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MILK MARKET MOOS — May 18-25, 2022

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Market Moos is a weekly column in Farmshine by Sherry Bunting

US Apr. milk output off 1%, Georgia surpasses Florida

In its May 18 report, USDA pegged total U.S. milk production at 19.2 billion pounds — down 1% from a year ago. The report tallied 9.4 million milk cows on U.S. farms reflecting a 98,000-head decrease (-1%) from a year ago, with output per cow unchanged.

Among the 24 monthly-reporting states, output per cow fell 0.1%, and cow numbers were off 78,000 (-1.1%), pushing production 0.9% below year ago in those major states.

USDA’s May 18 GAIN report noted an even larger pull-back in Australia’s 2022 output, forecast to be down more than 4% for the year, and New Zealand’s first quarter milk production is reported to be running 6% below year ago and the lowest level since 2013. 

Milk collection in the European Union is also running behind first quarter 2021 by a smaller degree, down 0.3%, according to an EU milk situation report delivered in Brussels last week. And, milk deliveries are reported to be 4% below year ago in Great Britain for the first quarter of 2022 — 3.3% below year ago in Ireland in March.

Throughout the world, these reports note that farmers are exiting the dairy industry. “The slump in milk production (in Australia) is largely due to farmers continuing to exit the dairy industry through farm sales, and some dairy farms partially or fully transitioning to less labor-intensive beef cattle production,” the GAIN report said.

In the U.S., the national impact of this trend is being buffered by the large production growth in places like Texas and South Dakota offsetting reduced production almost everywhere else.

In addition to the U.S. milking 98,000 fewer cows in April compared with a year ago, dramatic movements of cows out of some regions and into others is occurring. Notable shifts are also occurring within regions. (See chart above)

One region — the Mideast — that had been growing rapidly is now going through a substantial pull-back. The Mideast lost 35,000 cows and 68 million pounds of monthly milk production in April compared with a year ago. That is a collective 3.6% year-over-year decline broken down as -3.4% in No. 6 Michigan, -3.8% in No. 12 Ohio and -4.1% in No. 15 Indiana. Technically, western Pennsylvania is included in the Mideast when we look at the Federal Milk Marketing Order map, and the Keystone state, as a whole, recorded a 2.2% decline in milk production in April.

The Northeast and Midatlantic region lost 15,000 cows and 31 million pounds (-1.3%) of milk production with most of the decline coming from No. 8 Pennsylvania, down 8,000 cows and 2.2% in milk output vs. year ago while No. 5 New York (-0.8%) and No. 19 Vermont (-0.9%) were just under the national average.

In the Southeast region, the big news is Georgia’s milk production outpaced Florida for the first time, moving the relative 24-state newbie into 21st place and Florida to 22nd. Georgia and Florida were dead-even in March.

Georgia’s 12.1% year-over-year milk increase in April eclipsed Florida’s 12.1% year-over-year decline, with Georgia producing 1 million more pounds of milk with 7,000 fewer cows compared to Florida. Georgia producers milked 91,000 cows in April — up 9,000 head from a year ago. Florida producers milked 98,000 cows in April — down 12,000 head from a year ago.

As noted last month, Texas surpassed Idaho in March as the No. 3 milk-producing state. However, even the 4.7% increase in year-over-year April production in Texas (up 63 million pounds) could not overcome the 12.9% decline in No. 9 New Mexico’s production (down 92 million pounds), for a net 1.4% loss of 29 million pounds of milk from the Southwest region.

Regions holding steady-ish — lower by less than the national average — are the Upper Midwest down 10,000 cows and -0.4% in milk output and the Mountain States / High Desert down 3,000 cows and -0.3% in production, with No. 4 Idaho unchanged in both cow numbers and production vs. year ago.

In the Upper Midwest, No. 2 Wisconsin was almost steady as production was down just 0.1% with 1,000 fewer cows in April, while No. 7 Minnesota milked 9,000 fewer cows and made 1.4% less milk than a year ago in April.

The West Coast showed a net-loss of 1% just like the U.S. average: No. 1 California had -0.6% production (but milked 2,000 more cows), and the 2.7% production increase in No. 18 Oregon was not enough to make up for the 5.4% loss in No. 10 Washington State.

The Central U.S. was the only region to see a net gain — owing to a 0.9% increase in No. 11 Iowa and the whopping 16.7% (48 million pound) increase in milk production in No. 17 South Dakota, where cow numbers are up by 25,000 head. South Dakota is nipping at the heels of No. 16 Kansas (-2.2%), despite Kansas overtly seeking dairies to fill expanded processing there according to dairy market podcast advertising messages at the International Dairy Foods Association website. Elsewhere in the Central U.S., in addition to production losses in Kansas, declines were also recorded to the east for No. 23 Illinois (-3.8%) and to the west for No. 13 Colorado (-1.1%).

