In your October 25, 2020, issue

BUOYED BY STRONG SPOT CHEESE PRICES, the October Class III future contract traded above $20.50 per hundredweight (cwt.). That contract was propelled by $2.65 per pound Cheddar blocks on the CME.

WHILE CHEESE STOCKS SEEM ADEQUATE, the category has been experiencing bizarre inventory building, shared Phil Plourd of Blimling and Associates. In a typical year, inventories build from January through July. This year, stocks peaked in April. Turn to page 626 to learn more.

IT APPEARS FUTURES on the CME have accounted for this situation, as November Class III traded in the mid-$19 range and December was just short of $18. New year January-to-June contracts averaged $16.60.

HIGH CLASS III AND LOW CLASS IV PRICES have combined with depooling to cause negative producer price differentials for many months. However, Class IV markets have begun to show some positive movement as nonfat dry milk climbed over $1 per pound to reach $1.10.

EVEN WITH THE UPWARD MOVEMENT, prevailing world prices are even higher, and U.S. milk powder remains a bargain for foreign buyers. The U.S. accounted for more than 10% of China’s skim milk powder (SMP) imports in August, marking the third straight month of strong sales.

OCTOBER CLASS IV TRADED in the mid-$13 range, with November and December fetching bids over $14. For 2021, contracts started out with January’s $14.50 and climbed steadily to reach $16.60 next September.

SOYBEANS CONTINUED TO SHOW STRENGTH. November soybeans pushed past $10.50 per bushel on the strongest trading this year based on early harvest reports in the U.S. and a dry start to the growing season in Brazil. As a result, December soybean meal rallied to a contract high.

OPEN ENROLLMENT for 2021 Dairy Margin Coverage (DMC) began October 13. In 2019, 23,000 farmers signed up for protection, but only 13,000 took USDA up on the offer this year. After the COVID-19 pandemic took root, some dairy farmers who passed on coverage pleaded, to no avail, to reopen the program. Enrollment for 2021 ends on December 11.

DMC IS FAR MORE ROBUST than its predecessor, Margin Protection Program (MPP-Dairy), at predicting true feed costs. By adjusting the formula to Premium and Supreme alfalfa, DMC paid out $75 million more during 2019 and 2020 than would have been the case with average alfalfa.

“IT’S A RISK MANAGEMENT TOOL,” FSA administrator Richard Fordyce shared in a call with Hoard’s Dairyman. “It’s not an investment tool.” To improve the decision-making process, the Farm Service Agency partnered with University of Wisconsin and University of Minnesota economists to improve the Decision Support Tool on USDA’s website.

DAIRY FARMERS RECEIVED $1.75 BILLION in payments during the first round of the Coronavirus Food Assistance Program (CFAP), said Fordyce, who added that farmers prefer to make money based on their own work but the pandemic has unleashed unusual market forces.

A NEW CHEESE PLANT based in Michigan will go online soon. Once fully operational, the plant jointly owned by Glanbia (50%), Dairy Farmers of America (25%), and Select Milk Producers (25%) will process 8 million pounds of milk each day into Cheddar cheese blocks.

U.S. CHEESE CONSUMPTION REACHED a new zenith at 38.3 pounds per person in 2019. The top cheeses included: Mozzarella, 12.48 pounds; Cheddar, 10.09 pounds; other American varieties, 5.45 pounds; Cream and Neufchatel, 2.62 pounds; Swiss, 1.12 pounds; Hispanic, 0.93 pounds; and Muenster, 0.55 pounds. Since 1999, Mozzarella grew by 3.74 pounds.