Mielke Market Weekly

This column was written for the marketing week ending Nov. 19.

U.S. milk output is stalling as cow numbers and output per cow continues to fall. Production fell below that of a year ago for the first time since May 2020, the result of restrictions imposed by several cooperatives. The U.S. cent from a year ago, on a 25-pound drop per cow. Cow numbers were unchanged. Wisconsin was up 69 million pounds, or 2.7 percent, on a 20-pound gain per cow and 21,000 more cows. Idaho was up 0.9 percent on 6,000 more cows. Output per cow was unchanged. Department of Agriculture’s latest preliminary data shows October output at 18.52 billion pounds, down 0.5 percent from October 2020. The 24-state total, at 17.7 billion, was down 0.3 percent from a year ago. Revisions lowered the September 50-state estimate by 37 million pounds from last MIELKE MARKET WEEKLY By Lee Mielke was up 3.9 percent with 22,000 more cows milked and a five-pound gain per cow. The Daily Dairy Report says Texas’ increase in cows was likely due producer purchases of cows and production bases from shuttered dairies in New Mexico. month’s report to 18 billion, virtually unchanged from 2020. Cow numbers totaled 9.40 million head, down 14,000 from September. This is the fifth consecutive month they were down from the previous month, and the September head count was revised 8,000 head lower. The October herd was 14,000 head below a year ago and down a whopping 103,000 since June. StoneX Dairy Group says, “The only time we’ve seen that in the past 23 years was late 2009 when we lost 178,000 head over five months with the help of CWT and truly devastating margins.” Michigan was off 0.4 percent on a 30-pound drop per cow, though cow numbers were up 4,000. Minnesota was up 2.8 percent on 9,000 more cows and a 15-pound gain per cow. New Mexico again had the biggest drop, down 12.2 percent after falling 12.5 percent in September. Depleted finances shuttered several operations in the state. Cow numbers were down 34,000 head and output per cow was down 45 pounds. New York was up 1 percent thanks to 2,000 more cows and a 15-pound gain per cow. Oregon was unchanged across the board. Pennsylvania was down 3.1 percent on 7,000 fewer cows and 30 pounds less per cow. South Dakota was up 15.3 perThe Daily Dairy Report adds that a similar phenomenon has been happening in Idaho as an exodus of dairies occurs in Washington State which scored the second biggest decline in October, down 6.9 percent following a 6.8 percent drop in September. Cow numbers were down 15,000 and output per cow was down 30 pounds. n Farm profit margins have been taking a beating, especially between August and October, according to StoneX, “as longer-term feed contracts expired and many producers went from $180 per ton corn contracts to $275-$300 per ton. They culled animals

Output per cow averaged 1,970 pounds, down 6 cent on 21,000 more cows and a five-pound gain per because of it and we’re losing animals at a near pounds or 0.3 percent from a year ago cow. Vermont was off 0.5 percent on a five-pound record clip,” says StoneX, though some of it may be

California was down 43 million pounds or 1.3 per- drop per cow. Cow numbers were unchanged. Texas See MIELKE, pg. 15

News and information for Minnesota and Northern Iowa dairy producers

base rent to be adjusted downward if the actual crop yields and prices per acre fall below the established base figures.

Most flexible leases have been modified in recent years into a “bonus rent” agreement. This type of flexible lease uses a reasonable base rental rate which can flex upward with an added rental payment to the landlord if the base crop yield and/or base crop prices, or the base crop revenue per acre, are exceeded. However, the final rental rate does not drop below the base rental rate.

There are many variations to setting up a flexible lease agreement between a landlord and farm operator, including using yield only, price only, a base crop revenue compared to a harvest crop revenue, and many more. The big key, regardless of the flexible lease agreement, is that both the landlord and tenant fully understand the rental agreement and the calculations used to determine the final rental rate. It is also very important that flexible lease agreements, as well as all land rental contracts, be finalized with a written agreement.

Flexible leases can work well for newer or younger farm operators who may not be able to afford the higher cash rental rates for farmland. A flexible lease makes it easier for producers to utilize risk management tools such as crop revenue insurance policies and forward pricing of grain. A flexible lease, with a fair base rental rate, allows landlords the security of a solid base rental rate, while having the opportunity to share in added profits when crop prices and/or yields exceed expectations — such as occurred in many areas in 2021. Flexible leases are a nice alternative for landlords who want to continue to work with long-standing farm operators on multi-year rental contracts, without setting cash rental rates too high to keep the current tenants.

