By Lee Mielke

 The USDA announced the first Class III benchmark milk price of 2022 at $20.38 per hundredweight for January, up $2.02 from December, $4.34 above January 2021, and the highest Class III price since November 2020.

Late Friday morning, Class III futures portended a February price at $20.45; March, $21.31; April, $21.39; May, $21.30; and June at $21.22.

The January Class IV price is $23.09 per cwt., up $3.21 from December, $9.34 above a year ago, and the highest Class IV price since August 2014.

International dairy prices remain strong. The Feb. 1 Global Dairy Trade auction saw the weighted average jump 4.1 percent, following the 4.6 percent increase on Jan. 18. The average metric ton price climbed to $4,630 U.S., up from $4,463 and the highest in eight years.

All products offered were again in the black, led by buttermilk powder, up 9.7 percent. It did not trade in the last event. Whole milk powder was up 5.8 percent, following a 5.6 percent rise last time, and skim milk powder was up 2.1 percent, after jumping 5 percent. Butter was up 3.3 percent, after a 5 percent boost, and anhydrous milkfat moved 1.4 percent higher, after a 0.6 percent advance. GDT Cheddar was up 2.4 percent, after a 1.1 percent gain last time.

StoneX Dairy Group said the GDT 80 percent butterfat butter price equates to $2.8140 per pound U.S., up 8.9 cents after jumping 12.8 cents on Jan. 18, and compares to CME butter, which closed Friday, a steal at $2.50. GDT Cheddar, at $2.5783, was up 6.3 cents and compares to Friday’s CME block Cheddar at a bargain $1.90. GDT skim milk powder averaged $1.8375 per pound, up from $1.7977. Whole milk powder averaged $1.9614 per pound, up from $1.8517. CME Grade A nonfat dry milk closed Friday at $1.8325 per pound.

Shedding some light on what is going on in the global market, the Daily Dairy Report’s Monica Ganley wrote in the Jan. 28 Milk Producers Council newsletter: “European (milk) production is trailing prior year levels with some of the greatest losses seen in major dairy nations like Germany and France. In the Southern Hemisphere, the New Zealand milk production season continues to disappoint with December output down 5 percent compared to prior year. Argentina is still posting strong production figures, but the volumes are modest and logistical challenges are preventing the resulting dairy products from making a dent in global demand. As such, global milk supplies are lacking and are generally expected to support prices at higher than historical levels over the coming months.”

Dairy traders in Chicago pretty much ignored the GDT and CME prices start February mixed, as a massive winter storm hit the nation’s mid-section covering nearly 2,000 miles, with freezing temperatures and heavy snow. Traders were also anticipating the December Dairy Products report issued Friday afternoon.

The Cheddar blocks recovered the previous week’s losses and then some and ended three weeks of decline, closing Friday at $1.90 per pound, up 11 cents on the week, highest since Jan. 14, and 26 cents above a year ago.

Midwest cheesemakers continue to tell Dairy Market News that milk availability is generally balanced but cheese plant downtime due to logistic and staffing shortages kept discounts on hand. Prices at report time ranged from Class to $2 under. Supplies are stalled in shipping and plants are thus prone to downtime. Cheese demand remains slower than it was in late fall, at least partially due to market price downward pressure, but markets experienced some bullish correction this week. Inventories have grown but are not at concerning levels.

Port congestion is a continuing issue and prompted Agriculture Secretary Tom Vilsack to announce a new program to help deal with it. The initiative was addressed at a webinar of agriculture industry and policy leaders hosted by the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC).

The program was launched in partnership with the Port of Oakland, according to a joint press release, and will “set up a new ‘pop-up’ site at the port dedicated to easing the loading of empty containers with agricultural exports. The new site will also have a dedicated gate with the ability to pre-cool refrigerated shipping containers in order to reduce bottlenecks at the main entrance to the port. The new arrangement should be available beginning in March.

“Congestion in and around U.S. ports is one of a series of export supply chain challenges undercutting dairy exporters’ ability to reliably meet the needs of overseas customers for high-quality U.S. dairy products,” said USDEC’s Krysta Harden. “This new partnership should help alleviate some of those challenges.”

Meanwhile, legislation was introduced in the Senate this week that would also help. Sponsored by Sens. Amy Klobuchar (D-Minn.) and John Thune (R-S.D.), the Ocean Shipping Reform Act (S. 3580) is the Senate response to the House version (HR 4996) passed by a wide bipartisan vote (364-60) in December.

The International Dairy Foods Association (IDFA) also gave the legislation a thumbs-up and touted a USDA final rule that IDFA said will “maintain low-fat, flavored milk and other needed flexibilities in USDA child nutrition program meal requirements through the 2023-2024 school year.

“Today’s announcement clears up several years of confusion and takes a positive step toward restoring more varieties of milk to the school meals program. The final rule allows schools to continue to serve milk that students prefer to drink while remaining consistent with the Dietary Guidelines. The rule gives clarity to school meals professionals and food makers as they plan ahead amid supply chain challenges, and it will improve students’ access to dairy products, particularly milk and its 13 essential nutrients, and cheese as a nutrient-rich protein alternate,” according to the IDFA. NMPF also praised the final rule.

Dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Mo., stated in the Feb.7 Dairy Radio Now broadcast there will be no Dairy Margin Coverage payment for December, ending 12 straight months. FSA announced the December 2021 milk margin above feed costs at $9.53 per cwt., he said, up 39 cents from November, 99 cents above December 2020, and just 3 cents above the maximum coverage. This is the first time since November 2020 that producers with coverage at $9.50 per cwt, will not receive a payment on eligible production,” according to Brooks.

Based on his Feb. 2 estimates, Brooks does not see a payment the rest of 2022, adding the caveat that markets have a tendency to change quickly so the program is still one that producers need to consider and make sure they’re active in. He said the 2022 fundamentals look like there will be a small cushion between the rising costs producers are seeing but more than likely, it won’t be enough for some producers, as rising interest rates come into play.

He doesn’t see a big incentive for producers to add cows, however he concluded: “At any level, somebody is making money milking cows and somebody’s losing money, so there probably will be some producers who will add cows but in general, if they do, it’s probably not going to have a massive impact on increasing our herd size here this year.”