Dairy prices hemorrhaging

Dairy prices plunged the last full week of March and the bleeding continues as COVID-19 fear reigns supreme, pulling Class III milk futures down with them.

Cheddar block cheese did a free fall of 15 cents on Friday alone, as uncovered offers took them to close at $1.59 per pound, down 24.75 cents on the week and 5.5 cents below a year ago. The barrels finished Friday at $1.34, down 9 cents, 26.25 cents below a year ago and 25 cents below the blocks.

Monday’s trading took 15.25 cents off the blocks, and they fell 10.75 cents Tuesday to $1.33, down 54.25 cents in two weeks, mirroring CME prices in December 2018, and the lowest they have been since May 23, 2016.

The barrels gave up 4 cents Monday and lost 9.5 cents Tuesday, dropping to $1.2050, lowest since Jan. 25, 2019, and reduced the spread to 12.5 cents.

Cheese producers who ship primarily to foodservice accounts are feeling the crunch of the COVID-19 pandemic, says Dairy Market News, as orders have slipped noticeably. Retail orders were steady to stronger and cheese producers who work primarily or exclusively with retail accounts were busy.

Milk availability was questionable the week of March 16, with Class I plants pulling down milk supplies to keep up with the retail push. Milk was steadily available last week but spot interest was limited.

Retail cheese sales are strong in the West while foodservice demand is languishing.

Consumers were stocking up but schools and eating establishments are closed and cheese demand has shifted. Manufacturers say commodity cheese sales and exports have also slowed. Milk is getting diverted to Class I uses but cheese plants have plenty to keep vats running at capacity.

Cash butter fell to $1.4875 per pound Friday, down 26.75 cents on the week and 76.75 cents below a year ago.

The butter lost 9 cents on Monday and 6.25 cents Tuesday, melting down to $1.3350, lowest CME price in 8 years; May 11, 2012.

Butter sales are generally slower as COVID-19-related closures in most cities and states throughout the country are seeing food service in restaurants, schools and colleges ebb.

Retail butter sales are strong and have helped ease the pressure on the weak foodservice demand but not enough, according to contacts. Cream is excessively available but plant managers are not taking on as much due to the demand dips. Churns are busy and butter inventories are growing.

Western butter processing is ongoing as cream is also readily available. Grocery store managers are requesting more butter than usual but most restaurants and hotels have either reduced their activity levels or closed. Butter production is stable but inventories are plentiful, says DMN.

Grade A nonfat dry milk inched back above $1 per pound last Monday but it was short-lived and closed Friday at 92 cents per pound, 6.75 cents lower on the week and 4.25 cents below a year ago; 28 sales were reported for the week.

A lot of powder moved through the CME Monday, 31 carloads to be exact, and the price fell 2.5 cents and then gave up another penny Tuesday, falling to 88.5 cents per pound, lowest since Nov. 18, 2018.

CME dry whey was unchanged all last week, holding at 33 cents per pound, 0.75 cents above a year ago.

The whey remained on hold Monday and Tuesday at 33 cents per pound.

Where’s the bottom?

We would all like to know the answer. FC Stone’s Dave Kurzawski reminds us that “the U.S. did away with the price support system in the 2014 Farm Bill and switched to a system where the government would buy dairy commodities and donate them to people in need when farm gate margins fell to low levels.

"However, that program was dropped in the 2018 Farm Bill. The $2 trillion aid package passed by Congress last week does allocate $450 million for purchases of commodities to be donated to food shelves and you can be sure dairy will be part of that, but we do not have a hard floor directly under U.S. prices,” Kurzawski warned.

But he adds that “the EU does still have a price support program that might end up supporting U.S. prices, too. The EU Commission has decided (in recent years) that the goal of the commodity purchase program is to support the farm gate milk price, not to prop up commodity prices at specific levels. So, the price at which they will buy skim milk powder will depend on the price level of butter.”

Retail can’t offset restaurant losses

Dairy products have been flying off the shelves, along with toilet paper and hand sanitizer the past few weeks, in reaction to the COVID-19 outbreak, but dairy sales have since cooled.

The March 27 Dairy and Food Market Analyst reported, “Just-released Nielsen scanner data for the week ending March 21 shows sales of butter were up 127%. Sales of cheese increased by 84%, fluid milk were up 53%, ice cream grew by 50%, and yogurt increased by 34%.”

But the massive gains did not continue last week, according to the DFMA. “Instead, we heard of companies canceling retail orders because ‘grocery store sales have started to look more normal.’ This was true across the dairy supply chain, including for companies in fluid milk, yogurt, butter and cheese. And with sales to restaurants approaching zero and no longer offset by record-setting retail sales, dairy manufacturers are left with some hard choices. Either cut production schedules, renegotiate contracts with suppliers, or build inventory," the DFMA stated.

Dairy plants safe

Dairy has thankfully been deemed “critical infrastructure” by the U.S. Department of Homeland Security. Hoards Dairyman Managing Editor Corey Geiger talked about it in the March 30 “Dairy Radio Now” broadcast. He started with worry over dairy processing plants closing down due to employees contracting the virus and in turn lead to milk backing up on the farm and being dumped.

Geiger assured listeners that the nation’s food processing plants, including dairy facilities, have steps in place to protect food safety and “These procedures are the very reason America’s food supply is the safest in the world.”

Plants are disinfected and sanitized against COVID-19, according to Geiger, although he admits that, if a plant had numerous employees out sick, productivity could be impacted.

Geiger also pointed out that vitamin D supplementation of milk could “reduce the risk of respiratory infection, regulate cytokine production, and limit the risk of other viruses such as influenza,” according to Tom Frieden, former director of the U.S. Centers of Disease Control and Prevention and the former commissioner of the New York City Health Department.

“If children are drinking their milk, they are not vitamin D deficient,” Geiger stated. However, about 40% of Americans are deficient in vitamin D and, “while we don’t know if vitamin D deficiency plays a role in the severity of COVID-19, given the high prevalence of vitamin D deficiency in this country, it is safe to recommend that people get the proper daily dosage of vitamin D,” according to Frieden.

Planting intentions up

Corn planted area for all purposes in 2020 was estimated at 97.0 million acres, up 8% or 7.29 million acres from last year, according to the USDA’s Prospective Plants report issued Tuesday morning. Planted acreage is expected to be up or unchanged in 38 of the 48 estimating states.

Soybean planted area was estimated at 83.5 million acres, up 10% from last year, with planted acreage expected to be up or unchanged in 22 of the 29 estimating states.

From: Capital Press