Utilizing flexible cash lease agreements between farm operators and landlords can be a good management strategy as an alternative to extremely high straight cash rental rates. However, these agreements need to be fair and equitable to all parties. Landlords also need to be willing to adjust the base cash rental rates lower as necessary if crop margins become quite tight, as occurred from 2015 to 2019. It is extremely important all aspects of a flexible land rental lease agreement be detailed in a written rental contract signed by all parties. The agreement should include the base rent and yield, price determination, as well as other provisions of a flex lease. Successful flexible cash lease agreements, just as any other long-term cash rental agreement, have always involved cooperation, trust, and good communication between the farm operator and the landlord.

Iowa State University has some very good resources on flexible cash leases and written cash rental lease contracts, including sample cash rental contracts, which are available on their “Ag Decision Maker” web site, http://www.extension.iastate.edu/ agdm/. The University of Minnesota puts out an annual publication on annual rental rates and has a computer spreadsheet titled “Fair Rent” which is an excellent resource for determining equitable land rental rates and evaluating flexible lease examples, and is available at https://www.cffm.umn.edu/products/FairRent.aspx. For additional information on flexible rental leases, land rental rates, and 2022 crop budgets, as well as sample lease contracts, you can e-mail me at kent.thiesse@minnstarbank.com.

Kent Thiesse is a government farm programs analyst and a vice president at MinnStar Bank in Lake Crystal, Minn. He may be reached at (507) 726-2137 or kent.thiesse@minnstarbank.com. v

attributed to poorer feed or poorer weather.

The USDA’s latest Livestock, Dairy and Poultry Outlook projects the U.S. dairy herd will continue decreasing in the first two quarters of 2022. Consequently, the annual 2022 forecast was lowered to 9.395 million head, 55,000 head below the last month’s forecast, and 60,000 less than 2021.

The 2022 forecast for milk per cow is 24,280 pounds, 25 pounds lower than last month’s forecast. The 2022 milk production estimate was lowered to 228.1 billion pounds, 1.6 billion below last month’s forecast, but 1.7 billion pounds above 2021.

In the week ending Nov. 6, 59,900 dairy cows were sent to slaughter. This is up 300 from the previous week and 2,100 head or 3.6 percent above that week a year ago.

n

There is still plenty of milk available in this country and commercial dairy product disappearance slipped a little in September. USDA’s latest data shows total cheese disappearance at 1.15 billion pounds, down 0.3 percent from September 2020, though year-to-date is up 3.9 percent. Exports were up 20.5 percent. Butter totaled 186.6 million pounds, down 0.4 percent, with year-to-date up 5.2 percent and exports up 111.5 percent.

Dry whey disappearance, at 79.7 million pounds, was down 6.3 percent, with year-to-date off 2.2 percent. Nonfat dry milk-skim milk powder disappearance totaled 226.9 million pounds, down 8 percent from a year ago, with year-to-date up 0.4 percent. Exports were up 16.2 percent and on track for a record year, according to HighGround Dairy. n

This week’s Global Dairy Trade auction saw its weighted average jump 1.9 percent following the 4.3 percent jump on Nov. 2. Traders brought 67 million pounds of product to market, up from 66 million last time, and the most since Dec.15.

Butter led the gains, up 3.5 percent, following the 4.7 percent advance on Nov. 2. Anhydrous milkfat was up 1.3 percent after gaining 4.2 percent last time; and GDT cheddar was up 2.2 percent after leading the gains last time with a 14.1 percent advance. Whole milk powder was up 1.9 percent following a 2.7 percent gain; and skim milk powder was up 1.4 percent after a 6.6 percent gain last time.

