Update Highlights

CFAP dairy payments move into sixth week

The pace of direct payments to dairy farmers through the Coronavirus Food Assistance Program (CFAP) slowed as the program entered its sixth week.

Natzke dave
Dave Natzke
Editor / Progressive Dairy

As of July 6, U.S. dairy producers had been approved for more than $1.11 billion in direct payments, up about $70 million from the week before. Dairy applications processed by USDA Farm Service Agency (FSA) offices since May 26 stood at 19,071, up from 17,633 on June 29.

The top states for CFAP dairy payments as of July 6 were:

  1. Wisconsin: $235.9 million – 4,853 applicants
  2. California: $152.4 million – 819 applicants
  3. New York: $115.8 – 2,205 applicants
  4. Pennsylvania: $65 million – 1,963 applicants
  5. Minnesota: $64.9 million – 1,899 applicants
  6. Michigan: $58.8 million – 732 applicants
  7. Idaho: $47.8 million – 275 applicants
  8. Iowa: $34.3 million – 774 applicants
  9. Washington: $32.1 million – 236 applicants
  10. Ohio: $31.4 million – 727 applicants
  11. Texas: $28.8 million – 226 applicants

Find an interactive dashboard provide payment details, click here.

In addition to dairy, payments totaled $2.7 billion to livestock producers, $1.41 billion to producers of non-specialty crops and $134.7 million to producers of specialty crops. Overall, the USDA FSA had approved about $5.36 billion in payments to more than 365,262 agricultural producers who applied for assistance through the CFAP as of July 6.

Advertisement

Applications will be accepted through Aug. 28, 2020, with application numbers and program payments announced each Monday on the CFAP website.

About one-third of CFAP funds distributed through June

About one-third of Coronavirus Food Assistance Program (CFAP) direct producer payments were distributed through the end of June, according to John Newton, chief economist with the American Farm Bureau Federation (AFBF).

CFAP payments are funded through two federal programs: $9.5 billion from the Coronavirus Aid, Relief and Economic Security Act (CARES) and $6.5 billion from USDA Commodity Credit Corporation funding. The USDA is distributing 80% of the money in initial direct payments, with the remaining 20% to be distributed – potentially on a prorated basis depending on availability – at a later date. Payment sign-up closes on Aug. 28 at USDA FSA offices.

Summarizing data in a recent AFBF Market Intel report, Newton said about $4.85 billion had been distributed through the end of June.

Of that total, $2.4 billion, more than 50%, was paid to livestock (cattle, hog and lamb producers), $1.3 billion (26%) was paid to non-specialty crop producers. $1 billion (22%) was paid to dairy producers and $113 million (2%) was paid to specialty crop producers.

For more details, read: CFAP application period to open May 26; dairy payment is about $6.20 on 1Q production.

Newton’s analysis provides breakouts by commodity category and individual state. Payments to dairy producers align with the traditional milksheds. Through June 29, Wisconsin received the highest payment total at $224 million, that was followed California at $141 million and New York at $111 million.

The U.S. average CFAP payment of $59,250 per dairy producer application is significantly higher when compared to livestock, non-specialty crop and specialty crop producers CFAP payments. Average payments through the end of June were highest in Western states, where dairy operations tend to be the largest. New Mexico has an average CFAP payment of $250,000, followed by Nevada at $202,000 and Arizona at $202,000. Wisconsin, the nation’s second-largest milk producing state, currently has an average CFAP payment of $79,000 per application.

Find a summary of dairy payments by state and producer average here.

Dissolved dairies and CFAP payments

In a notice to state and county farm USDA offices, June 26, William Beam, FSA deputy administrator of farm programs, provided an update on forms, software and guidance covering CFAP payments to dairy farmers who end their operations in the first half of 2020.

According to the notice, any dairy operation that is dissolved during the first two quarters of 2020 is eligible for a CFAP payment based on when the operation ceased milk production.

With CFAP payments made in two installments, a dairy operation that dissolved during the first quarter (January-March) of 2020 is only eligible for the first installment payment.

A dairy operation that ceased operation in the second quarter (April-June) will be eligible for the second installment payment, prorated to the number of days it produced milk during the quarter.

June Class III milk price tops $21

June’s Federal Milk Marketing Order (FMMO) Class III milk price jumped nearly $9 to $21.04 per hundredweight (cwt). It’s $4.77 higher than a year ago.

The change means the Class III price went from a decade low of $12.14 per cwt in April to a 67-month high within just one month. The last time the Class III price was above $21 per cwt was in November 2014.

Comparatively, the June 2020 Class IV milk price rose $2.23 per cwt from May to $12.90 per cwt. It’s down $3.93 from June 2019.

Through the first six months of 2020, the Class III price averaged $16.09 per cwt, the highest for that period in three years. The January-June 2020 Class IV price averaged $13.78 per cwt, down $2.20 for the same period a year ago.

Despite the large increase in the Class III price for November, dairy farmers aren’t likely to see all of it in their milk check.

Read: Negative PPDs, depooling likely to create milk check fireworks.

Thanks, Dad: Grocery store dairy sales stronger

Stay-at-home Father’s Day celebrations may have helped fuel another strong week in retail dairy product sales, according to the International Dairy Deli Bakery Association (IDDBA). The value of dairy aisle sales for the week ending June 21 were up 18.6% compared with the corresponding week a year earlier, marking the 16th consecutive week that grocery stores dairy sales were double-digit higher than the year before.

