last time, and anhydrous milkfat was up 7.4 percent, following a 1.1 percent gain. GDT Cheddar was up 1.3 percent, after climbing 2.4 percent.

StoneX Group says the GDT 80 percent butterfat butter price equates to $2.5780 per pound U.S., up 30.8 cents from the last event and compares to CME butter which closed Friday at a huge discount, $1.69. GDT Cheddar equated to $1.9415 per pound, up 5.8 cents, and compares to Friday’s CME block Cheddar at $1.7325. GDT skim milk powder averaged $1.4976 per pound, up from $1.4548, and whole milk powder averaged $1.9795, up from $1.64. CME Grade A nonfat dry milk closed Friday at $1.1775 per pound.

Another shock wave came this week from the Biden Administration’s announcement that it will not renew Uncle Sam’s Food Box program.

Speaking in the March 8 Dairy Radio Now broadcast, Dairy and Food Market Analyst editor, Matt Gould, reported that the administration said food security is still a priority but will go about it in a different way. Funding to food banks will be increased instead so they can purchase the foods they desire. Food welfare programs will also be increased, according to Gould.

The hit on dairy, Gould said, that the Food Box program has purchased about 2 percent of total U.S. milk production and that will surely drop with the new program, and have a negative price effect on dairy.

U.S. January cheese output totaled 1.12 billion pounds, down 1.2 percent from December but 0.5 percent above January 2020 and the strongest January on record, according to USDA’s latest Dairy Products report.

Italian type cheese totaled 481.5 million pounds, down 0.7 percent from December and 0.8 percent below a year ago. American type cheese totaled 459.3 million pounds, down 0.8 percent from December but 5 percent above a year ago. Mozzarella output, at 374.6 million pounds, was down 1.9 percent from a year ago.

Cheddar, the cheese traded daily at the CME, crept up to 337.6 million pounds, up 0.1 percent from December and 18.4 million pounds or a bearish 5.7 percent above a year ago.

Churns produced 206.9 million pounds of butter, a record for January, up 0.3 percent from December and a bearish 13.5 million pounds or 7 percent above a year ago.

One of the measures of dairy farm profitability continues to slip, as milk prices fall and feed costs keep rising. The USDA’s latest Ag Prices report shows the January milk feed ratio at 1.98, down from 2.18 in December, down from 2.42 in January 2020, and the lowest since May 2020’s 1.77.

The index is based on the current milk price in relationship to feed prices for a ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay, thus one pound of milk could only purchase 1.98 pounds of dairy feed of that blend in January.

The US All-Milk price averaged $17.50 per cwt, down $1.00 from December and $2.10 below the January 2020 average.

The National Milk Producers Federation (NMPF) reports “The Dairy Margin Coverage program margin dropped below the maximum $9.50 per cwt. coverage level to deliver a final monthly payment for 2020 of 72 cents per cwt. in December, bringing the average payments for the maximum coverage level during all of 2020 to 73 cents per cwt. Payouts under the program, the main federal safety net for dairy producers, are expected for most of this year.

“With year-end data now reported, the annual average U.S. all-milk price for 2020 was $18.30 per cwt., 30 cents below 2019,” NMPF said. “But with the uncharacteristically high level of direct Coronavirus Food Assistance program payments and payment disparities due to the high level of Class III milk de-pooled from federal orders last year, the all-milk price is less reflective of average farmer revenues than typical. Also, the number of licensed U.S. dairies declined to 31,657 in 2020, a decrease of 7.5 percent from the previous year. That is slower than the loss rate in 2019 but still above historical averages.”

Meanwhile, the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC., stated that “With the exception of the spot period in first quarter, dairy margins improved over the last half of February as higher milk prices, which advanced to new contract highs in deferred months, offset generally steady feed costs over the past couple weeks.”

Spot butter shot up to $1.7150 per pound Tuesday, highest since July 27, 2020, but saw a Friday close at $1.69, still 22 cents higher on the week but 16.50 cents below a year ago when it fell 13 cents. 35 sales were made on the week.

Butter contacts expected some upside following the “new crop” butter rule on the CME, but few expected the nearly 25 cent bump in its first two days. Some question the sustainability of the markets with the amount of bulk butter available, but domestic prices continue to be a good value to exporter interests and there are some bullish indicators moving forward, says DMN.

There was a butter-battle of sorts north of the border the last week of February, as the Canadian dairy industry dealt with a controversial local news article that went viral. The Feb. 26 Dairy and Food Market Analyst (DFMA) reported that the article claimed Canadian butter was “overly hard because the country’s dairy farmers are relying on palm oil and palmitic acid as feed ingredients.”

DFMA said, “The article set off a public relations storm that resulted in Canada’s dairy processing lobbyist issuing a statement condemning its use and Dairy Farmers of Canada, the country’s dairy farm lobby, asking farms to voluntarily stop feeding the ingredients.”