Mielke Market Weekly

This column was written for the marketing week ending Jan. 21.

If there was any doubt about strength in the global dairy market, it was erased in the second Global Dairy Trade auction of 2022 (its 300th trading event). The weighted average jumped 4.6 percent (the biggest increase since March 2) and followed the 0.3 percent rise on Jan. 4, and StoneX, which was stronger than the the week at the CME and two of barrel. the 1.5 percent fall on Dec. 21. Traders brought 67.6 million pounds of product to market, with the average price climbing to $4,463 U.S. — the highest since March 2014. All products offered were in the black; led by whole milk powder, up 5.6 percent after holding steady on Jan. 4. Skim milk powder was up 5 percent following a 1 percent increase, and butter was up 5 percent after inching 0.3 percent higher. Anhydrous milkfat was up 0.6 percent after slipping 0.7 percent last time. Cheddar was up 1.1 percent following a 4.9 percent jump. StoneX Dairy Group says the GDT 80 percent butterfat butter price equates to $2.7252 per pound U.S. This is up 12.8 cents and compares to Chicago Mercantile Exchange butter which closed Jan. 21 at $2.935. GDT cheddar, at $2.5157, was up 2.7 cents and compares to Jan. 21’s CME block cheddar at a real bargain $1.8075. GDT skim milk powder averaged $1.7977 per pound, up from $1.7114. Whole milk powder averaged $1.8517 per pound, up from $1.7536. CME Grade A nonfat dry milk closed Jan. minus-1.3 percent they forecast. “Exports to China are still rather weak, seeing a month-to-month decrease of 23 percent,” says StoneX, “but other countries such as Indonesia, Nigeria, Philippines and the United States are making up for that. Shipments to Indonesia rose 57 percent month-to-month and up 38 percent year-on-year. Some of the largest monthto-month gains were butter, yogurt and whey protein isolates. Liquid milk exports were down from the previous month but are still strong on a yearon-year basis.” n Dairy prices here at home strengthened (except for cheese) during the Martin Luther King holidayshortened week. The cheddar blocks closed Jan. 21 at $1.8075 per pound. This is down 11.25 cents on the week (the lowest since Nov. 18) 24.5 cents below its Jan. 12 peak, but 19.75 cents above a year ago when they fell 11 cents to $1.61. The barrels, after peaking at $1.96 on Jan. 14, closed this week at $1.8125 which is down 14.75 cents, 42 cents above a year ago, and a half-cent StoneX says it hears continued reports of tight butter and nonfat dry milk, but not cheese. “Cheese demand is likely strong,” StoneX stated, “but we have cheese out there to meet that demand. That seems to be the narrative developing this week and spot prices are reflecting that narrative.” Traders await the December Milk Production and Cold Storage reports which were issued after this writing — Jan. 24. Dairy Market News reports that milk availability varied in the Midwest. Plants running fully staffed operations say milk is available; but the discounted prices of $3 and $4 under Class are no longer being offered. Still, there are plants running lighter lines, as employees are short due to Covid-related absences. Cheese sales were slowing, according to some, as prices rose and “market tones are lacking the bravado of prior weeks.” Retail cheese demand is steady to lower in the West while food service is mixed. Contacts note that rising Covid cases in the region have caused a decline in sales. Food service mozzarella sales are, 21 at $1.815 per pound. above the blocks. There were four sales of block on

StoneX’s Dustin Winston says North Asia (which includes China) buyers continue to seem hesitant. Market share was up just slightly from the last event, but remain well below last year’s levels. The Middle East picked up a large share of whole milk powder, according to Winston. n

Speaking of China, December dairy imports fell a combined 13.4 percent from December 2020, according to HighGround Dairy’s analysis; but adds the caveat, “While there is a lot of red on the table, it is important to remember the data is compared to a record December in 2020 — with December 2021 the second-highest ever observed despite the yearover-year losses.”

Whole milk powder imports took the biggest hit, says HighGround Dairy, down 38 percent. Skim milk powder was down 21.6 percent, and whey products were down 31.9 percent — a 20-month low.

Bloomberg reports China’s hog herd has rebounded and is now at a six-year high of 449 million. So with the country no longer aggressively building their herd, there has been a slowdown in whey demand for piglets.

