November Federal order Class III milk price up 20 cents

The Agriculture Department announced the November Federal order Class III milk price at $18.03 per hundredweight, up 20 cents from October, $5.31 below November 2020, but the highest Class III price since May. The 11 month average stands at $16.96, down from $18.39 a year ago and compares to $16.74 in 2019.


Late Friday morning Class III futures portended a December price at $18.43 which would result in a 2021 average of $17.09, down from $18.16 in 2020 and compares to $16.96 in 2019.
The Class IV price is $18.79, up $1.75 from October, $5.49 above a year ago, and the highest Class IV price since October 2014. Its 11-month average stands at $15.74, up from $13.50 a year ago and down from $16.26 in 2019.
Meanwhile, a sharply higher October All Milk Price and sharply lower corn and soybean prices propelled the October milk feed ratio higher for the second month in a row. The USDA’s latest Ag Prices report has the ratio at 1.87, up from 1.69 in September, but still down from last year’s 2.49.
The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk would purchase 1.87 pounds of dairy feed of that blend.
The U.S. All Milk Price averaged $19.70 per cwt., up $1.30 from September but 30 cents below October 2020. The California price climbed to $19.90, up $1.10 from September and a dime above a year ago. Wisconsin’s, at $19.60, was up $1.30 from September but $2 below a year ago.
The national average corn price fell to $5.02 per bushel, down 45 cents per bushel from September, after dropping 87 cents from the August level, but is still $1.41 per bushel above October 2020.
Soybeans averaged $11.90 per bushel, down 30 cents from September, after dropping $1.50 from August, but is $2.27 per bushel above October 2020.
Alfalfa hay averaged $213 per ton, up $4 from September, after gaining $3 from August, and is a whopping $44 per ton above a year ago.
Looking at the cow side of the ledger; the October cull price for beef and dairy combined averaged $70.60 per cwt., down $2.30 from September, $10.60 above October 2020, but $1 below the 2011 base average of $71.60 per cwt.
Dairy Margin Coverage payments will be triggered for the 10th month in a row.
In the week ending Nov. 20, 59,200 dairy cows were sent to slaughter, up 900 from the previous week and 500 head or 0.9% above that week a year ago.
Omicron became the buzzword of “Black Friday” and ever since, as another chapter is written in the ongoing COVID saga. Growing concern unleashed widespread commodity market selling for those open on that Friday, with crude oil taking the brunt, according to StoneX Dairy Group, as countries scrambled to formulate and institute travel bans in an effort to contain Omicron.
While several reports downplayed the seriousness of the new variant, the President tried to ease the fear, promising there would be no new lockdowns.
“It may be much ado about nothing,” said StoneX broker Dave Kurzawski in the December 6 ‘Dairy Radio Now’ broadcast. “Dairy has taken the news in stride,” he said, but “One thing is for sure, Omicron doesn’t make more milk.”
That’s the issue we’re dealing with right now, he said, and follows anemic growth and even negative milk growth in October. Year to date U.S. milk output is up 1.6% while domestic dairy demand is up 2.4%. Throw in exports, he said, and demand is up over 4%.
“We don’t have as much milk,” he reasoned, “And the cost of producing milk has gone through the roof for a lot of producers, especially in the last few months, so $18 milk isn’t what it used to be.” That said, he quickly added; “The market doesn’t have to give you a profit. If demand slows down because of Omicron or some other variant or something else comes out of the woodwork, prices can sink back down.”
Kurzawski says he doesn’t see people eating any less because of Omicron so he still sees a stable and slightly bullish market as we head into the end of the year. When asked how high milk prices might go in 2022 he answered, “No one knows for sure but the reality is, I wouldn’t rule out $20.”
“We’re not out of the woods yet,” he said, “But I don’t think milk production is going to turn on a dime here. After talking with dairy producers all day long, every day, I don’t see the capital investment being put back into dairy farming today and I don’t see demand slowing down a tremendous amount,” he concluded.
Cash dairy prices started December mixed. The Cheddar blocks held all week where they closed on November 19, at $1.8575 per pound, up 21.50 cents from where they were on November 3, and 27.25 cents above a year ago.
The barrels finished at $1.6025, up 7.75 cents on the week, 3.25 cents above the Nov. 3 perch, 20.25 cents above a year ago, but 25.50 cents below the blocks.
There were no sales of block on the week and 14 for the month of November, down from 22 in October. Barrel sales totaled 3 for the week and 98 for the month, up from 49 in October.
Interestingly, USDA’s recent solicitation for 13.5 million pounds of cheese went unfilled. StoneX says that means we are either light on production or on productive capacity and doesn’t read it as bullish or bearish because we just don’t know the reason.
Midwest cheesemakers were catching up following the Thanksgiving holiday week, according to Dairy Market News. Production schedules varied as some plants were closed for the holiday while others were down for multiple days. Milk availability had not shifted much at midweek but demand has, says DMN. Some contacts, for weeks ahead of the holiday, were mentioning slowdowns in orders, but some of those producers now say orders are rebounding. Cheese market tones are still uncertain, as the large block-to-barrel price gap remains. Cheese availability varies within the region, but mostly balanced, according to contacts.
Cheese demand in the west remains strong in retail and food service and international purchasers are looking for U.S. cheese, with notable purchases for export to Asian markets. Port congestion continues to cause delays which have increased in recent weeks. Spot cheese inventories are tight, says DMN, and stakeholders say this may persist as purchasers continue to buy for strong year-end holiday demand. Cheese producers are running busy schedules in the west as milk continues to be available.
