In your February 2022 issue . . .

FOR THE FIRST TIME IN 12 MONTHS, the Dairy Margin Coverage (DMC) program did not make a payout as milk prices climbed to a $21.80 All-Milk price. On the cost side of the equation, premium alfalfa hay fetched $253 per ton; soybean meal, $400 per ton; and corn, $5.47 per bushel. That yielded a final feed cost of $12.27 for a $9.53 per cwt. margin.

FRIDAY, FEBRUARY 18 IS THE FINAL DAY to sign up for the DMC program in 2022. While program payouts appear to be slim in the near term, the health pandemic showed dairy farmers that market conditions can turn on a dime. Sign up at local USDA Farm Service Agency (FSA) offices. In 2021, DMC paid out over $1.1 billion, or $58,000 per dairy farm.

A $22-PLUS ALL-MILK PRICE could be in store for 2022. Propelled by tight global supplies of dairy products, Class IV futures continued to move up, reaching a $22.40 per cwt. average for February-to-December contracts on the CME. February-to-May Class IV contracts had a $23.35 median.

WHILE CLASS IV HAS BEEN THE MARKET LEADER, Class III cheese contracts traded for a $20.90 average on the CME for the months of February to December. Those values were up a full 40 cents in the past month.

MILK PRICES WERE LIFTED TO A $9.20 MIDPOINT by New Zealand’s Fonterra Cooperative. After converting kilograms of milk solids to hundredweights, that would net $20.83 per cwt. with a range from $19.96 to $21.31 for farmers in the world’s leading dairy product exporting nation.

DECEMBER MILK FELL 5.5% in New Zealand. Many point to poor weather and reduced feed quality as culprits for slowed milk flow. However, one cannot overlook labor. With the country in a virtual lockdown since the start of the COVID-19 pandemic, there has been a shortage of immigrant labor. Special government permission recently allowed 200 of the 1,500 requested dairy workers into the country, still an 87% shortfall.

PROPELLED BY BACK-TO-BACK TRADING SESSIONS where a six-product bundle rose 4.6% on January 18 and then 4.1% on February 1, dairy prices climbed to the highest levels since 2014 on New Zealand’s Global Dairy Trade. Butter approached $2.90 per pound; Cheddar, $2.60.

GIVEN STRONG DEMAND FOR FAT, butterfat prices leapt past protein in January’s U.S. milk checks. Butterfat values were $2.96 per pound; protein, $2.36. In December, butterfat was $2.29 and protein $2.60.

MILK PRODUCTION SLIPPED 0.4% in November and 0.1% in December across the United States. That also led to the tightening of butter stocks. The top two dairy states, California and Wisconsin, grew milk output.

U.S. DAIRY EXPORTS REMAINED ON PACE to post a record year of shipments despite the port congestion and lack of willing shipping carriers. At 105,000 metric tons, Mexico imported a record level of cheese in 2021. The U.S. held a 75% market share, according to Mexican Custom reports.

BALANCING MILK SUPPLIES AND PRODUCT DEMAND was a challenge even prior to the pandemic. That led to a number of cooperatives and processors creating “base programs” to moderate milk flow. “Based on our estimates, about half of U.S. milk is currently under some form of a base program,” shared Zack Bowers of Ever.Ag.

WHILE MOST BASE PROGRAMS LIMIT milk pounds, limits seldom exist on solids. This market condition, along with strong demand for butterfat and protein, are among the reasons component levels continue to climb.

BUTTERFAT VAULTED FROM 3.68% TO 4.04% from 2010 to 2021 in the Upper Midwest Federal Milk Marketing Order. During that same 12-year horizon, protein percentages climbed from 3% to 3.17%.

THE DRUMBEAT FOR FEDERAL ORDER REFORM has been gaining momentum after USDA Secretary Tom Vilsack shared he would consider a proposal should the industry present a unified plan. IDFA released the industry’s first working paper on modernizing U.S. milk pricing.