Staying in the global market, EU November exports were up 1.7 percent from 2020, according to

By Lee Mielke

Where to look when evaluating dairy facilities ST. CLOUD, Minn. — With the howling winds, components in the structure of a building. Insects enthusiastic snowfall, and bone-rattling cold from can also cause significant damage throughout the these past several weeks, many livestock producers facility. These kinds of relatively minor repairs don’t are evaluating their facilities. All producers strive for necessarily warrant a brand spanking new building; the optimal environment, but many of us adapt our but do deserve repair and a fix-it date on the schedfacilities to meet our needs — picking and choosing ule soon. If damage is severe, it may not be worth our battles. renovating. Here are some key areas to evaluate in your dairy Next on any evaluation checklist is seeing if the cattle barn to determine if your facilities are provid- facility provides a clean and comfortable resting ing the best environment for your top producers. area, with free access to feed and water, as well as Naturally, before moving on to new shiny facilities with all the bells and whistles, it is best to evaluate what facilities are already on-site. Dairy producers should first ensure that the barn is structurally sound. Barns in central Minnesota that are solid as a rock, made to stand the test of time, may suffer damage from continually high moisture levels, poor ventilation, or the perpetually leaky roof. This could proper ventilation. Bank and two-story barn styles can make it difficult (or impossible) to deliver feed in a TMR wagon (easing feed delivery with herd expansion). This feature of older barns limits access, adding labor and complicating animal access to feed and water. These styles are not typically easy renovations; but adjustments can be made (usually limited by the second-story floor joist system). easily contribute to the deterioration of wood struc- This article was submitted by Dana Adams, tural components and iron-based fasteners — key University of Minnesota Extension. v

News and information for Minnesota and Northern Iowa dairy producers

reportedly, increasing as strong demand is present for pizza making, thanks to football playoffs. International cheese demand remains strong but transportation issues caused by a shortage of truck drivers and port congestion continue to cause delays. Cheesemakers say milk is available, but delayed deliveries and labor shortages are causing some plants to run reduced schedules, according to Dairy Market News. Continuing port woes are likely hurting U.S. exports of cheese despite our competitive prices.

Butter was firing on all cylinders, shooting to a $2.935 per pound finish on Jan. 21. This is up 21 cents (the highest since Sept. 28, 2015) and $1.5325 above a year ago. Thirty-two sales transpired on the week. Butter’s CME record is $3.135 per pound on Sept. 25, 2015. The U.S. price, while above the GDT, is below European levels.

Midwest churners are calling for cream and have been very active since before the holidays. Freight

— National Milk Producers Federation

continues to be the biggest hurdle — particularly moving cream from Idaho and the mountain states. Butter sales have begun to settle. The holidays were very busy, but prices have caused buyer hesitancy.

Western cream demand is unchanged. Loads of cream are heading to the Midwest — though some faced delays from bad weather and a shortage of truck drivers. Butter demand is strong in domestic and international markets and inventories are tight. Butter makers are running below capacity due to labor shortages and delayed deliveries of production supplies, according to Dairy Market News.

Grade A nonfat dry milk climbed to $1.85 per pound on Jan. 18 (the highest since June 12, 2014) but closed Jan. 21 at $1.815. The price went unchanged on the week, but 64.25 cents above a year ago, on seven sales for the week.

Dry whey closed at another new record high — 80 cents per pound, up 3 cents on the week and 26 cents above a year ago, with two sales reported at the CME.

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The good news keeps coming. Per-capita dairy consumption in the United States has been growing and is at the highest levels since 1960, according to

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the National Milk Producers Federation. “Exports in 2021 are on pace for a record,” says NMPF, “and now, with last year’s retail sales data available, we can see that 2020’s gains in grocery-store purchases weren’t just a rechanneling of lost school and restaurant business toward at-home consumption. By comparing 2021 with 2019, we can see that dairy’s gains are built to last, according to data from industry researcher IRI.”

Commercial disappearance remained strong in November, according to U.S. Department of Agriculture data. Cheese totaled 1.18 billion pounds, up 5.2 percent from November 2020, topping the year-ago level for the second consecutive month, and the largest year-over-year gain of any month since April, according to HighGround Dairy. “This was the strongest cheese disappearance on a volume basis of any month on record.”

Butter disappearance totaled 232.1 million pounds, up 3.4 percent, and topped that of a year ago for the fifth consecutive month. Nonfat and skim milk powder totaled 211.3 million pounds, up 1.9 percent, thanks primarily to exports — though domestic demand was weaker.

HighGround Dairy’s Lucas Fuess, speaking in the Jan. 24 “Dairy Radio Now” broadcast, said Class III and Class IV futures curves look very good for farmer returns this year but cautioned that demand destruction could occur due to the rising prices.