All of this bears note as farmers face escalating costs and milk futures are hesitatingly recovering the past three weeks of losses but under market conditions that are again creating divergence between Class III and IV that could create producer price differentials (PPDs). When milk is de-pooled from Federal Orders in these circumstances, we see inequitable distribution of losses and of value that can contribute even faster to the way the milk production map is changing.

At the same time, the USDA World Agricultural Supply and Demand Estimates for May highlighted an expected increase in fat-basis exports as the world is tight on butterfat, but a decline in skim-basis exports, which could change if China resumes its earlier level of milk powder imports. 

On the flip side, the WASDE report forecasts 2022 U.S. dairy imports to run well ahead of previous years’ on both a fat- and skim-solids basis. The WASDE report stated this increase in dairy imports will be boosted by larger than expected importation of products that contain dairy.

WASDE: 2022 imports up

According to the World Agricultural Supply and Demand Estimates (WASDE) last week, the 2022 All Milk price is forecast to average $25.75, down a nickel from April’s forecast.

The May WASDE raised the 2022 milk production forecast on what it says are higher milk cow inventories more than offsetting slower growth in milk per cow. But it is important to realize the April milk production report this week (as reported above) showed otherwise.

Cheese and butter price forecasts are raised from the previous month’s report on strong demand, but non-fat dry milk and whey prices are lowered. The Class III price is unchanged and Class IV is lowered.

Some are suggesting that higher retail prices for butter and cheese and other dairy products are negatively affecting demand and that the food industry can shift from butter to oils. However, recent reports from many sources indicate the global supplies of food oils and butter substitutes are also in reduced supply and rising in price at wholesale and retail levels.

Biden orders Operation Fly Formula via Dept. of Defense

Operation Fly Formula was ordered by President Biden invoking the Defense Production Act on Wed., May 18, sending military planes abroad to bring infant formula home to America’s babies, especially the specialty hypo-allergenic formulas for babies with allergies to milk or special health needs. Parents currently face 45 to 60% out-of-stock shortages in infant formula and two military cargo plane loads of hypoallergenic specialty formula have arrived from Europe and the UK over the past 7 days.

Spot out-of-stock undercurrents in baby formula and specialized milk-based meal replacements have been mentioned in this column several times over the past few months, but the situation has worsened. The USDA announced WIC vouchers allowing participants to buy brands other than sanctioned low-bidders.

By Thurs., May 19, the American Academy of Pediatrics had issued a statement telling parents it is safe to switch to whole cow’s milk for babies over 6 months of age that are not on “special” formula, making sure they are consuming other iron-rich foods or talking to their own pediatricians about supplemental iron.

Discussion is rampant through social media about goat milk as a substitute for formula. There’s something to this because goat’s milk is A2A2 in its protein composition, as is sheep’s milk and human milk. There are A2A2 cow’s milk brands available now also. Parents are urged not to switch to plant-based beverages that do not have the nutrition of whole milk and to be cautioned that lactose free milks may not have sufficient carbohydrate for electrolyte balance since the lactose IS the carbohydrate in milk.

The FDA also struck a deal to get the Abbott plant back up and going by June 4 after product recalls and a plant closure related to bacteria tests occurred in February, in part because of a whistleblower’s report that was delayed for months by a “mail room disruption” according to FDA.

‘Confusion is real’

Anxiously waiting for the expected FDA decision on label standards of identity for milk and dairy, NMPF reported this recent exchange between FDA Commissioner Robert Califf and U.S. Senator Tammy Baldwin of Wisconsin at a recent Ag Appropriations Subcommittee hearing. Baldwin chairs the Senate subcommittee that sets spending levels for FDA. Baldwin asked the Commissioner for his thoughts on how plant-based beverages masquerading as dairy products should be labeled. His response noted that when people think about dairy vs. plant-based beverages, they “are not very equipped to deal with what’s the nutritional value” of the products. Yes, the confusion is real.

Milk futures flip higher, Class III and IV diverge

Green ink the past two weeks replaced three weeks of red ink as milk futures posted back to back gains despite some waffling on the Class III side due to a report this week showing record natural cheese inventories. By Wednesday, May 25, the Class III contract average for the next 12 months was 25-cents higher than the previous week and fully steady compared with the end of April at $22.96. The Class IV milk futures went roaring $1 to $1.50, spots $2 higher — tripling the spread between the two. On the close Wed., May 25, Class IV contracts for the next 12 months averaged $24.05 — up $1.03 from a week ago and 60 cents higher than the end of April. Class IV continues to top Class III, with the average divergence now at $1.10. Aug. through Nov. contracts on the CME futures board now diverge by more than the $1.48 threshold that suppresses the Class I mover value under the new averaging formula.

