FDA Decision on Labeling Won't Clear Up Confusion for Consumers
Published: Friday, March 10, 2023
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The February federal order Class III benchmark milk price was announced by the USDA at $17.78 per hundredweight, down $1.65 from January, $3.13 below February 2022, and the lowest it has been since September 2021.
Last Friday morning Class III futures had the March price at $17.79; April, $17.61; May, $17.88; and June at $18.37, with a peak of $19.80 in November.
The February Class IV price is $18.86, down $1.15 from January, $5.14 below a year ago, and the lowest Class IV since November 2021.
As reported last week, U.S. fluid milk sales continue to flounder, down 3.7% in December and down 2.4% for all of 2022. Some of the blame is put on plant-based beverages, and the dairy industry has been calling on the Food and Drug Administration to stop such products from using dairy terms like "milk." However, the FDA's recent draft guidance does not stop such usage.
HighGround Dairy President Eric Meyer, speaking in the March 6 "Dairy Radio Now" broadcast, said the dairy industry seems to have lost the term "milk" and probably should have done more earlier to head that off. He said the FDA directive is a "double-edged sword" that forces plant-based manufacturers to publish data on nutrition, concluding it is confusing for consumers that nutrition differs under the term milk and "there's no explanation about use of the term."
There are some dairy-state legislators who are upset over this, according to Meyer, so previous legislation from 2017 that would address this may be reintroduced. "The fight remains," he said, "but the government seems to have allowed for this use of the term milk and that's almost not up for debate anymore and needs to go through the Congressional process to try and get that back."
Meyer does not believe the dairy industry should give up on trying to turn around fluid milk sales and says certain innovations have returned value to the farmer. "It may not be a volume play," he concluded, "but more of a margin play for the consumer of fluid milk versus the others." I'll drink to that.
Shelves are fattening up. The USDA's January Cold Storage report puts Jan. 31 butter stocks at 262.7 million pounds, up 46.4 million pounds, or 21.4%, from December, and 43.3 million pounds, or 19.7%, more than January 2022.
Butter stocks had trailed year ago levels for 16 consecutive months until December. January is the second month to reverse that.
American cheese stocks fell to 818.8 million pounds, down 6.5 million pounds, or .8%, from December, and 18.8 million, or 2.2%, below a year ago.
The "other" cheese category crept up to 598.9 million pounds, up 3.3 million pounds, or .5%, from December, and up 15 million, or 2.6%, above a year ago.
The total cheese inventory slipped to 1.441 billion pounds, down 4.1 million pounds, or .3%, from December, and 4.1 million, or .3%, above a year ago.
Exports likely kept cheese inventories in check. It remains to be seen if that will be the case in 2023.
The USDA's 2022 Cold Storage Summary shows that June had the biggest inventory of butter on hand, at 330.8 million pounds. That compares to a peak of 414.7 million pounds in June 2021.
The biggest month for total cheese storage was July, at 1.521 billion pounds, up from 1.469 billion in March 2021.
Cash dairy prices saw little reaction to the January Cold Storage data, though the Cheddar blocks jumped 3 cents the following Monday, hitting $1.91 per pound. They closed the first Friday of March at $1.95, up 7 cents on the week, but 20 cents below a year ago when they jumped 20.50 cents.
The Cheddar barrels gained a nickel last Monday, hitting $1.59, then headed lower, falling to $1.53 last Thursday, lowest since Nov. 24, 2021, but finished last Friday at $1.5750, up 3.50 cents on the week, 39.50 cents below a year ago, and 37.50 cents below the blocks.
Sales totaled nine cars of block for the week and 26 for the month of February, down from 27 in January. There were 25 carloads of barrel sold on the week, 20 on Friday, and 127 for the month, up from 89 in January.
Midwest cheese processors tell Dairy Market News demand is steady to strong. Cheddar and Italian cheesemakers say demand is being met and production is busy with ample milk. As has been the case since the early days of the COVID pandemic, plant managers are seeing extra downtime sporadically during the workweek but production remains fairly busy. Barrel producers are finding some balance in inventories. Customer needs are being met and any buildups of cheese are usually alleviated within two weeks of production. Spot milk is widely available at similar prices to previous weeks. Market tones are "more neutral than bullish or bearish," said DMN, due to the large block-barrel price gap.
Looking west, domestic cheese demand is steady from retail and food service purchasers. However, some pizza producers report lightened demand and below forecast sales. Contract sales remain at a steady pace finishing second quarter bookings with some sold out inventories through May. Export demand is mixed. Asian market demand is strong according to some. Barrel inventories are staying ahead of blocks. Cheese output remains strong to steady with plentiful to ample milk available, according to DMN.
Cash butter gained 2 cents last Monday but suffered a 7 cent relapse last Wednesday and headed lower from there to a Friday finish at $2.3450 per pound, down 8.50 cents on the week, lowest in five weeks, and 34 cents below a year ago. There were six cars sold on the week and 41 for February, up from 30 in January.
Butter plants report that demand tones have yet to shift in either direction, but continue to edge on "the slower side," said DMN. Buyers are approaching with caution as market prices have slipped. Butter availability has grown in the early months of 2023 and bulk butter interests have slowed. Cream is widely available, and some Midwestern producers are full. Contacts expect a seasonal demand push in the upcoming weeks however, as the spring holidays approach.
Cream is plentiful in the West and demand for it remains steady to light. Churns are running steady to strong, working through cream volumes. Retail demand is light. Some stakeholders report heavy inventories due to below forecasted retail sales. Export demand has lessened, according to DMN.
Grade A nonfat dry milk was not helped by last Tuesday's Pulse and closed last Friday at $1.1775 per pound, down 3.75 cents on the week, lowest CME price since March 29, 2021, and 69.50 cents below a year ago. There were eight sales for the week and 42 for the month, down from 50 in January.
Cash dry whey closed the week at 44.50 cents per pound, down 2 cents on the week and 31.25 cents below a year ago. Sales totaled nine for the week and nine for the month, down from 66 in January.
Dairy producers know first-hand that profitability is taking a dive. One more confirmation of that is in the Agriculture Department's latest Ag Prices report. The January milk feed price ratio fell to 1.73, down from 1.84 in December, lowest since August 2022, and compares to 2.16 in January 2022.
The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk would only purchase 1.73 pounds of dairy feed of that blend.
The All-Milk Price average fell for the third month in a row, hitting $23.10 per hundredweight, down $1.60 from December, after losing 90 cents the month before, and is $1.10 below January 2021.
California's price averaged $23.90 per hundredweight, down $1.60 from December, and 50 cents below a year ago. Wisconsin's, at $22, was down $1.30 from December, and $1.40 below a year ago.
The national corn price averaged $6.64 per bushel, up 6 cents from December after jumping 9 cents the month before, and is $1.06 above January 2022.
Soybeans climbed to $14.50 per bushel, up a dime, after jumping 40 cents the previous month, and are $1.60 per bushel above January 2022.
Alfalfa hay averaged $263 per ton, down $6 from December, but is $48 per ton above a year ago.
Looking at the cow side of the ledger, the January cull price for beef and dairy combined averaged $81.70 per hundredweight, up $4.80 from December, $10.10 above January 2022, and $10.10 above the 2011 base average.
As for the income over feed calculation, dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Mo., said, "The drop in feed costs offset the third highest January All-Milk price and dropped the income over feed from the previous month and to the lowest level since October 2021."
Return to Top of Page