“If we do get too expensive, there could be some buyers around the world that take a step back and maybe hesitate to purchase U.S. dairy,” he warned, “But in the time being, we don’t see that happening as the world remains short on protein and continues to pay up — even at these purchase levels.” n

Unfortunately, inflation continues to soar in the United States. The consumer price index for all food was 287.0, up 6.3 percent in December from 2020, according to Dairy Market News. The dairy products index, at 235.4, was up 1.6 percent. Fresh whole milk was up 4.9 percent; cheese, down 0.6 percent; and butter was up 0.8 percent.

The February Federal order Class I base milk

REQUEST A FREE QUOTE! ACT NOW TO RECEIVE TO RECEIVE price was announced by the USDA at $21.64 per hundredweight. This is up $1.93 from January, $6.10 above February 2021, and the highest Class I price since December 2014. It equates to $1.86 per gallon, up from $1.69 in January and $1.34 a year ago.

The latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC., says, “Dairy margins strengthened sharply to start the year as a continued surge in milk prices combined with a mild correction in the feed markets to boost projected profitability.”

“The milk market has caught fire from a perfect storm of declining global production at the same time as demand for dairy products soar,” the Margin Watch stated. “USDA’s Foreign Agriculture Service reported record November monthly exports, with 492.1 million pounds of dairy product shipped during the month, up 17.3 percent from 2020 and 60 million above the previous November record set in 2017. Nonfat dry milk exports of 168.5 million pounds were up 24.7 percent from 2020, with strong demand from Mexico, the Philippines, Colombia and Vietnam pacing gains. Nonfat dry milk stocks have been declining after reaching a high of 349 million pounds in June, dropping to 196.5 million pounds in November.”

“More milk being diverted away for cheese has caused nonfat dry milk production to decline since mid-2021, trailing 2020 by 54 million pounds between July and November. November’s production of 155.4 million pounds was down 2.4 percent from 2020. This helped support Class IV prices, with the USDA announced price in December of $19.88 per cwt. up $6.46 from 2020 and the highest announced price in seven years.”

“Class IV futures are trading above $22 per hundredweight in each of the next four months,” according to the Margin Watch, “and Fonterra is now forecasting their highest pay price ever as production declines in New Zealand. Feed prices meanwhile have corrected as much-needed rain is forecast for parched areas of Argentina and Southern Brazil while the USDA’s January World Agriculture Supply and Demand Estimates report was considered neutral for corn and soybeans.” n

Meanwhile, the National Milk Producers Federation says the Pandemic Market Volatility Assistance Program will provide up to $350 million in pandemic assistance payments to dairy farmers early this year. “This initiative will partially reimburse producers for unanticipated losses created during the Covid-19 pandemic when federal dairy food box purchases weighted heavily toward cheese, combined with a change to the Class I mover formula created the unintended consequence of significant financial losses.”

“Payments will reimburse qualified dairy farmers for 80 percent of the revenue difference per month on up to 5 million pounds of milk marketed and on fluid milk sales from July through December 2020. The payment rate will vary by region based on actual losses on pooled milk related to price volatility. As part of the program handlers also will provide virtual or in-person education to dairy farmers.”

More details are posted at the NMPF website.

Dairy cow culling increased from the previous month, but fell below that of a year ago in December, according to USDA’s latest Livestock Slaughter report.

An estimated 267,800 head were sent to slaughter under federal inspection in December. This is up 22,500 from November, but 5,700 head or 2.1 percent below December 2020. Culling for the year totaled 3.1 million, up 42,900 or 1.4 percent from a year ago.

In the week ending Jan. 8, 63,000 dairy cows were sent to slaughter, up 10,600 from the previous week, but 4,500 head or 6.7 percent below a year ago.

The USDA’s latest Livestock, Dairy, and Poultry Outlook, issued Jan. 19, mirrored milk price and production projections in the Jan. 12 World Agricultural Supply and Demand Estimates report.

The Outlook also reported that the number of milk cows is projected to continue decreasing in the first part of 2022. For the first half of the year, milk cows are projected to average 9.38 million head. However, in the second half of the year, they are projected to increase to 9.385 million. The estimated number of cows for the year 2022 is 9.385 million, unchanged from last month’s projection. Average yield per cow is projected to be 24,265 pounds, unchanged from last month’s projection.

The December publication of “Dairy: World Markets and Trade,” by USDA’s Foreign Agricultural Service, projects milk production for the top five major exporters will total 647.1 billion pounds in 2022, a modest increase of 0.7 percent from the total expected for 2021. Milk production totals for the European Union and New Zealand are expected to grow by 0.7 percent and 0.5 percent, respectively, says USDA.