Dairy products rally higher

CME spot cash dairy product markets have reversed course to move higher for two consecutive weeks, capped by a strong rally on Class IV products (butter and nonfat dry milk) driven by a 22% decline in butter inventories. Compared with the end of April, the May 25 daily spot prices for the four commodities used in federal milk order pricing are: Butter up 28 cents at $2.89/lb after 12 consecutive days of gaining more than 2-pennies per day in active trade volume; Nonfat dry milk up 13 cents at $1.84/lb; Cheese steady compared with a month ago at $2.30/lb, Dry whey firming up the 8-cent loss at 50 cents.

April blend up $1-1.50

The April uniform prices across the 11 Federal Milk Marketing Orders (FMMOs) moved $1 to $1.50 higher, with the Upper Midwest closer to $2 higher than previous month. This is the 6th straight month of gains, reported as follows:

  • FMMO 1 (Northeast) SUP $26.07 PPD +$1.65
  • FMMO 33 (Mideast) SUP $24.91 PPD +$0.49
  • FMMO 32 (Central) SUP $24.65 PPD +$0.23
  • FMMO 30 (Upper Midwest) SUP $24.55 PPD +$0.13
  • FMMO 126 (Southwest) SUP $25.43 PPD +$1.01
  • FMMO 124 (Pacific Northwest) SUP $24.79 PPD +$0.37
  • FMMO 51 (California) SUP $25.08 PPD +$0.66
  • FMMO 131 (Arizona) uniform price $25.52
  • FMMO 5 (Appalachian) uniform price $27.17
  • FMMO 7 (Southeast) uniform price $27.35
  • FMMO 6 (Florida) uniform price $29.13

June Class I ‘mover’ $25.87

The June Class I base price, or ‘mover’, was announced Wed., May 18 at $25.87. This is 42 cents higher than the May Class I ‘mover’ and $7.58 higher than a year ago. This marks the 9th consecutive month of Class I mover gains.

The June 2022 Class I mover is 61 cents higher under the current average-plus formula than it would have been using the previous ‘higher of’ for the second consecutive month after being a loss under the averaging formula for the previous four consecutive months. In 2022, alone, the average-plus Class I mover formula produced no difference in January and was 51 cents below the ‘higher of’ method for February, 79 cents lower for March and 50 cents lower for April before turning 17 cents higher in May and now 61 cents higher for June.
Since implementation in May 2019, the new formula has been negative more months than positive (18 of 38 months) for a net loss in Class I value of over $725 million from May 2019 through June 2022.

2022 milk futures rally continues as butter leads the spot market gains

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Updated Market Moos, by Sherry Bunting, a weekly feature in Farmshine

2022 Class III futures avg. $20.10, Class IV $21.10

Milk futures surged to levels not seen since 2014 this week on the heels of previous weeks’ gains, and the Class III milk futures contracts for 2022 now average over $20 with Class IV over $21 as of Dec. 29, 2021.

Class III milk futures first broke into the $20s last week, hitting new contract highs daily since Wed., Dec. 22 on all 2022 contracts. The closeup contracts for Dec. 2021 and Jan. 2022 were flat in pre-Christmas trading, but see-sawed toward gains in post-Christmas trading.

On the milk futures close Wed., Dec. 29, Class III contracts for the next 12 months (Dec. 2021 – Nov. 2022) averaged $20.01, up $1.35 from a month ago, with January through October 2022 contracts all at or above $20.00.

Class IV futures broke the $21 mark for the Feb. 2022 contract last week, and then continued marching higher after Christmas with January through October 2022 contracts all at or above $21. At the close of trade Wed., Dec. 29, the next 12 months (Dec. 2021 through Nov. 2022) averaged $21.05, which is $1.89 higher than a month ago.

Excluding the lower and expiring current month contract, the 12-month average of 2022 futures contracts averaged at $20.10 for Class III and $21.10 for Class IV.

Class IV continues to dominate the board, and the average spread between the two widened to $1.00 this week with December’s contract pegged at a Class IV over III differential of $1.45; January’s $1.29.

Butter’s impressive gains lead the spot-market

Butter is leading the charge as CME spot dairy products moved mostly higher in pre- and post-Christmas trade. Cheese prices had weakened in pre-holiday trade while butter, nonfat dry milk and whey all made solid or impressive gains. In the post-Christmas spot calls, impressive gains were made on both cheese and butter while whey held firm and milk powder weakened.

On Class III dairy product spot markets at the CME Wed., Dec. 29, the 40 lb block Cheddar price was pegged at $1.95/lb — recovering all of the pre-holiday loss and then some. A single load traded at $1.94 and a spot bid to purchase at $1.95 was left on the table by sellers. Barrels have seesawed almost daily but moved decidedly higher on a nickel upswing Wed., Dec. 29, when 500-lb barrel Cheddar was pegged at $1.69/lb and 5 loads changed hands.