StoneX says the GDT 80 percent butterfat butter price equates to $2.4491 per pound U.S., up 8.2 cents, after gaining 10.6 cents last time, and compares to Chicago Mercantile Exchange butter which closed Nov. 19 at $2.0475. GDT cheddar, at $2.3416, was up 4.8 cents after jumping 28.7 cents last time, and compares to Nov. 19’s CME block cheddar at $1.8575. GDT skim milk powder averaged $1.6676 per pound, up from $1.6450. Whole milk powder averaged $1.8086 per pound, up from $1.7785. CME Grade A nonfat dry milk closed Nov. 19 at $1.5550 per pound.

n

•Provides superior lunge area •Much stronger than our competitors’ beam systems •NoStall mounts in the concrete or sand •Fully adjustable •Stall system stays high and dry, resulting in longer life •Installation labor savings •Head-to-head and single row options available •Compare the weight of this system, heaviest available on the market today

•24” wide,50” long x45” tall, lowersection 16” deep

Auto Release Head Locks Panel

•Entire panel made of H.D. 10 gauge tubing •Panels are hot dipped galvanized after welding inside and out •6’, 8’, 10’, 12’ lengths •12’ panel weight 275 lbs.

Diagonal Feed Thru Panel

• Simple low maintenance • No thin top cover to break down and tear • Specialized urethane foam unde y not pack over time like crumb filled beds • Fully molded and reinforced top mat for stability and added hygiene • Simple and fast installation • 5year warranty erlay which does

• Proven for Extreme Durability • 5mm Stainless Cable Inlay • Guaranteed NEVER to Stretch • Grooved TopFor Traction • Can Be Used With Automatic &SkidSteer Scrapers • 10 year warranty

North Asia’s market share of purchases continued to be below year-ago levels, but rose above the last event, according to StoneX. “GDT volume was nearly flat from last event. With increased purchases in North Asia from the last event most other regions experienced a decline in purchases, but still maintained a market share greater than year-ago levels.”

We do have stiff competition on the global market. StoneX says, “Despite weak milk production, September EU exports came out stronger than expected, up 4.1 percent year-over-year, with August revised up to 6.6 percent.”

“Cheese exports remain strong with the United States being the top destination,” StoneX went on to report. “Fat-filled exports have really taken off in the last two months. We would guess we’re seeing some substitution away from whole milk powder given the fat prices. Overall the data was bullish. Global demand was a little better than expected for September, and since we know production isn’t doing great in Europe, the strong exports are likely coming from inventory. Given the stronger exports, we had to pull EU 2021 milk equivalent ending stocks from being down 3 to 5 percent lower.”

Exports were a key topic at this week’s joint annual meeting of the National Milk Producers Federation, United Dairy Industry Association, and Dairy Management Incorporated in Las Vegas.

Hoards Dairyman’s Corey Geiger said NMPF’s Jim Mulhern said the United States is on track for a record year in exports, meaning we will export about 17 percent of our milk solids or all of the country’s milk output for five days per month from 9 million cows. He said 75 percent of the new milk we produced is in effect being exported.

The U.S. Dairy Export Council’s Krysta Harden said no one is going to give us market share, we have to go out and get it, according to Geiger. Mexico is our biggest market, he said; but DMI’s Barbara O’Brien pointed out the 16 countries of Southeast Asia, not including China, have a growing middle class that want dairy products.

NMPF’s Mulhern added New Zealand is the world’s largest dairy exporter, followed by the EU, and the United States, but he believes we can become number two … and ultimately number one, “but our work is cut out for us.”

Meanwhile, NMPF First Vice Chairman Simon Vander Woude called on the U.S. government to prioritize expanded market access opportunities for U.S. dairy exports at a House Subcommittee for Livestock and Foreign Agriculture hearing this week. He stressed the urgency of expanding access to dairy markets like the UK, Asia (Japan, Southeast Asia, China) and the Middle East to catch up with competitors whose countries have aggressively sought trade agreements the past decade. He highlighted other policy priorities impacting U.S. operations, including the current supply chain crisis, securing long-term relief from Chinese retaliatory tariffs, and implementation and enforcement of existing trade agreements, including the U.S.-Mexico-Canada agreement. n

After jumping 16.5 cents the previous week, the cheddar blocks fell to $1.66 per pound Nov. 16 but closed Nov. 19 at $1.8575. This is up 10.75 cents on the week (the highest since Sept. 30) and 21.25 cents above a year ago when they tumbled 27.25 cents.