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

The 2022 reference prices for the PLC program are Corn, $3.70 per bushel; Soybeans, $8.40 per bushel; and Wheat, $5.50 per bushel.

The ARC-CO and ARC-IC benchmark prices for 2022 are Corn, $3.70 per bushel; Soybeans, $9.12 per bushel; and Wheat, $5.50 per bushel.

Final 2022 market year average prices for corn and soybeans will be calculated from Sept. 1, 2022 to Aug. 31, 2023. As a result, the current upswing in crop prices may not necessarily impact final 2022 farm program payments. Final 2022 market year average prices for wheat and other small grains will be calculated from June 1, 2022 to May 31, 2023.

Calculation formulas for the PLC and ARC-CO programs are as follows: The PLC payment per crop base acre is the reference price minus the 2022 market year average price, multiplied by the FSA program yield times 85 percent. (If the final 2022

2022 Farm Program Sign-Up Deadline is March 15, 2022

PROGRAM DETAILS PRICE LOSS COVERAGE (PLC) AG RISK COVERAGE — COUNTY (ARC-CO)

Base Price • Crop Reference Price. • Reference Prices for 2021: Corn = $3.70 per bushel Wheat = $5.50 per bushel Soybeans = $8.40 per bushel • Benchmark Price. • Higher of the Reference Price or the 5-year “Olympic” average price. (2016-2020 final market year average price) • 2022 Benchmark Prices: Corn = $3.70 per bushel Soybeans = $9.12 per bushel\ Wheat = $5.50 per bushel

Final Price • 12-month national market year average price for 2022-23. Sept. 1, 2022 to Aug. 31, 2023 for corn and soybeans. June 1 to May 31 for Wheat. • Same as for PLC. • 2021-22 market year average price estimate (as of Jan. 1, 2022) Corn = $5.45 per bushel Soybeans = $12.10 per bushel Wheat = $7.05 per bushel

Payment Yield

Payment Revenue • Farm Unit FSA program yields. • County Benchmark Yields. 2022 — Higher of 2014 Farm Bill yields 5-year (2016-2020) rolling “Olympic” or updated FSA yields based on 2013-2017 average. County RMA yield (Trend Adjusted). average farm yields. • Harvest yield is the final county average yield (RMA data).

N/A • Benchmark Revenue = County Benchmark Yield times Benchmark Price • Revenue Guarantee = Benchmark revenue times 86 percent

Payment Acres • 85 percent of Base Acres for an eligible crop. • 85 percent of Base Acres for an eligible crop. Payment Formula • PLC Payment per Base Acre = • ARC-CO Payment per Base Acre = (Reference price minus final market year Revenue Guarantee minus Final County average price) multiplied by FSA yield Revenue (final county yield multiplied by times 85 percent final market year average price times 85 percent • If the final market year average price • If the final County Revenue is higher is higher than the reference price, than the Revenue Guarantee, there is no there is no PLC payment for that crop. ARC-CO payment for that crop. Maximum Payment •(Reference Price minus National Loan Rate) • County Benchmark Revenue multiplied by (Per Crop Base Acre) multiplied by FSA yield times 85 percent 10 percent times 85 percent Payment Limits • $125,000 per individual or entity. • Same as PLC. • $900,000 maximum adjusted gross income on Federal Tax Return. market year average price is higher than the reference price, there is no PLC payment.

ARC-CO benchmark revenue guarantee per acre is the county benchmark yield multiplied by the benchmark price times 85 percent. The final 2022 ARC-CO revenue per acre is determined by multiplying the final 2022 county yield by the final 2022 market year average price. The ARC-CO payment per base acre is the benchmark revenue guarantee minus 2022 final revenue, times 85 percent. If the final revenue is higher than the benchmark revenue, there is no 2022 ARC-CO payment.

Here are some good Farm Program web-based decision tools to assist producers: https://www.ag. ndsu.edu/farmmanagement/farm-bill (North Dakota State University); http://www.agmanager.info/agpolicy/2018-farm-bill (Kansas State University); https://extension.umn.edu/business/farm-bill (University of Minnesota Extension); and https:// farmdocdaily.illinois.edu/category/areas/agriculturalpolicy/farm-bill (University of Illinois).

Refer to the adjoining tables, “PLC and ARC-CO Farm Program Comparison Table” and “2022 Farm Program Decision Table” for key points the regarding 2022 farm decision for corn, soybeans and wheat for the 2022 crop year.

For information on PLC and ARC-CO programs, and other farm program details, go to the FSA farm program website at www.fsa.usda.gov/arc-plc

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

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