Dry whey gained 6 cents last week and held firm at that 75-cent level Dec. 27, 28 and 29, although zero product changed hands.

In the Class IV products, the spot butter market was very active, and the spot price was pegged at $2.43/lb on Wed., Dec. 29, up a whopping 24 cents from the previous Wednesday and 33 cents higher than two weeks ago. On Mon., Dec. 27, a whopping 10 loads of butter traded with the price pegged at $2.30. On Tues., Dec. 28, another big round of 12 loads traded with the price pegged at $2.40/lb. Then on Wed., Dec. 29, another rally resulted in 3 loads trading with the spot price reaching $2.43/lb with sellers on the sidelines holding their offers at $2.45.

Grade A nonfat dry milk had added a penny last week but lost two pennies this week. On Wed., Dec. 29, the NFDM spot price was pegged at $1.6475/lb with 5 loads changing hands.

November milk production fell 0.4% vs. year ago amid increasingly obvious geographic patterns

U.S. milk production was 0.4% lower than a year ago in November, but for the major milk states, the decline was 0.1%.

Cow numbers dropped 10,000 head nationally in the month of November, alone. Almost one-third of them (3000 head) left the count in Pennsylvania between October and November. Compared with a year ago, cow numbers across the U.S. were down 47,000 head.

In Pennsylvania, cow numbers at 472,000 head were down 10,000 vs. year ago with production off 3.5%. Elsewhere in the Northeast milkshed, New York’s production was down 0.2%, but cow numbers were up 2000 head. In Vermont, milk production fell 1.4% while cow numbers were stable compared with a year ago.

(Producers in Pennsylvania and through most of the Northeast and Midatlantic region report continued penalties on overbase milk, continuance of the 12% cuts in Northeast/Midatlantic producer base allotments instituted by the largest national footprint cooperative during the height of the pandemic. This, despite USDA Dairy Market News reports confirming very tight milk and cream supplies in the eastern markets, and increasing evidence of store shortages based on consumers facebooking their photos of empty dairy and milk shelves at prominent regional supermarket chains throughout the Northeast and Midatlantic states. The recent revelation that the iconic Readington Farms in New Jersey — that supplies ShopRites and other stores in the Wakefern Foods retail group throughout New England, New York, Pennsylvania and the Delmarva — will begin procuring milk for these stores from former Dean plants now owned by Dairy Farmers of America (DFA) also sent shockwaves throughout the Northeast last week)

In the Southeast, Florida dropped 6000 cows with production down 3.4% from a year ago. Georgia gained 1000 cows and 1.4% in production.

In the Mideast region, Ohio, Indiana and Michigan collectively lost 14.000 cows and were down 1.6% in milk vs. year ago.

Growth in the Central Plains continued. States that gained both cows and production vs. year ago include South Dakota, up 22,000 head and 16.7% in milk; Minnesota up 6000 cows and 1.9% in milk; Iowa up 6000 cows and 2.7% in milk; Wisconsin up 18,000 cows and 2.2% in milk; and Texas up 17,000 cows and 2.8% in milk.

California produced 1% more milk than a year ago but lost 1000 cows.

January Class I mover $19.71, Class IV pricing factor tops Class III by $1.48 per cwt.

The Class I mover for January 2022 was announced Dec. 22 at $19.71. That’s 54 cents higher than December’s mover and $4.57 higher than January a year ago.

By the hair of its chinny-chin-chin, the January Class I base price is identical under the new formula as it would have been under the old. Based on USDA AMS prices for cheddar, butter, nonfat dry milk and whey in the first two weeks of December, the January 2022 Class IV advance pricing factor was calculated by USDA to be 12.21 while Class III figured at $10.73.

Averaging the two advance pricing factors together and adding 74 cents is how we get to that $19.71 Class advance base price for January 2022 — under the new Class I formula. This is also the price it would be using the previous ‘higher of’ Class I formula because the $1.48 spread between the Class III and Class IV advance pricing factors (74 cents x 2) is the magic number that keeps the new method from calculating a Class I base price that is lower under the new method than it would have been under the old method. Any wider than $1.48, and the difference becomes negative.

Class IV is projected to be higher than Class III throughout 2022, if the current futures markets and market fundamentals hold out. This means the ideas circulating to change the Class I formula to a Class III-plus would be negative over the duration of time that Class IV beats Class III.

In volatile markets, where the dairy industry is vulnerable to market shocks, the use of the ‘higher of’ formula for Class I did help prevent further disparities that lead to de-pooling and negative PPDs, which affect not only producer milk checks but also their risk management.