Spot butter slipped to $1.97 per pound Tuesday but fought its way back to a Friday close at $2.0025, up 1.25 cents on the week and 52.25 cents above a year ago. Sales totaled 21 for the week and 59 for the month, up from 25 in October.
Butter churning resumed as more cream became available Thanksgiving Week and this week, due to Class II and III producers taking days off. Plant managers were locating cream in the low 1.20s, regionally and from the West. Bulk butter remains tight and contacts question if cream availability will remain as it currently is for long. A major factor holding back output remains the lack of employees. There has been some improvement, says DMN, but the problem remains.
Cream inventories are available to meet demand in the West and some contacts are, reportedly, sending loads to other regions as cream demand is strong. Again, a shortage of truck drivers is causing delays to loads of cream and butter throughout the region. Butter demand in retail and food service is steady and international purchasers are looking for U.S. butter but spot availability is limited. Producers are running busy schedules, though delays to production supplies and a shortage of labor aren’t helping matters any, according to DMN.
Grade A nonfat dry milk fell to $1.5475 per pound Wednesday but saw a Friday finish at $1.5625, unchanged on the week and 41.25 cents above a year ago on 18 sales for the week and 57 for the month, up from 17 in October.
Dry whey fell to 68 cents per pound Wednesday but closed Friday at 69.75 cents, a quarter-cent lower on the week but still 23.50 cents above a year ago. There was 1 sale on the week and 8 for the month, down from 16 in October.
Looking globally we got a look at New Zealand’s October dairy exports. Whole milk powder was off 1.3% from a year ago while skim milk powder was up 12.9%.
HighGround Dairy says “October was not an all-time high for the month even as volume shipped to China, the top destination, did hit a record. Strong powder exports were recorded into the country despite rumors of high inventories.”
HGD says the strongest increase by volume into the rest of the world was on cheese, at 69.6 million pounds, up 20.1% from a year ago, strongest for the month in five years, according to HGD. China’s market share reached 26%, as it remained the number one destination, but gains over prior year were strongest to Japan. Year to date cheese exports were up17.1%.
Butter totaled 41.8 million pounds, down 17.7%, though YTD is up 2.1%.
Speaking of “down under;” DMN says “Australian dairy production has not met expectations for the season and there is increasing concern that current factors will impact longer term results in coming seasons. Farm labor shortages remain a limiting factor frequently cited, resulting from various COVID restrictions. Observers fear these challenges will deter needed investments by producers to yield longer term increases in dairy production.”
The current milk producing season in New Zealand has also been disappointing, says DMN. Pastures in both islands have yielded sub optimal growth. Excessive rain on the North Island has overwhelmed the ability of pastures to absorb water in a productive way and growth has suffered. The South Island has suffered from erratic rain, resulting in periods of too dry weather.
The Daily Dairy Report says New Zealand cows produced just 6.9 billion pounds of milk in October, a decline of 3.3% compared to last year and the lowest October volume since 2017. Cumulative production for the first five months of the milking season has trailed the prior year by 3.1%, says the DDR.
In politics, Senators Kirsten Gillibrand, D-N.Y., Patrick Leahy, D-Vt., and Susan Collins, R-Maine, introduced legislation this week which calls on the Agriculture Secretary to begin a national hearing process on Federal Milk Market Orders within six months of its passage. The hearings will consider the Class I mover but may also address other issues as well.
A task force from six Midwest dairy groups gave the measure a thumbs up and stated “The Dairy Pricing Opportunity Act leaves the door open to considering various proposals, such as the Class III Plus proposal put forth early this year, and the ability to address other areas of the system that are just as urgent, such as increasing price transparency.”
The task force also supports creation of an academic dairy pricing study that would aid in the discussion and called on lawmakers to “support this research effort to help inform whatever emerges from the hearing process. We look forward to working with the Senate and USDA to find a lasting solution for our dairy farmers.”
Task force members include Wisconsin-based Dairy Business Association, Edge Dairy Farmer Cooperative, the Iowa State Dairy Association, Minnesota Milk Producers Association, Nebraska State Dairy Association and South Dakota Dairy Producers.
The National Milk Producers Federation says the legislation “adds bipartisan momentum to a range of critical milk pricing discussions that dairy farmers are having through NMPF’s Economic Policy Committee. NMPF is continuing to work with USDA and Congress on how best to remedy deficiencies in the Class I mover formula and fully recoup $750 million in unintended losses felt by farmers of all sizes.”
The Federation said that it is “leading discussions on a broad range of Federal Milk Marketing Order reform issues important to producers in all regions of the country. We look forward to pursuing policy improvements that will serve all dairy producers more equitably and effectively.”
The International Dairy Foods Association (IDFA) recognized six individuals this week at the annual ‘Celebration of Dairy,’ “whose work in federal legislation and food and agricultural policy has helped to advance the economic impact of the U.S. dairy industry.”
IDFA President and CEO Michael Dykes, recognized Senator Roy Blunt of Missouri, House Agriculture Committee Chairman Rep. David Scott of Georgia, Rep. Sanford Bishop of Georgia, Rep. Mike Simpson of Idaho, and Jason Hafemeister and Bruce Summers of the USDA with the IDFA Leadership Award.

2021-12-09T11:15:42-05:00December 9, 2021|Country Folks Article, Mid Atlantic|0 Comments

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