The barrels fell to $1.445 on Nov. 17, but finished two days later at $1.52. This is 2.25 cents higher, 9.75 cents above a year ago but 33.75 cents below the blocks. Sales included five cars of block and 28 of barrel in the week before Thanksgiving.

Spot milk offers remained somewhat quiet this week, according to Dairy Market News, with Central prices around $1 over class at midweek. Cheese production remains similar to recent weeks, with plants running full schedules, if they can, though some are cutting back. Cheese demand is strong in most cases for Midwestern producers. Some reported lighter customer interest this week but many have been in catchup mode for weeks with labor shortages and orders.

Western retail cheese demand is strong as buyers prepare for the holidays. Food service demand is steady and prices are favorable for international buys; but loads intended for export face delays due to port congestion. That may be causing buyers to hesitate, not knowing when or if they would get product from the United States. Delays are also occurring due to a shortage of truck drivers. Cheese stocks are tightening and output is mixed. Milk is available to run at or near capacity, though some say staffing shortages are limiting output. Uncle Sam announced a cheese solicitation for 19.2 million pounds from March to July. n

Butter climbed to $2.0475 per pound on Nov. 19. This is up 9.75 cents on the week (the highest since Nov. 19, 2019) and 70.25 cents above a year ago, on 12 sales.

Cream supplies are tight, says Dairy Market News, so microfixing is occurring — taking frozen blocks, thawing them, and cutting into consumer-ready sticks. But the process requires additional hands which are in short supply. Butter demand is very strong and cream tightness is expected to continue potentially into 2022, says Dairy Market News.

Western cream availability is mixed. Some contacts report availability while others say inventories are tight. Demand for cream is strong in retail and food service and international demand remains strong. A shortage of truck drivers is causing delays to cream and butter loads.

Spot nonfat dry milk closed Nov. 19 at $1.555 per pound, up a half-cent on the week and 47 cents above a year ago, with 12 sales reported on the week.

The whey continued to climb, closing at 70 cents per pound. This is up 3 cents on the week (the highest since April 20) and 26.25 cents above a year ago, on two sales.

n

The USDA announced the December Federal order Class I base milk price at $19.17 per hundredweight. This is up $1.19 from November, 70 cents below December 2020, and the highest Class I since December 2020. It equates to about $1.65 per gallon, down from $1.71 a year ago. The 2021 Class I average is $16.83, down from $16.91 in 2020, and compares to $16.99 in 2019.

U.S. fluid sales remain below a year ago. September sales of packaged fluid products totaled 3.7 billion pounds, down 1.3 percent from September 2020. Conventional product sales, at 3.4 billion pounds, were down 1.1 percent from a year ago. Organic products, at 227 million pounds, were down 4.1 percent, and represented 6.2 percent of total sales for the month.

Whole milk sales totaled 1.2 billion pounds, down 3.4 percent from a year ago, with year-to-date consumption down 6.6 percent. Whole milk represented 33.2 percent of total milk sales for the nine-month period.

Skim milk sales, at 203 million pounds, were down 9.8 percent from a year ago, and down 13.2 percent year-to-date.

Total packaged fluid milk sales for the nine months amounted to 32.9 billion pounds, down 4.5 percent from 2020. Conventional product sales totaled 30.8 billion pounds, down 4.6 percent. Organic products, at 2.1 billion, were down 2.3 percent and represented 6.4 percent of total milk sales for the period.

The figures represent consumption in Federal milk marketing order areas, which account for approximately 92 percent of total fluid milk sales in the United States.

U.S. per capita consumption of fluid cow’s milk has been decreasing for over 70 years, according to the USDA’s Economic Research Service. During the previous decade, it fell at a faster rate than it did during each of the previous six decades. ERS data show that the average rate of decrease was 1 percent per year over the 2000s. During the 2010s, it was 2.6 percent per year.

“About 90 percent of the U.S. population does not consume enough dairy products to meet Federal dietary recommendations, and declining per capita consumption of fluid cow’s milk prevents these individuals from consuming a diet more line in with those recommendations,” says the ERS.

Lee Mielke is a syndicated columnist who resides in Everson, Wash. His weekly column is featured in newspapers across the country and he may be reached at lkmielke@juno.com. v