Secretary Vilsack says bring me consensus, first

Last week during a farm visit in Wisconsin, Secretary of Agriculture Tom Vilsack told dairy producers he wants to see the dairy industry come together with a consensus on Federal Milk Marketing Order changes before holding USDA hearings.

Three weeks ago, Senators Kirsten Gillibrand (D-NY), Patrick Leahy (D-Vt.) and Susan Collins (R-Me) introduced the Dairy Pricing Opportunity Act of 2021, a bipartisan bill in the U.S. Senate that would direct the Secretary of Agriculture to provide notice of, and initiate, national hearings to review Federal milk marketing orders … “which shall include review and consideration of views and proposals of producers and the dairy industry on the Class I skim milk price, including the ‘‘higher of’’ Class I skim milk formula…”

In the past, whenever USDA has initiated administrative hearings to make specific FMMO changes, a consensus was typically sought before such hearings.

On the other hand, if the Senate bill becomes law, a more open process appears to be described that could make national hearings a review of the system, consideration of proposals, and specifically a look at the Class I formula change, which had been made legislatively without hearings, comment or a producer referendum in the 2018 Farm Bill.

Perhaps national FMMO hearings could open a consensus-building process.

PMVAP payments delayed

The Pandemic Market Volatility Assistance Program (PMVAP) payments related to the Class I formula losses from July through December 2020 will be delayed until late January or into February or March, according to Erin Taylor, USDA AMS. She told dairy farmers in a Dairy Industry Call hosted by the Center for Dairy Excellence this week that eligible producers should have been contacted by their milk cooperative or handler by now requesting proof they meet the Adjusted Gross Income limits of USDA payment programs.

USDA is in the process of finalizing agreements with each eligible handler that had any milk pooled on any FMMO during that time period and is providing workbooks with methodology on how the payments should be made to their producers based on how they were paid during the July-Dec 2020 period. Look for more information in the Jan. 7 edition of Farmshine and click here.

Whole Milk for Healthy Kids Update

There are 84 Congressional cosponsors from 30 states (including the prime sponsor, G.T. Thompson of Pennsylvania) who are now supporting the Whole Milk for Healthy Kids Act, H.R. 1861. However, for those readers who live in the New England states as well as Maryland, Delaware, South Carolina, West Virginia and several western states, representation is absent.

To-date, there are no cosponsors yet from the following states: Colorado, Connecticut, Delaware, Hawaii, Maine, Maryland, Massachusetts, Montana, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Carolina, Utah, Vermont, West Virginia, and Wyoming.

This bipartisan bill was introduced in March by Congressmen G.T. Thompson (R-PA) and Antonio Delgado (D-NY), to end the federal prohibition of whole milk in schools. It gained 18 new cosponsors over the past two weeks to reach 84 from 30 states, but needs at least 100 cosponsors representing all 50 states to get moving in committee toward the goal line.

Consider contacting your Representative with thanks or a request to cosponsor this bill that simply allows school children the healthy milk choice they love and will drink. To find your Representative, enter your address at https://www.govtrack.us/congress/members


Milk Market Moos, June 25, 2021

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By Sherry Bunting, published weekly in Farmshine Newspaper

Cutting through consumer confusion

Consumers and producers of food and beverages — anything in the protein market — are going to see a disruptor explosion of new products. As I look through the food-related publications coming across my desk and into my email inbox — Culinology, Progressive Grocer, Food Navigator, Meat + Poultry, Dairy Foods, Food and Beverage, and the list goes on — the sudden onslaught of animal-free cellular agriculture, portrayed as dairy and meat without the animals, is stunning.

Even Facebook pop-up ads push Nick’s ice cream every day in my Facebook ‘newsfeed’ — with the tagline ‘dairy without the cow’ courtesy of Perfect Day Foods.

They use ‘climate’ to generate interest from companies wanting to reduce a carbon footprint by incorporating the excrement of genetically-altered yeast to replace a portion of real dairy protein in the dairy manufacturing space. It’s an easy swap, Perfect Day founders say, and according to the USDA Bio-engineered labeling regulations that became official last January, the stuff doesn’t have to be labeled BE because the genetically-altered yeast are not being consumed — just their excrement harvested from the fermentation vats.

“We ran the numbers, and if we partnered with the dairy industry to use Perfect Day protein in just 5% of their products, we’d save 12.3 million metric tons of greenhouse-gas emissions – equivalent to the carbon emitted from every single car registered in the city of Los Angeles,” says Nicki Briggs, Perfect Day’s vice president of corporate communications in a Berkeleyside online interview on the third day of June 2021. Ms. Briggs was formerly an employee of Chobani.

