In your August 10, 2020 issue . . .

MARKETS REMAIN UNSETTLED with block Cheddar cheese trading between $2.50 and $3 per pound on the CME from mid-June to mid-July. Those prices still propelled August Class III futures to over $22.

FOR THE REMAINDER OF THE YEAR, Class III futures traded a bit lower, with August to December contracts at an $18.10 average. For the first half of 2021, traders peg milk destined for cheese at $16.30.

USDA ECONOMISTS PROJECTED AN $18.25 All-Milk price for 2020. That value was up $1.60 from the June projection as cheese continued to carry markets. The early 2021 All-Milk price forecast was $17.05.

A $14.23 TO $15.56 FORECAST has been projected by Fonterra for the 2020 to 2021 season. Milk prices in New Zealand tend to trail those in the U.S.

“DAIRY SEEMS TO BE FINDING its new rhythm, and it is a good one,” said Abrielle Backhouse, research coordinator with the International Dairy Deli Bakery Association. “The biggest category within dairy, natural cheese, still sits about 20% above last year’s levels all these weeks later.”

PANDEMIC-INDUCED PRICE SWINGS caused June’s Class III price to catapult the Class I price announced weeks earlier. As a result, cheese plants had an economic incentive to depool milk. That created negative producer price differentials (PPDs) over $7 for federal orders.

WITH ITS MASSIVE CLASS III MARKET, the Upper Midwest order could have had a negative PPD in the minus $8 range had all the Class III milk been depooled, reported Mark Stephenson and Andy Novakovic. Instead, the Upper Midwest experienced only a negative $3.81.

IN THE CALIFORNIA AND SOUTHWEST ORDER, nearly every drop of Class III milk was depooled, as the $7.91 and $7.62 per cwt. negative PPDs matched the earlier projections by the pair of dairy economists.

WITH CHEESE LEADING THE CHARGE, a $10 spread could occur between Class III and IV prices in July. That cheese buying-induced spread, at the expense of milk powders and butter, could lead to more PPD deductions; granted, none should be as large as those experienced in June.

WITH MAY’S LOW PRODUCT PRICES, U.S. dairy export volume reached a two-year high, accounting for 17.4% of the nation’s milk production. Those exports were paced by record sales of nonfat dry milk and skim milk powder. Cheese, lactose, and whey shipments also rose.

ABOUT 8% OF WORLD MILK PRODUCTION is traded internationally, reported the United Nations’ Food and Agriculture Organization. By 2029, the “Big Three,” which includes the European Union, New Zealand, and the U.S., could account for 65% of cheese, 68% of whole milk powder, 76% of butter, and 77% of skim milk powder exports.

PRODUCERS WHO BOUGHT COVERAGE up to the $9.50 level in the Dairy Margin Coverage (DMC) program received $4.13 per cwt. for May milk. That’s the largest payment to date and was due to a $5.37 milk margin above feed costs. That was the lowest margin since July 2013.

ENROLLMENT FOR 2021 DMC COVERAGE will begin on October 12 and run until December 11. For the current fiscal year, more than 13,000 operations enrolled in the program administered by USDA’s FSA offices.

WILL CANADA HONOR the terms for dairy in the newly activated United States-Mexico-Canada Agreement (USMCA)? At the onset, it appeared that Canada may not be acting in good faith by implementing restrictive tariff rate quotas (TRQs) and assigning sales opportunities to distributors and processing never intending to move product.

USDA MAY RESURRECT ITS PROPOSAL to require electronic identification tags on all adult cattle entering interstate commerce by 2023. A public comment period on the proposal runs through October, 5, 2020