In your May 25, 2020 issue . . .
HAS DAIRY HIT ROCK BOTTOM? “May is the bottom,” responded Mark Stephenson to the question asked on Hoard’s Dairyman DairyLivestream. “May is the month we are expecting prices to be the lowest and coming up over that time period . . . but never returning to the optimism that we had at the beginning of the year,” he continued.
SOME PRICE RECOVERY RETURNED to the markets, as May to December Class III futures rebounded to a $14.75 average on May 7 — up 85 cents from the April 23 projection. July to December contracts netted $15.45.
THERE HAS BEEN A PICKUP IN PROCESSING over the last couple weeks as food service is starting to reopen, reported United Dairymen of Arizona’s CEO Keith Murfield. The supply chain is adjusting, and USDA is also purchasing some dairy products for food pantries.
PRODUCT INVENTORIES ARE MOUNTING, however. “We usually keep about 20 days of milk powder inventory on hand,” said Murfield. Now the Arizona co-op has 70 days of stock, up 250%. Given this situation, the organization asked its members to only ship 90% of typical milk volume.
FOR NEARLY TWO WEEKS, the cooperative did have to dump milk into manure digesters. “We even had to dump cream for the first time in my 46-year career,” added Murfield on DairyLivestream.
DUMPED CREAM WAS EYE OPENING because, prior to COVID-19, dairy fat had been on a steep climb. In fact, the national bulk tank averaged 3.92% milkfat last year — that was up from 3.67% in 2009. The last time butterfat approached 4% was in 1951 during the Truman administration.
ON THE EASTERN SEABOARD, Maryland & Virginia Milk Producers have not dumped milk but stepped up butter and milk powder production. “Our plants are running wide-open 24 hours, seven days a week,” said CEO Jay Bryant, noting it will take time to work down inventory.
“WE ARE NEARING COLD STORAGE LIMITS for products such as cheese, and that will put further pressure on the market,” commented Stephenson. However, Class III is expected to be a bit of better news. “Dairy producers may see a larger spread between Class III and Class IV than normal,” added Murfield in an exchange on DairyLivestream.
IN MARCH, U.S. DAIRY EXPORTS VOLUME were up for the seventh straight month, despite the coronavirus. “Exports are showing some light, as the southeastern Asian market picks up some of the slack lost in sales headed to Mexico,” added the University of Wisconsin’s Stephenson.
WHEN WILL SUPPLIES REBALANCE? “At this point, dairy cow culling is not happening at a rate that’s needed to curb milk supplies,” said the University of Missouri’s Scott Brown. “It is important to note that slaughter capacity has been constrained with COVID-19 outbreaks in many plants, and that may be delaying cow culling so far.”
AS COVID-19 RAVISHED WORKFORCES, the pork industry was forced to euthanize hogs. In a typical week, over 500,000 pigs are processed in the U.S. A number of plants that slaughter cull cows were also forced to close until President Trump issued an Executive Order to keep meat and poultry processing facilities open during the national emergency.
BRIEFLY: Dean Foods completed its bankruptcy liquidation by selling 44 of its plants to Dairy Farmers of America. Prairie Farms, based in Illinois, also acquired eight plants. USDA denied a request for an emergency hearing to set the Class I price mover at $15.68 for the months of June, July, and August. Dairy replacement prices averaged $1,250 in April, down just $50 from January 2020. Mailbox prices netted $17.89 last year, up from $15.72 per cwt. in 2018.