U.S. dairy farmers are feeling the squeeze.
Average feed costs are up more than $5 per hundredweight compared to a year ago, according to the April 23 Dairy and Food Market Analyst.
“A low-cost dairy farmer that broke-even at $15 per cwt milk in 2020 will now need $20 to make money,” the DFMA stated.
“That means many milk producers, especially those that are buying spot feed and are receiving a milk price that is close to Class IV, are deep in the red.”
Margin still slipping
A small rise in the all milk price could not offset sharply rising feed costs and USDA’s latest Ag Prices report shows the March milk feed ratio at 1.75, down from 1.78 in February, and compares to 2.24 in March 2020.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay.
In other words, one pound of milk could only purchase 1.75 pounds of dairy feed of that blend in March.
The U.S. All-Milk price averaged $17.40 per hundredweight, up 30 cents from February but 50 cents below the March 2020 average.
California’s All Milk price slipped to $17.10, down 70 cents from February and 20 cents below a year ago. Wisconsin’s, at $17.50, was up 30 cents from February but 60 cents below a year ago.
The national average corn price hit $4.89 per bushel, up 14 cents per bushel from February, which followed a 51-cent rise the month before, and was priced $1.21 per bushel above March 2020.
Soybeans averaged $13.20 per bushel, up 50 cents per bushel from February, which followed a $1.80 rise from January. The March soybean price was priced $4.73 per bushel above March 2020.
Alfalfa hay climbed higher as well, averaging $181 per ton, up $6 from February and $9 above a year ago.
The March cull price for beef and dairy combined averaged $67.10 per cwt., up $1.50 from February, 40 cents below March 2020, and $4.50 below the 2011 base average of $71.60 per cwt.
GDT down 0.7%
Dairy fat weighed heavily in this week’s Global Dairy Trade auction where the weighted average was down 0.7%, following the 0.1% slip on April 20.
Butter led the losses, plunging 12.1%, after slipping 0.6% in the last event. Anhydrous milkfat was down 4.2%, after falling 3.3% last time. Cheddar was down 4.5%, after it inched 1.2% higher last time, and lactose was off 2.0%, following a 3.4% loss.
Buttermilk powder was up 14.4%. It did not trade last time. Skim milk powder was up 2.0% and whole milk powder inched up 0.7%, after eking out a 0.4% rise last time.
StoneX Group says the GDT 80% butterfat butter price equates to $2.2282 per pound U.S., down 31 cents, and compares to CME butter which closed Tuesday at a bargain $1.7450.
GDT Cheddar, at $1.9388, is down 7.3 cents, and compares to Tuesday’s CME block Cheddar at $1.80. GDT skim milk powder averaged $1.5572 per pound, up from $1.5265, and whole milk powder averaged $1.8664 per pound, up from $1.8583. CME Grade A nonfat dry milk closed Tuesday at $1.34 per pound.
Cheese & powder strong
CME cash dairy prices ended April stronger for the most part. The Cheddar blocks finished at $1.80 per pound, up 0.75 cents on the week, 2.50 cents above their April 1 posting, and 59.50 cents above that week a year ago.
The barrels closed Friday at $1.8350, up 3 cents on the week, 32.25 cents above the April 1 perch, 64.50 cents above a year ago, and 3.5 cents above the blocks.
Sales totaled 24 of block on the week and 87 for the month, up from 31 in March. Barrels totaled 12 for the week, with 85 for the month, up from 28 in March.
Traders left the blocks unchanged both Monday and Tuesday, as they awaited the afternoon’s March Dairy Products report.
The barrels lost 2.25 cents Monday but recovered 0.75 cents Tuesday, pausing at $1.82 per pound.
Cheese market tones are remaining solid, according to Dairy Market News, and Midwestern producers are running active schedules. The spot milk price range ticked higher the previous week and seemed to hold last week, though most contacts suggest there’s enough milk to go around. Demand remains strong but buyers are more hesitant regarding how much cheese they take. Customers are buying on a necessity basis and don’t want to get caught holding extra loads if markets shift, although inventories are “generally moving out the door.”
Western retail cheese demand held steady last week. Foodservice demand is still shifting higher, though some contacts report sales are beginning to level off. Asian export demands have shifted higher in recent weeks. Plenty of milk is available in the region, as producers continue to run full schedules.
Cash butter closed Friday at $1.7525, down 1.75 cents on the week, 9.25 cents lower on the month, but 56.50 cents above a year ago. There were 21 CME sales on the week and 108 for the month, up from 73 in March.
Monday’s butter was unchanged but slipped 0.75 cents lower Tuesday, to $1.7450.
Food service butter demand has ebbed somewhat from a few weeks ago, when upticks due to easing of COVID-19 restrictions were boosting demand. Retail demand is lackluster. Butter inventories are generally balanced. Plant managers report that cream was a little tighter but butter market tones are “uncertain.”
Cream abounds in the West but availability may be tightening slightly as ice cream makers pull increasing large volumes of cream. Butter inventories are fairly stable. DMN says food service butter orders “remain on an upward trajectory overall as dine-in restrictions have been relaxing.
However, some contacts expect bulk butter demand to waver a little as some counties are now heightening public activity restrictions in response to rising COVID cases and hospitalizations. Retail butter demand is termed steady, says DMN.
Grade A nonfat dry milk climbed to $1.3250 per pound Friday, up 7.25 cents on the week and 53.25 cents above a year ago. There were 16 sales on the week, 62 for the month, down from 72 in March.
The powder was down 0.50 cents Monday but jumped 2 cents Tuesday to $1.34, highest since Oct. 17, 2014.
CME dry whey, after setting the highest price ever the week before, fell back to 64.50 cents per pound Monday, then pushed higher. It ended the week and the month at 66 cents per pound, up 4 cents on the week and 26.50 cents above a year ago.
There were 6 sales on the week and 17 on the month, up from 14 in March.
Monday’s whey was unchanged but it dropped 1.50 cents Tuesday, sliding to 64.50 cents per pound.
Butter output jumped
You’ll recall U.S. milk production totaled 223.2 billion pounds in 2020, up 2.2% from 2019. This week’s annual Dairy Products summary shows where that milk went.
Cheese output totaled 13.3 billion pounds in 2020, 0.9% above 2019 output, with Wisconsin remaining the biggest cheese producer, accounting for 25.6% of total cheese production.
Italian varieties totaled 5.63 billion pounds, down 0.8% from 2019, and accounted for 42.4% of the total cheese output in 2020.
Mozzarella cheese accounted for 79.1% of the Italian group, followed by Parmesan at 7.4%, and Provolone at 6.5%. Again, Wisconsin was the leading producer of Italian type cheeses, at a 29.3% share.
American type cheese output amounted to 5.34 billion pounds, 2.0% above 22019 output, and accounted for 40.3% of 2020 cheese. Wisconsin was the leading state again, with 19.9%.
Cheddar cheese totaled 3.8 billion pounds, up 2.4% from 2019.
U.S. butter production totaled 2.15 billion pounds, up 7.6% from 2019. California was the No. 1 butter producer, with 31.1% of the total output.
Nonfat dry milk for human consumption totaled 1.99 billion pounds, up 7.6%, while skim milk powder amounted to 695 million pounds, up 21.4% from 2019.
Dry whey totaled 951 million pounds, down 2.7%.