There are other dairy turncoats and straddlers moving between real and fake and seeking to blend them to some sort of climate / carbon standard. But data like that of Ms. Briggs doesn’t tell the whole cow story. Just like the data Impossible Foods is using to coax schools to replace 50% of their beef with Impossible Burger — now that it has the coveted USDA Child Nutrition Label — are figures that do not consider the entire cycle of cattle for a net figure on GHG.

It is maddening. This onslaught of bright packaging with new and clever names and claims populating the meat, dairy and seafood offerings — starting with plant-based concentrates and chemical combinations and leading to cells growing in bioreactors and yeast excreting protein in fermentation vats. Big Tech is the new wannabe farmer, and Big Ag, Big Food, Big Finance, and Big ole Uncle Sam are in for the deal.

Consumers will begin to feel like they are stuck inside a pinball machine, or to be more current with my analogy, a warp-speed version of a video game bombarded by bangs, pops and whistles.

That’s what Gen Z wants, they all say. And yet, a survey by the Hartman Group recently showed Gen Z — just like the Millennials before them — are most comfortable with the food choices they grew up with, but unlike Millennials who still had a preference for local, seasonal and farm-to-table, Gen Z-ers have a preference for fast food and foods with familiar tastes.

We’ve got some work to do to navigate all of this with a straight forward message that cuts through the climate half-truths and outright lies about cows, that penetrates the government dietary restrictions based on outdated and incomplete reviews of the scientific literature on dietary fat.

We’ve got our work cut out for us to keep educating others, giving them the facts that are being ignored and bullied out of the national, even global, conversation about food as the industry grows its margins for investors through consumer confusion at the expense of consumer’s knowing what’s real.

USDA joins global school lunch deal

USDA can’t even get U.S. school lunch right, but now plans to lead America’s joining into a “global coalition” called the “School Meals: Nutrition, Health and Education for Every Child.”
There’s also a bill before Congress seeking to make three meals and a snack universal for all children through school.

As for the global coalition, this is right up Secretary Vilsack’s alley. In a press release Wed., June 23 about USDA’s leadership in joining the global deal, Vilsack talked about “powerful incentives” and “building resilience to future shocks” by focusing on improving the nutrition, health, and education of vulnerable children and adolescents worldwide. Sounds good, right? Who can argue with words like that? But like everything else out of USDA these days, where’s the details? And what’s it really mean?

The global coalition is centered around education and school meals and will launch at the United Nations’ Food Systems Summit in September. Like the 30 x 30, the Net Zero initiatives, and everything else coming through the pipeline from World Economic Forum, the goal line for this, too, is 2030 — making nutritious meals available for all children by 2030, with other benchmarks set for 2022.

Who can argue with nutritious meals for all children? There’s not a single person who doesn’t want all children to have nutritious meals. The problem is this: Who defines what is nutritious? How will the systemization child-feeding change the future of food and agriculture?

Details, please, because the track record so far where USDA is concerned is marred by lack of logic and reduced application of current nutrition science via institutions like the Dietary Guidelines and restrictive policies for feeding children.

“We look forward to bringing our expertise to bear, expanding our reach, and benefiting millions more vulnerable children by partnering with the World Food Program and other like-minded countries as part of this important coalition,” said Vilsack in Wednesday’s press release.

Okay, let’s hear those details.

Will USDA do dairy?

In a June 15 press release about previously authorized aid for dairy, USDA announced $580 million for Dairy Margin Coverage base changes and $400 million for Dairy Donation Program would be implemented within the next 60 days, but we’ve yet to see the details.

As part of that news release, USDA also noted that, “Additional Pandemic Assistance for Producers (PAP) payments would be targeted to dairy farmers who have demonstrated losses not covered by previous payments.” No details on that either.

However, on the same day of that press release — June 15 — Senator Patrick Leahy, Chairman of the Senate Appropriations Committee, asked USDA Secretary Tom Vilsack about delivering urgently needed relief to dairy farmers. Vilsack replied to say that USDA was announcing that day (again without details).

In the exchange between Vilsack and Leahy during a Senate hearing, Vilsack said: “We are creating a program to help reduce the differential that occurred between Class I and Class III milk pricing because of the disproportionate number of purchases of cheese during the Food Box effort. That distorted the market, and it caused a lot of harm to smaller producers. We’re putting resources in to reimburse those producers for some of the loss they incurred.”

Those ‘differential’ discrepancies have not been outlined yet by USDA, but here are several manifestations Farmshine and other publications have been documenting:

  1. Due to the new Class I base calculation that uses a III / IV averaging method instead of the prior ‘higher of’, which was implemented by USDA in May 2019, over $750 million in cumulative Class I value was lost from May 2019 through May 2021.
  2. As much as $3.5 billion was potentially withheld or represented as inequitable transmission of milk value when massive volumes of Class III milk were withdrawn from FMMOs, as further reflected in severely negative PPDs. This would be a net loss after months of positive PPDs are applied; however, even positive PPDs in some months were smaller than normal.
  3. Both 1 and 2 contributed to the inequitable transmission of Class III value to many producer milk checks
  4. These losses affected the performance of purchased risk management tools, meaning that a change in Class I pricing that was supposed to help dairy processors manage their risk, had the resulting effect of making it more difficult or impossible for dairy farmers to manage their risk — during a time when they needed it most.