The report, summarizing weekly Information Resources Inc. (IRI) U.S. grocery store sales data, revealed increases across all dairy product categories, said Abrielle Backhaus, research coordinator with IDDBA.

Weekly sales of natural cheese were up 24% in value and 16% in volume compared to a year earlier, while butter sales increased by 26% and 30% in value and volume, respectively. Fluid milk maintained trends initiated with changes in consumer buying habits due to the coronavirus outbreak, up 7% in value and 2.6% in volume. Sales of yogurt, creams and creamers, processed cheese, sour cream, whipped toppings and cottage cheese were all higher.

Looking ahead, the report noted new spikes in COVID-19 cases and hospitalizations in some regions of the country that had previously relaxed restrictions are likely to impact business activities at grocery stores and restaurants.

CoBank: Dairy supply chains will need to adjust

The weekly IDDBA data (above) shows how dramatically consumer buying habits have changed. A new report from CoBank’s Knowledge Exchange indicates that behavior could extend for the next 12-18 months, and dairy supply chains – from farm to fork – will need to adjust.

Even as COVID-19 restrictions have begun lifting, polling shows widespread reluctance among consumers about immediately returning to normal activities like restaurant dining and business travel, said Tanner Ehmke, manager of CoBank’s Knowledge Exchange. Forecasts from Open Table, an online restaurant reservation service, suggest that the U.S. could lose up to 25% of its restaurants.

The report, “Dairy Supply Chains Adapt as Consumers React to COVID-19,” notes that any structural reduction in restaurant sales has potential product mix implications for dairy processors and converters. Firms that specialize in making or packaging products for food service accounts will need to retool, making different types of cheese or filling different-sized sour cream containers for at-home consumption.

Some buyers are asking for more extended shelf-life alternatives. Business models may also be readjusted from just-in-time inventory practices to having more inventory stored in warehouses.

Grocers are also cutting down on product selection to enhance operational efficiency. Nielsen data shows that for the four weeks ending June 13, supermarkets carried nearly 7% fewer dairy items than the year prior. That could mean fewer line extensions, fewer opportunities to differentiate and fewer chances to test new concepts.

Acreage report: Feed cost implications

With implications on dairy feed costs, the USDA released its annual Acreage report on June 30, updating projections for the 2020-21 crop year.

  • Hay producers intend to harvest 52.4 million acres of all hay in 2020, down slightly from 2019 and down about 902,000 acres from the March Planting Intensions report. If realized, this will represent the lowest total hay harvested area since 1908. Record-low harvested area for all hay is expected in California, Indiana, Maine, Michigan, Minnesota, New York, Ohio, Rhode Island and Wisconsin.

At 16.35 million acres, U.S. alfalfa hay area is down 391,000 acres from 2019. Much of that decline is in the 24 major dairy states, which are forecast 368,000 acres lower, led by declines of 145,000 acres in California, 140,000 acres in Wisconsin and 100,000 acres in Kansas.

U.S. area devoted to other hay is estimated at 36.03 million acres, an increase of 347,000 acres from 2019. In contrast to alfalfa, the major dairy states will see a 360,000-acre increase, with a big jump in Kansas (550,000 acres), offsetting declines of 100,000 acres in Texas and 90,000 acres in both Wisconsin and New York.

  • Corn-planted area for all purposes in 2020 is estimated at about 92 million acres, up 2.3 million acres from last year but 5 million acres fewer than forecast in the USDA’s Prospective Planting report, issued in March. The drop in acreage spurred a rally in corn prices. The prospect of the market building a weather premium seems high over the next week given the current weather forecast, according to Todd Hubbs, University of Illinois ag economist.
  • Soybean-planted area for 2020 was estimated at 83.8 million acres, up 7.7 million acres (10%) from last year but slightly lower than March intentions. Year-over-year increases were expected in 24 of the 29 states where estimates were available. Area for harvest, forecast at about 83 million acres, is up 11% from 2019. If realized, this will be the third-highest planted and harvested soybean acreage on record.

  • Affecting cottonseed availability and price, U.S. cotton acres are down down 11% from last year. The only state showing an increase compared with last year is Kansas. The largest decline is in Texas, where upland cotton-planted acreage decreased 450,000 acres; Arkansas, Georgia, Mississippi, North Carolina and South Carolina also cut acreages by 100,000 or more.

May cheddar output lower; butter, SMP post gains

With May 2020 U.S. milk production down about 1% from the year before, production of American-type cheeses dipped during the month. However, more milk was processed into butter and skim milk powder, according to the USDA’s monthly Dairy Products report, released July 1.

Total cheese output (excluding cottage cheese) was estimated at 1.1 billion pounds in May 2020, down 0.7% from May 2019 but 3.2% more than April 2020. Declines in cheddar cheese production were offset by increases in the production of Italian-type cheeses. Through the first five months of 2020, total cheese production was estimated at 5.4 billion pounds, down 0.1% from January-May 2019.

Butter production was estimated at 178 million pounds in May, 4.9% more than May 2019 but 18% less than April 2020. January-May 2020 butter production was estimated at 973 million pounds, up 8.8% from the same period in 2019.

Skim milk powder showed the biggest production increase on a percentage basis in May 2020. At 47 million pounds, it was up almost 77% from May 2019 and up 8% year to date. Nonfat dry milk output at 158 million pounds in May 2020 was down 9% from the year before.

Despite lower overall cheese production, May 2020 output of dry whey was up nearly 9%, but production of whey protein concentrate was lower.  end mark

Dave Natzke