Volatility was the word of the day, the week, and the hour, as the war between Russia and Ukraine rages on, raising havoc in every market, not to speak of the devastation on innocent human life. StoneX Dairy Group broker Dave Kurzawski said in the March 7 ‘Dairy Radio Now’ broadcast that markets are currently focusing on the worst-case scenarios and hopefully, calmer heads will prevail.

The USDA announced the February Federal order Class III benchmark milk price at $20.91 per hundredweight, up 53 cents from January, $5.16 above February 2021, and the highest Class III price since November 2020.

Late Friday morning Class III futures had the March contract at $22.38; April, $23.43; May, $23.48; with the peak in June at $23.61 before heading down. The Class IV price is a record $24.00 per cwt., up 91 cents from January, $10.25 above a year ago, and topped the previous record of $23.89 in August 2014.

“The wheat markets are on fire,” said StoneX, and impacting other commodities. Milk prices are also climbing but they need to, Kurzawski said, in order for producers to pay the higher feed and fertilizer costs ahead. $20 dollar milk would normally portend a response of more milk, he said, “But that’s not the case right now and if corn goes to $8 or $9, $22 milk is not going to be enough.”

Markets are on edge worldwide and that was evidenced in the March 1 weighted average at the Global Dairy Trade auction, up 5.1 percent, biggest boost since the 15.0 percent pole vault on March 2, 2021, and the fifth consecutive session of gain.

Traders brought 55.6 million pounds of product to the market, down from 61.1 million on Feb. 15, lowest since Sept. 21, 2021, but the average metric ton price climbed to a record high $5,065 U.S., highest since Feb. 14, 2014.

GDT Cheddar led the way, up 10.9 percent, following a 3.5 percent rise on Feb. 15. Butter followed, up 5.9 percent, after rising 5.1 percent last time. Buttermilk powder was up 5.8 percent, and whole milk powder was up 5.7 percent, after advancing 4.2 percent in the last event. Skim milk powder was up 4.7, following a 6.0 percent jump. Anhydrous milkfat was up 2.1 percent, following a 1.2 percent rise, and lactose was up 0.9 percent.

StoneX Dairy Group said the GDT 80 percent butterfat butter price equates to $3.1359 per pound U.S., up 17.7 cents, after jumping 14.5 cents on Feb. 15, and compares to CME butter, which closed Friday at a real steal of $2.6850. GDT Cheddar, at $2.9002, was up 23.3 cents, after gaining 8.9 cents on Feb. 15, and compares to Friday’s CME block Cheddar at $2.15.

GDT skim milk powder averaged $2.0328 per pound, up from $1.9482. Whole milk powder averaged $2.1578 per pound, up from $2.0424. CME Grade A nonfat dry milk closed Friday at $1.8725 per pound.

The Daily Dairy Report’s Sarina Sharp wrote in the Feb. 25 Milk Producers Council newsletter: “Global milk output is shrinking and deficits getting bigger. In December, milk production among the world’s five largest dairy exporters fell 1.3 percent below December 2020. That’s the steepest decline in five years, dating back to 2016 when European governments paid dairy producers to pare back production. The deficit likely got even bigger in January,” Sharp said. “Australia and Europe have yet to report January output, but losses accelerated elsewhere.”

In other trade news, New Zealand milk equivalent exports were weaker than expected in January, according to StoneX, down 13.7 percent from last year with shipments to China down 26.6 percent.

Meanwhile, the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council rejected a proposal this week by Global Affairs Canada that “outlines Canadian ‘changes’ to their current scheme for allocating U.S.-Mexico-Canada Agreement (USMCA) dairy tariff-rate-quotas (TRQ).”  Michael Dykes, D.V.M., president and CEO of the International Dairy Foods Association agrees and called the plan “a nonstarter.”

You’ll recall the U.S. Trade Representative announced last month that it had won USMCA’s first-ever dispute settlement panel by prevailing in its case against Canada regarding how Canada’s USMCA dairy TRQ allocation process violated the agreement. Ambassador Tai noted: “This historic win will help eliminate unjustified trade restrictions on American dairy products and will ensure that the U.S. dairy industry and its workers get the full benefit of the USMCA to market and sell U.S. products to Canadian consumers.”

NMPF said this a “test-case for whether or not the USMCA dispute settlement process can provide effective enforcement and deliver genuine compliance with the agreement.”

CME block Cheddar closed March 4 at $2.15 per pound, up 20.50 cents on the week, highest since Nov. 11, 2020, and 41.75 cents above a year ago.

The barrels closed at $1.97, 7 cents higher, also the highest since Nov. 11, 2020, 46.25 cents above a year ago, and 18 cents below the blocks.

The CME saw 10 cars of block trade hands on the week, 16 in the month of February, down from 18 in January. Barrels sales totaled 21 for the week, 39 for all of February, up from 23 in January.

Midwest cheesemakers report demand ranged from steady to very busy as March got underway. Dairy Market News said limited staffing is a recurring problem in meeting customer needs but things are improving. Milk prices remain around Class III to slightly lower. More contacts are saying milk yields are not as ample as they had previously expected in the late winter weeks, which brought milder weather.

Cheese sellers in the west report that retail sales are steady and food service continues to improve as COVID restrictions loosen. Cheese made in the U.S. continues at a discount to other countries, prompting increased interest from international markets. A shortage of truck drivers and port congestion are still causing delays. Loads of milk and production supplies also continue to face delays due to the ongoing lack of truck drivers and plants continue to report that, combined with labor shortages, they are not able to run at capacity.

Butter hit $2.70 per pound Thursday but backtracked to a Friday finish at $2.6850, up 9.75 cents on the week and 99.50 cents above a year ago, with 27 sales on the week, 69 for the month of February, down from 111 in January.

DMN said Central butter production is busy as cream multiples hold in the low 1.20s. There are setbacks due to employment shortness, but plants are churning as close to capacity as possible. A number of contacts see a potential shortness of butter moving into late summer and fall. Butter market tones are mixed near term, but longer-term expectations generally fall under the bullish category, DMN said. “Some regional butter makers are keeping an eye on the Ukrainian situation, particularly as to what global milkfat suppliers plan to ship, or not ship, into Russian ports.”

Cream is available in the West, though inventories are tightening and cream demand is steady. COVID restrictions continue to loosen in the West and restauranteurs are increasing butter purchases while retail is mixed. Butter inventories are tight in the region, though some say availability is increasing.