In your April 25, 2020 issue . . .
THE MILK DUMPING EPICENTER could be Wisconsin. “I fear we could be looking at least 10% and quite possibly much more as we move through the spring flush,” said Cornell University’s Andy Novakovic. Prior to this spring, dumping had been limited to the Northeast and Mideast regions.
AS MILK SEARCHES FOR A HOME, co-ops can sell milk at distressed prices. However, that milk is not tracked by federal market administrators. Those distressed milk sales would be in addition to the 10% forecast.
FEDERAL ORDER POOLING PROVISIONS do track dumped milk. “Pooling allows dumped milk to receive producer price differentials (PPD) out of the pool revenues, but the rest of the price has to come from the cooperatives’ pockets,” said Novakovic, who has studied markets for 40 years.
DIRECT SHIPPERS to a proprietary plant are a bit different. “If a direct handler tells a direct ship to keep their milk, that farmer is out of luck,” said Novakovic. “The handler never receives the milk and isn’t going to report it, and there is no cooperative to report it.”
MARKET UPHEAVAL CAUSED A SURGE in retail sales for the week ending March 15. Retail sales of milk were up 47%, shredded cheese rose 77%, and frozen pizza jumped 117% when compared to the same time last year.
“UNFORTUNATELY, ONCE REFRIGERATORS and freezers were full at home, this panic buying slowed to more moderate levels,” said Ben Laine.
FOOD SERVICE CHEESE SALES could take a big hit, falling by 50% during the second quarter. “More than 110 million pounds of cheese each month will need to be held in inventory, pushing us well over our maximum historical levels this spring,” continued Rabobank’s Laine.
CLOSED RESTAURANTS MATTER. “It looks like the average food service meal has 0.14 pounds or 29.8% more milk than a homemade meal,” said INTL FCStone Financial’s Nate Donnay. “So the shift from food service to homemade would be a net negative for overall dairy demand.”
THE LOST DEMAND FROM FOOD SERVICE will not be offset by gains in retail sales, estimated Rabobank’s Laine. This will amount to more than 5% of U.S. milk production per month through the summer.
THE DAIRY DEMAND LOSS COULD BE HIGHER. “We estimate that supply exceeds demand by at least 10% — a gap that could widen as supply increases to its seasonal peak and as ‘shelter in place’ conditions endure,” stated the National Milk Producers Federation’s (NMPF) Jim Mulhern.
A JOINT MILK CRISIS PLAN has been presented to USDA by NMPF and the International Dairy Foods Association. It asks USDA to offer milk price assistance from April to September, to reopen the Dairy Margin Coverage Program (DMC), and a host of other recommendations.
MILK FUTURES have been volatile and swirling downward. The following Class III averages prevailed for April to December contracts: February 10, $17.55; March 10, $16.60; and April 10, $14.60. USDA projected the 2020 All-Milk price at $14.35, down $3.90 from its estimate 30 days earlier.
CORN PRICES HAVE BEEN BATTERED by falling energy prices and slowed demand for ethanol. As a result, corn grain prices have fallen substantially, while dried distillers grains (DDG) rose $40 per ton.
DEAN FOODS’ ASSETS DREW 35 BIDS. Dairy Farmers of America (DFA) acquired 44 plants for $433 million and Prairie Farms obtained 10 facilities for $75 million. The remaining assets sold for $26 million.
BRIEFLY: Canada isn’t immune to milk dumping despite its supply management system; nearly every province reported farms that had to dump. A one-month extension has been granted to the 2020 Dietary Guidelines Advisory Committee in its quest to deliver updated eating specs.
