THE CAPITALIST CRISIS IS OVERPRODUCTION
Pandemic forces changes in the dairy market
THEY DUMP MILK AS THE DAIRY MONOPOLIES ALWAYS HAVE, TO INCREASE PRICES
Pandemic forces changes in the dairy market
THEY DUMP MILK AS THE DAIRY MONOPOLIES ALWAYS HAVE, TO INCREASE PRICES
THIS WASTE OF SURPLUS THAT COULD BE USED FOR THE POOR,
SCHOOL LUNCH PROGRAMS, HOMELESS SHELTERS, ETC.
IS PETITE BOURGEOIS SOCIAL SABOTAGE
Cattle graze at Fernandez Ranch in Martinez, Calif. Myra Saefong/MarketWatch
Milk prices this year have more than erased the gains they scored for all of 2019, as the closure of restaurants and schools to prevent the spread of COVID-19 forced changes in the dairy market and in consumer buying behavior.
“The dairy industry remains stuck in a challenging and unfortunate position” because the processing pipeline is becoming backed up due to the abrupt loss in demand, says Rick Kment, market analyst at commodity analysis provider DTN.
Cattle graze at Fernandez Ranch in Martinez, Calif. Myra Saefong/MarketWatch
Milk prices this year have more than erased the gains they scored for all of 2019, as the closure of restaurants and schools to prevent the spread of COVID-19 forced changes in the dairy market and in consumer buying behavior.
“The dairy industry remains stuck in a challenging and unfortunate position” because the processing pipeline is becoming backed up due to the abrupt loss in demand, says Rick Kment, market analyst at commodity analysis provider DTN.
Milk is a perishable product and the “ability to store it unprocessed for more than a couple of days is nearly impossible,” he says, adding that with processing plants at full capacity, farmers have had to dump excess milk.
Most-active futures prices for Class III milk DAM20, +0.16%, which is used to make most types of cheese, settled at $12.11 per hundredweight on Thursday—the lowest since September 2009. Class III milk has lost around 37% year to date, erasing last year’s 35% climb.
Meanwhile, the Thursday finish for cash-settled cheese futures CSCK20, -0.08% at $1.184 a pound was a record low based on data going back to 2010.
The impact of the coronavirus hit the dairy industry in waves, says Matt Gould, editor at newsletter The Dairy Market Analyst. The first wave was at the end of January, when the disease was rapidly spreading in China. The impact of the shutdowns there was immediately felt in the nonfat dry-milk market, says Gould.
The next wave came as states in the U.S. began to shut down, which led to a boost in purchases of pizza, he says. Pizza accounts for much of the country’s demand for cheese, which is made from milk.
Then there was a run to grocery stores, which strained the supply chain for fluid milk and saw a period of record sales for milk, butter, cheese, and yogurt. Dairy commodity prices did not initially fall, Gould says.
Read:Shuttered schools, plunging milk demand led to race among dairy farmers to tap small-business rescue program before funding ran out
But when refrigerators were restocked, consumers stopped ordering in and grocery store sales weren’t enough to offset the losses from restaurant sales, he explains.
Gould estimates domestic cheese demand loss from the food-service industry at 214 million pounds each month, which equals 2.1 billion less pounds of milk, or about 11% of all the milk produced during the month.
Gould forecasts a drop in Class III milk prices to a low of $8.95 per hundredweight in June, which he says would be a record based on data going back to 1998.
Still, the dairy industry has made moves that will lessen the blow of lost demand and the drop in prices.
Those include the dumping of excess milk at levels that are likely “substantially” larger than normally seen in the spring, when production seasonally peaks, says David Maloni, executive vice president of food-service supply-chain technology firm ArrowStream.
Cow herd “liquidation” is also anticipated in the coming months and this should “lead to much tighter milk and dairy product supplies and higher prices later this year,” Maloni says.
He also says, “U.S. dairy markets have fallen substantially below other major exporting countries’ prices,” and that should result in “better export demand in the not-so-distant future.”
An early sign of a turnaround may come from China.
“The single most important factor for dairy prices to rebound is improved buying patterns in China,” says Arun Sundaram, equity analyst at CFRA Research.
“Agricultural commodity prices should improve once we start to see greater, more consistent agricultural product purchases from China.” After its bout with the virus, the Chinese economy is beginning to open up again.
Most-active futures prices for Class III milk DAM20, +0.16%, which is used to make most types of cheese, settled at $12.11 per hundredweight on Thursday—the lowest since September 2009. Class III milk has lost around 37% year to date, erasing last year’s 35% climb.
Meanwhile, the Thursday finish for cash-settled cheese futures CSCK20, -0.08% at $1.184 a pound was a record low based on data going back to 2010.
The impact of the coronavirus hit the dairy industry in waves, says Matt Gould, editor at newsletter The Dairy Market Analyst. The first wave was at the end of January, when the disease was rapidly spreading in China. The impact of the shutdowns there was immediately felt in the nonfat dry-milk market, says Gould.
The next wave came as states in the U.S. began to shut down, which led to a boost in purchases of pizza, he says. Pizza accounts for much of the country’s demand for cheese, which is made from milk.
Then there was a run to grocery stores, which strained the supply chain for fluid milk and saw a period of record sales for milk, butter, cheese, and yogurt. Dairy commodity prices did not initially fall, Gould says.
Read:Shuttered schools, plunging milk demand led to race among dairy farmers to tap small-business rescue program before funding ran out
But when refrigerators were restocked, consumers stopped ordering in and grocery store sales weren’t enough to offset the losses from restaurant sales, he explains.
Gould estimates domestic cheese demand loss from the food-service industry at 214 million pounds each month, which equals 2.1 billion less pounds of milk, or about 11% of all the milk produced during the month.
Gould forecasts a drop in Class III milk prices to a low of $8.95 per hundredweight in June, which he says would be a record based on data going back to 1998.
Still, the dairy industry has made moves that will lessen the blow of lost demand and the drop in prices.
Those include the dumping of excess milk at levels that are likely “substantially” larger than normally seen in the spring, when production seasonally peaks, says David Maloni, executive vice president of food-service supply-chain technology firm ArrowStream.
Cow herd “liquidation” is also anticipated in the coming months and this should “lead to much tighter milk and dairy product supplies and higher prices later this year,” Maloni says.
He also says, “U.S. dairy markets have fallen substantially below other major exporting countries’ prices,” and that should result in “better export demand in the not-so-distant future.”
An early sign of a turnaround may come from China.
“The single most important factor for dairy prices to rebound is improved buying patterns in China,” says Arun Sundaram, equity analyst at CFRA Research.
“Agricultural commodity prices should improve once we start to see greater, more consistent agricultural product purchases from China.” After its bout with the virus, the Chinese economy is beginning to open up again.
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