MD_DA950 Dairy Markets at a Glance Report 21 - Released on May 22, 2020 CME GROUP CASH MARKETS (5/22) BUTTER: Grade AA closed at $1.5925. The weekly average for Grade AA is $1.6160 (+.1150). CHEESE: Barrels closed at $1.8900 and 40# blocks at $1.9375. The weekly average for barrels is $1.8305 (+.3110) and blocks, $1.8920 (+.2945). NONFAT DRY MILK: Grade A closed at $1.0125. The weekly average for Grade A is $.9895 (+.0990). DRY WHEY: Extra grade dry whey closed at $.3625. The weekly average for dry whey is $.3645 (-.0325). CHEESE HIGHLIGHTS: COVID-19 has presented cheesemakers with a metaphorical roller coaster in regards to supply, demand, production and milk availability. Cheese producers are busier. Some stocks built up in the past month are obligated to customers who bought when markets were much lower, but heavy inventories are much less of a concern as markets have shot up since one month ago. Milk supplies are lighter as dairy farmers are now culling more cattle, and weekly milk yields are declining. Spot milk prices in the Midwest were Class to $2 over. This week marks the first time this year without a reported sub-Class III spot milk price. Week 21 has brought many variances in spot milk prices over the years. For perspective, last year's prices were $2 under Class to $.50 over, while in 2015, prices reached $10 under Class. Although some contacts question longevity of market bulls, there is no other way to describe the markets right now. During April, CME prices were closer to $1, while this week they are closing in on the $2 mark. BUTTER HIGHLIGHTS: The national butter market continues slowly recuperating from the effects of COVID-19. In general, butter sales into food service are gradually recovering as some restaurants slowly reopen across the country. Print butter sales into retail accounts are reported as strong. Cream churning is expected to be very active throughout the holiday weekend. Bulk butter inventories are ample and steadily building into cold storage. Across the country, this week, bulk prices are ranging from 2.0 cents below the market to 7.0 cents above the market. Today, the CME Group’s Grade AA butter spot price is $1.5925, down $0.0525 from last Friday. FLUID MILK: Milk production across the country ranges from lower to steady, conditional to the locality in the United States. Many farms are on the downside of peak production, bringing closure to the flush. The mountain states of Idaho, Utah, and Colorado are the only areas where milk production levels remain strong. For the first time in 2020, there were zero sub-Class III spot milk prices reported in the Midwest region. Class I milk sales are mostly stable, with upticks in New Mexico and California. Condensed skim demand is good. Cream availability tightened to the tune of ice cream production, as thrifty butter makers, shopping for surplus loads, found current multiples unfavorable. Cream multiples for all Classes were 1.20-1.40 in the East, 1.24-1.42 in the Midwest and .85-1.20 in the West. DRY PRODUCTS: Low/medium nonfat dry milk spot prices are higher in a bullish market. Less milk available in the market and active Mexican buying adds to the firm conditions. Dry buttermilk prices are unchanged. Domestic demand is somewhat quiet. Dry whole milk continues to have steady pricing. Inventories are balanced to meet contractual and spot needs. Dry whey spot prices are mixed across the country. Production is stable to higher. Inventory is adequate. Whey protein prices are steady to lower. Inventories are comfortable to snug, but become more available for interchangeable brands. Lactose prices are higher. Demand from standardization and infant formula customers is solid. Casein prices are steady to lower. There is uncertainty as to expectations for future pricing. INTERNATIONAL DAIRY MARKET NEWS: EUROPE OVERVIEW: WESTERN: Milk production in most Western European countries is near the seasonal peak. Early observations peg German milk production last week as being up 0.5 percent from the same week last year. Warmer weather and easing of COVID-19 restrictions are factors motivating more ordering of dairy products from the food service industry. EASTERN: Poland, traditionally the largest Eastern European milk producer, had 3.3 percent higher milk production January – March 2020 than the same period of 2019 according to Eurostat. Poland production percent changes YTD and YOY include cheese, +6.9, 2.2; butter, 7.7, 9.9; SMP, -12.9, -15.9; and WMP, +2.2, +13.2. OCEANIA OVERVIEW: AUSTRALIA: The sharp decline in passenger flights due to COVID-19 has hindered maintaining air freight dairy exports to meet contract obligations. The Australian government has begun a program to subsidize these exports by facilitating wider use of dedicated freight carrying planes. The logistics are still being worked out. While dairy trade has moved toward normal as COVID-19 concerns abate, a new dispute is developing between Australia and China, a major customer for Australian dairy exports. NEW ZEALAND: The end of the dairy season in New Zealand is looming closer. Milk production is near the expected low point. Dairy producers await the anticipated June 