Conundrum: U.S. milk production up 4.6% in May

But here is the conundrum in regard to USDA dragging its feet on details for ‘dairy aid’: May milk production nationwide was up a whopping 4.6% over year ago — so says the USDA report released June 22. April production was up over 3% vs. year ago.

USDA looks at this as though dairy producers are doing so well that they are expanding their herds. In fact, in May, there were 145,000 more milk cows in the U.S. than a year ago. Could this be another sign of the inequitable transfer of value in the milk pricing formulas?

More insight on the production report next week’s Market Moos.

July Class I advance $17.42

The July advance Class I base price, or ‘mover,’ was announced Wednesday (June 23) at $17.42. This is 87 cents lower than June’s Class I base price and 86 cents higher than a year ago. The July 2021 Class I base price at $17.42 — using the current formula of average plus 74 cents — is 34 cents higher than it would have been if figured using the previous ‘higher of’ method at $17.08.

July 2021 marks the first time in 12 straight months that the new calculation method resulted in a higher Class I base price than the old method. However, there’s a lot of ground to make up, considering that for 16 of the 27 months since the new method was implemented, the difference between the new ‘average plus’ and the old ‘higher of’ was lower and only 11 months were higher.

In fact, the Class I base value losses for 16 months averages to $3.28 per hundredweight while the value gains (including upcoming July 2021) for 11 months averages to just 39 cents.

Class III/IV milk futures plunge

Class III and IV milk futures were all lower across the board this week. The only green in the sea of red, was the Class III current month gained a dime heading into the last week of June contract trading, but the Class III July contract lost 15 cents and August plunged by $1.00 below week ago, with the rest of the board on Class III milk ranging 10 to 50 cents lower. On the Class IV board, the losses were more evenly spread ranging 20 to 50 cents lower across all 12 months.

As all four dairy commodities trended lower on the CME spot market this week, the 12-month futures average lost 29 cents on both classes, equally, by midweek, so the spread between Class III and IV 12-month future contract averages remained exactly at 67 cents on Wednesday, June 23 — right where it was a week ago and still well below the $1.48 mark.

On Wed., June 23, Class III milk futures for the next 12 months averaged $17.67, down 29 cents from the previous Wednesday’s average, the 7th straight week the 12-month Class III futures price average was lower than the prior week. Class IV contracts averaged $17.00 — down 29 cents from the 12-month average on the previous Wednesday.

Dairy commodities all lower

Butter slid lower almost daily, on the CME daily spot market. By Wed., June 23, the price was pegged at $1.73/lb — down 7 cents from the previous Wednesday with 6 loads trading.

Grade A nonfat dry milk (NFDM) also slipped this week. On Wed., June 23, the CME spot market price was pegged at $1.2575/lb, a penny lower than a week ago with a single load trading.

Cheddar trade plunged lower on the CME, then firmed up a penny or two at midweek. Barrels took the brunt of the decline and by Wed., June 23, both the 40-lb block Cheddar and 500-lb barrel cheese were pegged at $1.49/lb on the spot market with 2 loads of blocks and a single load of barrels changing hands. This was a net 3-cent loss for the week on blocks and a 15-cent loss on barrels.

Whey price was firm on the CME spot market, pegged at 59 1/2 cents with zero loads trading.

Dairy Exports: Jekyll and Hyde

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MilkMarketMoosHeader070914web.jpgDairy Exports: Jekyll and Hyde

By Sherry Bunting, Milk Market Moos, Farmshine, February 2, 2018

Talk to dairy farmers and industry observers about dairy exports and the response runs the gamut from enthusiastic full-court-press to cautious optimistic pursuit to a pessimistic skepticism about the profitability they bring to the table.

awGDC18-Day1-56.jpgNo matter where you are on the scale of good, bad or indifferent, exports are essential for agriculture and for dairy.

The hands of time do not turn backward on technology and progress, and so we are in a global market. If we want to be competitive in our domestic market, we need to also be competitive globally.

The food industry is increasingly served by global players and multinational companies that can source and supply from all corners of the globe. People would be surprised to learn how relatively small the transportation cost is in exporting ag commodities, especially further processed dairy products, overseas compared with cross country, on a per-unit basis.

If our ships are not arriving at other ports because we can’t compete, then other ships will arrive at our ports because we can’t compete.

