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April 09, 2021 MPC Friday Report Highlights

Updated: Jan 17, 2022


Milk, Dairy and Grain Market Commentary By Sarina Sharp, Daily Dairy Report

It was another big week on LaSalle Street, and nearly all products gained ground at the CME spot market. Whey was the exception. CME spot whey fell 3ȼ from its all-time high. But, at 63ȼ per pound, whey powder remains lofty. Demand is strong. China continues to import large volumes of whey for pig feed, and consumers have developed a growing appetite for high protein products.

The other spot dairy products moved decisively upward. On Tuesday, skim milk powder (SMP) climbed 0.6% at the Global Dairy Trade (GDT) auction and reached its highest GDT value since 2014. In Chicago, spot nonfat dry milk (NDM) followed suit and advanced 1.5ȼ to $1.205, a 13-month high. Spot butter rallied 3.5ȼ to $1.88, its highest perch since mid-June. With both butter and powder on the rise, second-half Class IV futures scored lifeof-contract highs.

Cheddar posted the strongest performance at the spot market. Blocks added 5.5ȼ and reached $1.83. Propelled by a 10.75ȼ jump today, barrels vaulted 18ȼ this week. At $1.6925, they stand at their highest price since mid-November, when euphoria over the impact of government purchases began to wear off. Nearly every Class III contract on the board posted life-of-contract highs yesterday. But they may have climbed too far, too fast. Today, cheese and Class III futures watched barrels sprint upward, shrugged, and moved in the opposite direction.

As more Americans receive their vaccines and return to some of their old habits, cheese makers are stepping up sales to restaurants. Meanwhile, sales to grocery outlets remain firm. In this rapidly changing environment, grocers and restaurateurs find it difficult to project how much food they’ll need. After last year’s shortages, they’re likely inclined to keep their shelves and larders extra full. Todays’ retreat suggests that the trade may be concerned that either retailers or restaurants are overdoing it. As grocery and restaurant managers true up their inventories to match consumption, cheese orders could prove fitful. Meanwhile, U.S. cheese output is growing every day. In that light, $19 milk looks a bit rich.

Global trade in general and U.S. exports in particular have slowed due to a litany of woes. The U.S.-Chinese trade imbalance and backlogs at U.S. ports clogged with Pelotons and homeoffice furniture tied up the containers needed to move goods of all sorts. Winter storm Uri hammered Houston, home to the sixth-largest port in the nation. A massive container ship was stuck in the Suez Canal for nearly a week, further entangling global supply lines. High water on the lower Mississippi River slowed barge traffic, and there are more rains in the forecast for the Delta. It all adds up to major headaches for exporters looking to move product.

Nonetheless, U.S. dairy exports are going strong, a testament to our competitive prices. The United States sent huge volumes of whey and milk powder abroad in February, with both categories scoring record-high volumes for the month. That helped lift the value of U.S. dairy exports to $557.8 million, the highest February total since 2014. Compared to the prior year, the United States stepped up exports of NDM by 36.1% and whey powder by 30.5%. Exporters more than doubled butter shipments in February, although, at 7.6 million pounds, the total is still a relatively small share of the market. U.S. cheese exports of 66.5 million pounds were up a modest 1.1% from the prior year. Southeast Asian buyers remain hungry for U.S. dairy products, and shipments to Mexico are starting to recover.

U.S. dairy producers are milking more cows than they have in over a quarter-century, and both milk yields and components continue to impress. If the U.S. dairy industry plans to sustain this kind of growth, it will need robust exports to keep dairy product inventories in check.


Coronavirus Food Assistance Program 2 Application Period Reopened

By Geoff Vanden Heuvel, Director of Regulatory and Economic Affairs

While USDA reopened the opportunity to apply for the Coronavirus Food Assistance Program (CFAP) 2 payments to dairy producers this past week, this is not an expansion of the available money each individual producer can receive. The original application period for CFAP 2 was September 21, 2020-December 11, 2020. If you applied at that time, you should have already received the payments which were calculated at $1.20 per cwt. for the milk you produced between April 1, 2020 and August 31, 2020. But if for some reason you did not apply for CFAP 2 milk payments late last year, USDA is allowing you to apply now.

There will be some additional payments for row crops. USDA will send you another $20 per acre if you applied last year for per acre payments for any of these crops: alfalfa, amaranth grain, barley, buckwheat, canola, corn, Extra Long Staple (ELS) cotton, upland cotton, crambe (colewort), einkorn, emmer, flax, guar, hemp, indigo, industrial rice, kenaf, khorasan, millet, mustard, oats, peanuts, quinoa, rapeseed, rice, sweet rice, wild rice, rye, safflower, sesame, sorghum, soybeans, speltz, sugar beets, sugarcane, sunflowers, teff, triticale, and all classes of wheat. There’s no need to file anymore paperwork; the money will be automatically sent to you.

These payments are subject to the payment limit caps for CFAP 2.

There will also be additional payments for non-breeding cattle. If you received CFAP 1 payments for livestock, which were based on the number of head you owned between April 16, 2020 and May 14, 2020, there will be an additional payment per head coming to you automatically.

These payments are subject to the payment limit caps that apply to CFAP 1. Importantly to note, CFAP 1 and CFAP 2 are different programs with different payment caps. There will be more information in the coming weeks about USDA’s plans for additional food and dairy product purchases. Congress allocated multiple billions of additional dollars for food and agriculture commodity purchases. Hopefully, these expenditures will provide balanced economic support for all dairy producers. The need for USDA to act in a balanced way is a message that is being constantly communicated by the producer community to government officials.

2021-04-09 MPC Newsletter
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