In your November 2020 issue . . .
FARMERS WERE STRUCK A BLOW when Representative Collin Peterson (D-Minn.) lost his reelection bid for Minnesota’s Seventh Congressional District. As the ranking member of the House Committee on Agriculture, Peterson brokered deals on the three most recent farm bills.
THE 30-YEAR HOUSE MEMBER WORKED HARD to understand agriculture in all corners of the country, not just his district . . . a rare trait in today’s Congress. Peterson not only understood farmers, he knew what policy could best help them achieve success. For more, turn to page 672.
SIGN-UP IS UNDERWAY FOR THE FARM BILL’S signature dairy program, Dairy Margin Coverage (DMC). “As we saw this year . . . when we did not expect that the program was going to make payments . . . it made major payments,” said NMPF’s Peter Vitaliano.
“WE URGE ALL DAIRY PRODUCERS to sign up for Dairy Margin Coverage, if you have not already done so, at the $9.50 level for the first 5 million pounds of milk,” was Vitaliano’s crystal clear advice for 2021.
NEAR-TERM CHEESE MARKETS remain strong, with spot Cheddar blocks at $2.50 per pound and spot Cheddar barrels also near $2.50. Those prices for 640-pound barrels had pushed past records on the CME. As a result, December Class III futures traded in the $19.50 range.
MARKETS BACK OFF in the new year with unknowns about the continuing pandemic, restaurant and food service sales, and overall demand for dairy products. January-to-March Class III futures averaged near $17, while Class IV contracts were near $14 for those same months.
AS TRADING ON THE CME EXTENDED to April through October 2021, Class III and Class IV come closer together. Should that come to fruition, negative producer price differentials (PPDs) could finally evaporate. At the moment, those Class III contracts averaged $16.50; Class IV, $15.60.
WHILE NOT A RECORD, PROTEIN PRICES stood at $5.02 per pound for milk priced under the federal order system in October. That was off slightly from July’s $5.62 record. Butterfat fetched $1.64 per pound.
FLUID MILK SALES BUCKED long-term trends as June beverage milk was up 5.4% from the same month last year. Whole milk rose 4.6%, reduced-fat sales grew 4.9%, and low-fat milk moved up 3.7%. Overall, fluid milk sales have grown by 0.8% through the first six months of the year.
RETAIL DEMAND HAS BEEN A BRIGHT SPOT. “From February through August of 2020, compared to those same months in 2019, dairy sales were up 0.7% on a fat basis and 0.8% on a skim basis; so call it 0.75%,” said Cornell’s Andy Novakovic. “The impact on dairy product sales total has been positive during this pandemic period.”
A MILK IMBALANCE MAY BE AHEAD. The sales growth might be unsustainable as government stimulus to consumers dries up and USDA’s Farmers to Families Food Box Program eventually expires.
“WE NEED TO BE WARY of the fact of the underlying fundamental that production is starting to increase faster than demand and actually not by a small amount,” Novakovic added. “In normal times, these relative changes . . . would signal concern about future milk prices.”
LONGTIME DAIRY STRATEGIST Mike Brown, who is now with Kroger, concurred, “I looked at the forward buying of the future market as a buyer of products, and I think it’s optimistic. If I was a producer, I would be looking closely.” His concern is that rising milk production and better feed this year will mean expanded milk production that has no home.