That said, forward progress in supplying markets overseas needs to be pursued, not with reckless abandon finding ‘homes’ for excess milk, but with strategic thinking that includes the marketing and a consideration for the well being of our dairy farm sector.

As Secretary of Agriculture Sonny Perdue pointed out in his visit to Pennsylvania last week, America’s food security is America’s national security. Our farmers are the thin green line that, along with our military, keep our nation safe. After 9/11, the U.S. set out to be energy independent within 25 years and accomplished this in 10, according to a talk, given by Dr. David Kohl, Virginia Tech professor emeritus, in Lancaster County, Pennsylvania last Friday.

Just as our growing economy became at one point dependent on other nations for a portion of its energy needs, to its peril, we should take care that we do not become dependent in the future on other nations for our food.

A laughable thought, perhaps, but the rapidly consolidating agriculture industry needs its wide and varied base of family farms, small independent businesses, that support a varied and competitive rural infrastructure and provide the safety net of food security for American consumers through their independent pursuit of partnering with industry and academia to producer more, with less.

Kohl talked about how important trade is to American farmers, including the dairy industry, which currently exports 1 out of every 7 days’ worth of milk.

He made some observations about China’s agriculture. That Chinese interests purchase of Smithfield was largely to purchase the food safety protocols to ensure their food security. Here’s a statistic Kohl shared that got me thinking. He said that while there are 2 million farmers in the U.S., there are 314 million farmers in China.

“They are not taking on technology there as rapidly because there are 800 million people living in rural China and they need something to do,” said Kohl.

Just think about that for a minute. Technology is as essential to the future in agriculture as are our trade negotiations and exports; however, this statistic made me think about our rural youth both on and off the farm.

Dairy farming, like the hog business in the 1990s, is at a crossroads. Farmers, through their cooperative memberships, partnerships and other arrangements, own some of the largest and most aggressive processing assets that are strategically consolidating markets and distribution.

They hold in their hands their futures as individual small businesses — parts of the whole, contributors to a market, dairy farmers who not only are improving their own business acumen but continually improving how they manage their herds and possess a passion for what they are doing, a passion that is being called upon to directly market their farming lifestyle to consumers to counteract the negative attacks of anti-animal activists casting doubt wherever they turn.

U.S. Dairy Export CEO Tom Vilsack has set a lofty goal of getting U.S. dairy exports to 20% of production vs. the current 14. That would be nearly one and a half days’ worth of milk production out of every seven.

That sounds exciting, but when have we heard percentage of increase goals set for the fluid milk category? Could that incremental effort not also be exciting?
There are reasons why we are not seeing this, and in some respects, those reasons bring us back full circle to the export discussion.

Beverage milk is not exported on the scale that dairy commodities and dairy products are. Yes, DFA is among those exporting shelf stable milk to China for supermarkets, but this is not a globally traded product as are cheese, butter, and particularly dairy indgredients and protein powders.

While dairy processors eye up the opportunities and build inventories around allocated sales, and manage their risk with offsets, dairy farmers are in the price-taking position with the promise that if exports grow, they and their families can grow their businesses, without a serious discussion about the profitability in that proposition.

All of this to say, that the main market for U.S. farm milk is here at home as not only a beverage but also a growing number of dairy products finding good demand.
We are not New Zealand, which exports most all of what they produce.

The U.S. has, already, a strong robust customer base for cheese, yogurt, butter and a host of dairy products, as well as a sector of our industry (beverage milk) that needs our committed attention through dynamic labeling, comparative promotion vs. the imposters, consumer education about MILK, not how many situps and pushups to do each day. It needs people in charge who truly believe it is important, not an offhand remark by a checkoff-paid employee for U.S. DEC speaking at a conference, saying that fluid market is a dead horse as he proceeded to dig into the exciting team of horses (exports) waiting in the wings to save the day.

Having said all of this, it is imperative that U.S. dairy farmers be competitive to be involved in the global marketplace because it is here, with all of its pluses and minuses, but that does not mean we turn way from the prize in which the Federal Orders place high value and for which other products are taking over because we have, in effect, laid down and allowed the incremental loss of beverage milk sales.

But let’s examine the fluid milk dilemma further in the next edition.

Author’s Note: Re-inventing this Ag Moos blog for the times….  Milk Market Moos is a column I have been writing in Farmshine since 2003. It became a weekly feature in 2007. Find some of this content here, at Ag Moos, along with other dairy and beef market related stories, agriculture news, and, in between, the stories and images of the inspirational people of agriculture… but you can get it first, and you can get it all, in Farmshine Newspaper, just $15/year. Farmshine is a weekly newspaper published in Brownstown, Pennsylvania — now in its 39th year of publishing all-dairy, all-the-time.