In your December 2021 issue . . .
MILK FUTURES MOVED UP SHARPLY during trading from November 1 to December 9. Class III futures rose 95 cents to reach a $19.50 average for the bundle of January to October 2022 contracts.
CLASS IV FUTURES CLIMBED EVEN HIGHER, gaining $1.30 per hundredweight on those same monthly contracts to reach a $20 average.
FEED COSTS CONTINUED TO TUG on margins to counter the favorable milk price outlook. The September hay price climbed to $230 per ton in the Dairy Margin Coverage (DMC) program. Meanwhile, soybean meal moderated to $325 per ton. CME corn approached $6 per bushel.
DMC PAYMENTS TOOK PLACE in each of the first 10 months of this year. Even though October posted the year’s most improved income over feed cost, the $8.77 figure still yielded payments at both the $9 and $9.50 coverage levels. Year to date, each 1 million pounds insured at $9.50 paid out $23,000. The total U.S. payout could net $1.1 billion.
DECEMBER 13 BEGINS THE ENROLLMENT PERIOD for 2022 DMC coverage. An updated feed cost formula exclusively uses Premium alfalfa hay rather than a 50% level. Dairy farmers who expanded production but remain under the 5 million production cap can sign up for Supplemental Coverage. USDA projects this Supplemental Coverage could net $580 million. Sign up runs through February 18, 2022.
THE GLOBAL MILK PRODUCTION FORECAST calls for minimal growth from New Zealand and the European Union, the world’s top two dairy export markets. The combination of high input costs, lackluster feed quality, and new environmental regulations have diminished milk production capabilities in these two major milk sheds.
WHY IS U.S. MILK PRODUCTION HITTING A WALL? Large herd dispersals in some parts of the country may have been part of this developing situation, as some dairy farms have bought out other operations to gain base and market access. Also, high input prices and poor forage quality in some regions have contributed to slowed milk flow.
IS THIS MILK FLOW PATTERN A NEW TREND? We will need to see a few more months of U.S. data, suggested NMPF’s Peter Vitaliano.
TRADING ACTIVITY at Global Dairy Trade suggested continued tight dairy product supplies. During December 7 trading activity, the seven-product bundle rose 1.4%, making it the eighth straight session prices moved upward at the every-other-week commodity market.
A $5 MILLION BOOST FOR EXPORTS was signed into law by Wisconsin Governor Tony Evers. Of the funds, half, or $2.5 million, would be used to enhance exports of cheese, yogurt, whey, and other dairy products.
WHILE DAIRY PRODUCT SALES kept growing both domestically and globally, fluid milk continued to stumble. September fluid milk was off 1.3% compared to a year earlier. Year-to-date sales were down 4.1%.
FLAVORED WHOLE MILK BUCKED the trend, climbing 7.6%, and flavored, reduced-fat milk also posted a 10.9% gain in year-to-date sales.
CHEESE AND BUTTER ABSORBED MOST DAIRY FAT. In 2020, cheese accounted for 41.7% of all fat use; butter, 19.5%; frozen dairy products, 7.5%; and sour cream, 3.2%. The highest level for cheese was 42.8% in 2018.
ONE CATEGORY THAT HAS CLEARLY LOST market share is fluid milk. In 2020, beverage milk accounted for 11.2% compared to 18% in 2000.
WHEN IT COMES TO ARC OR PLC, the University of Wisconsin’s Paul Mitchell advises farmers to sign up for USDA’s Agricultural Risk Coverage (ARC) for corn, soybeans, wheat, and oats in 2022.