1 announcement from a large dairy cooperative of the 2020/21 seasonal milk pay price. Some agricultural bankers anticipate a reduction in the previously projected price, due to slowing global economic activity. New Zealand continues to be very dry. Hopes for more rain leading to better conditions to begin the new season are widespread. But many lenders expect struggles to continue. SOUTH AMERICA OVERVIEW: In Argentina and Uruguay, farm milk production is steadily improving, in line with fall seasonal patterns. Currently, milk intakes are more than enough to meet most manufacturing needs. The cream market remains firm, but butterfat supplies are slowly becoming more accessible in the market. The high price of corn and soybean, the low value of local currencies, and steady farmgate prices, have not been favorable for small dairy producers without economies of scale. Brazil’s farm milk production is down. Milk intakes are less than enough to meet processors demands. COVID-19 cases are peaking up across the country. The operations for farm milk collection, milk manufacturing, and dairy product distribution, have remained relatively normal. Overall, market conditions for most dairy products have improved, compared to the previous month. Stock levels for cheese, UHT milk, and milk powder are reported as low, while prices are rising. Meanwhile, yogurt retail sales have been very active for the past two weeks. NATIONAL RETAIL REPORT (DMN): Conventional retail ad numbers this week increased 2 percent. Organic retail ad numbers increased 4 percent. The most advertised single category/size is 48-64 oz conventional ice cream. Ad numbers increased 17 percent from last week. Ads for conventional 1# butter increased 251 percent. Conventional cheese ads increased 14 percent. Conventional yogurt ads declined 20 percent. The national weighted average advertised price for conventional milk in half gallons is $1.97, compared with $4.20 for organic milk half gallons. This results in an organic premium of $2.23. Conventional milk ads decreased 30 percent, while organic milk ads increased 45 percent. APRIL MILK PRODUCTION (NASS): Milk production in the 24 major States during April totaled 17.8 billion pounds, up 1.6 Percent from April 2019. March revised production, at 18.5 billion pounds, was up 3.0 percent from March 2019. The March revision represented an increase of 115 million pounds or 0.6 percent from last month's preliminary production estimate. Production per cow in the 24 major States averaged 2,013 pounds for April, 17 pounds above April 2019.The number of milk cows on farms in the 24 major States was 8.85 million head, 65,000 head more than April 2019, but 4,000 head less than March 2020. APRIL COLD STORAGE ( NASS): On April 30,2020, U.S. cold storage holdings of butter totaled 368.7 million pounds, up 19 percent from the previous month and up 27 percent from April 2019. Natural American cheese holdings total 836.2 million pounds, up 8 percent from the previous month and up 7 percent from April 2019. Total natural cheese stocks were 1.483 billion pounds, 8 percent more than last month and 6 percent above April 2019. JUNE ADVANCED CLASS PRICES (FMMO): Under the Federal milk order pricing system, the base Class I price for June 2020 is $11.42 per cwt, a decrease of $1.53 per cwt when compared to May 2020. A Class I differential for each order's principle pricing point (county) is added to the base price to determine the Class I Price. The advanced Class IV skim milk pricing factor is $5.99 per cwt, the Class II skim milk price is $6.69 per cwt. Thus, the Class II nonfat solids price is $0.7433 per pound. The two-week product price averages for June 2020 are butter $1.2538, nonfat dry milk $0.8395, cheese $1.1859, and dry whey $0.3822. NOTICE: USDA Announces Details of Direct Assistance to Farmers through the Coronavirus Food Assistance Program, Farmers and Ranchers to Receive Direct Support for Losses Related to COVID-19. U.S. Secretary of Agriculture Sonny Perdue announced details of the Coronavirus Food Assistance Program (CFAP), which will provide up to $16 billion in direct payments to deliver relief to America’s farmers and ranchers impacted by the coronavirus pandemic. For dairy, the total payment will be calculated based on a producer’s certification of milk production for the first quarter of calendar year 2020 multiplied by a national price decline during the same quarter. The second part of the payment is based a national adjustment to each producer’s production in the first quarter. More information on this notice can be found here: https://www.ams.usda.gov/press- release/usda-announces-details-direct-assistance-farmers-through-coronavirus-food-assistance Eligibility and application information can be found here: https://www.farmers.gov/cfap Information for the period May 18 - 22, 2020, issued weekly Published by: Dairy Market News - Madison, WI DANIEL JOHNSON, 608-422-8605 Email: daniel.johnson4@usda.gov Additional Dairy Market News Information: Dairy Market News (DMN) by Phone: (608)422-8602 DMN Website: https://www.ams.usda.gov/market-news/dairy DMN MARS (My Market News): https://mymarketnews.ams.usda.gov