Mielke Market Weekly

This column was written for the market- than forecasted production,” says StoneX. ing week ending Feb. 25. “Pasture growth index levels have been The world witnessed war this week as Russian troops invaded Ukraine. Energy markets shot higher as did grains. Russia is the world’s largest wheat supplier, according to StoneX, and Ukraine is the world’s third-largest exporter of corn and fourth-largest exporter of wheat. What happens next is anyone’s guess — as well as how effective sanctions against Russia will be. Russian President Vladimir Putin MIELKE MARKET WEEKLY By Lee Mielke running below year-ago and five-year averages for the last few months; but recently, pasture levels surpassed the five-year average as weather has begun to improve. With poor production through the first two-thirds of the season, we have moved our full season forecast down to a 3.8 percent decline; but we see an easy path towards a 4 percent decline,” says StoneX. says Russia is “ready to negotiate Dairy cow culling in January was MARKETING down from December and from a year ago, according to USDA’s latest Livestock Slaughter report. An estimated 260,800 head were sent to slaughter under federal inspection, down 7,000 from December and 16,500 head or 6 percent below January 2021. with Ukraine.” Meanwhile, U.S. milk production dropped for the third month in a row from a year ago. The U.S. Department of Agriculture’s latest Milk Production report shows preliminary January output at 19.05 billion pounds. This is down 1.6 percent from January 2021 and the In the week ending Feb. 12, 70,000 dairy cows were steepest year-over-year decline since March 2004, sent to slaughter, up 7,100 from the previous week, when there was a shortage of recombinant bovine and 3,500 head or 5.3 percent above a year ago. somatotropin. Dairy and Food Market Analyst editor Matt Gould spoke about this on the Feb. 28 “Dairy n Radio Now” broadcast. Driven by bullish Milk Production and Cold Output in the top 24 producing states totaled 18.2 billion pounds, down 1.4 percent. Revisions lowered the original 50-state December estimate by 35 million pounds, now put at 18.8 billion pounds, down 0.3 percent from a year ago. Storage reports and perhaps the invasion, cash dairy prices during the President’s Day-shortened week moved higher, then slipped back. The cheddar blocks climbed to $2.0175 per pound on Feb. 24, but closed the next day at $1.945. This is down 4.25 cents on the week, while 32.75 cents above a year ago. January cow numbers totaled 9.368 million head, down 5,000 from December. This is the eighth consecutive month they were down from the previous month, and were 82,000 head below a year ago. The December count was revised 2,000 head lower. The milking herd has dropped 139,000 head from its The barrels got to $1.955 on Feb. 22, but finished at $1.90. This is down 3.5 cents on the week, 48 cents above a year ago, and 4.5 cents below the blocks. There were four sales of block reported on the week at the Chicago Mercantile Exchange and six of barrel. peak in May 2021. Dairy Market News reported Midwest cheese plants January output per cow averaged 2,034 pounds, down 15 pounds or 0.7 percent from 2021. continue to undergo operational updates and maintenance, which resulted in time away from cheese production. Plants are performing updates now because

Final data pegs 2021 milk output at 226.3 billion laborer shortages and higher production costs have pounds, up 1.3 percent from 2020. Cow numbers yet to cease. Cheese inventories are balanced to averaged 9.45 million, up 60,000 or 0.6 percent from available and customer interest is steady. Plant man2020. Output per cow averaged 23,948 pounds, up agers say orders are more analogous to pre-Covid 171 pounds from 2020. The average annual rate of years. Spot milk is remaining somewhat available, output per cow increased 10.2 percent from 2012, primarily due to plant maintenance downtime. according to USDA. Western cheesemakers say export demand is strong n as loads are being sold at lower prices than those Class III futures moved higher but backed off some. February was trading late morning Feb. 25 at $20.90; March, $21.96; with a peak of $22.35 in April. from other countries, with continued notable interest from Asian markets. Domestic cheese interest is “more muted,” says Dairy Market News, as retail demand is steady to lower. In some parts of the West

Milk output globally is tighter than anyone warmer weather and loosening Covid restrictions expected and it isn’t any better “down under” either, have led to an uptick in food service demand. A according to StoneX. Dairy Companies Association shortage of truck drivers was causing delays, while of New Zealand says January output was down 6.1 port congestion is further delaying exports. Spot percent (down 6.1 percent on a milk-solids basis). cheese inventories are unchanged. Cheese production StoneX expected it to be down 5.7 percent. The is steady though some plants say labor shortages and decline puts their season-to-date production down delayed deliveries of production supplies continue to 3.8 percent so far. cause them to run below capacity.

“This marked six consecutive months of lower

Cash butter closed Feb. 25 at $2.5875 per pound, 10.25 cents lower on the week but still $1.1175 above a year ago, with 15 sales reported.

Butter demand remains a little softer, according to Central producers. Churning is ongoing at as brisk a pace as possible, due to laborer and driver shortages. Cream availability is steady or more available when compared to previous weeks. Cream demand was lighter into Class II production.

Butter market tones of recent weeks have reflected the general tightness of supply, a strengthened export market, and bullish global butterfat values, says Dairy Market News.

Cream inventories are reportedly beginning to tighten in the West as demand for cream is steady. Some plants report cream inventories are short, as bad weather and a shortage of truck drivers caused delays. Western demand for butter is mixed. Loosening Covid restrictions in parts of the West are leading to higher food service demand though retail demand is softening. Domestic loads are currently being sold at a discount to other countries. Butter inventories are tight in the region. Butter makers are running busy schedules, though managers continue to cite labor shortages and delayed deliveries of production supplies as preventing them from running at or near capacity.

Grade A nonfat dry milk climbed to $1.875 on Feb. 24, but closed Feb. 25 at $1.86. This is up a penny on the week and 72.75 cents above a year ago, with 27 loads sold.

Dry whey closed Feb. 25 at 78 cents per pound, down 3 cents on the week, lowest since Jan. 14, but 22.25 cents above a year ago, with four sales reported on the week at the CME.

Dairy margins strengthened the first half of February as a sharp recovery in milk prices following the recent selloff more than offset an increase in projected feed costs, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.

“Class IV Milk prices have been particularly strong as a surge in butter prices is supporting the market,” the Margin Watch stated. “CME spot butter increased 17.75 cents Feb. 11, the largest single session price rise in the past 20 months and continued rallying to start the following week. Butter production ran below pre-pandemic levels for the second half of 2021, with churn activity suggesting a continued lag in output during January and February. This has caused butter stocks to drop and tightness in other global markets is aggravating the situation.”

“The latest Global Dairy Trade auction recorded its third consecutive jump of 4 percent or more, with the index climbing 4.2 percent led by gains in whole milk powder, skim milk powder and butter. GDT skim milk prices are 34 percent higher than last year and up 67 percent from five years ago. April Class IV