• November retail dairy sales affected by COVID-19, inflation
• GDT price index dips
• October 2021 fluid sales reviewed
• Dairy margins start December stronger
• USDA seeks fluid milk, butter
• Dairy replacement heifer exports
• Interest rates headed higher in 2022
• 2022 estate tax limits raised
• USDA funds school meal programs

November retail dairy sales affected by COVID-19, inflation

Driven by concerns over COVID-19 and inflation, consumers continued to eat more meals at home in November, affecting values and volumes of retail dairy product purchases, according to a monthly update from the International Dairy Deli Bakery Association (IDDBA). While retail inflation is the highest in many decades, the cost of eating out rose even more.

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“The share of meals prepared at home remains around 80 percent despite more people working away from home and most of the nation’s school children being back to in-person education,” said Jonna Parker, team lead for Information Resources Inc. (IRI).

Like October, November retail dairy sales (value basis) exceeded year-earlier levels, up 0.6% from November 2020 and up 8.7% from November 2019. The value of November 2021 sales was higher than November 2019 sales across all product categories. However, sales performance compared to a year earlier remained mixed at the category level.

The value of November 2021 fluid milk sales was up 0.4% and 5.7% from November 2020 and 2019, respectively. Compared to the same periods, November 2021 yogurt sales were up 5.5% and 9.7%. Other product categories posting value gains over November 2020 and 2019 were creams and creamers, whipped toppings and sour cream. In contrast, the value of natural cheese, butter cream cheese, process cheese and cottage cheese were down slightly from a year earlier.

Following patterns established in October, November 2021 unit and volume sales trended below 2020 levels for most dairy categories. Fluid milk sales were down 4.2% on a unit basis and -5.7% on a total volume basis. Natural cheese unit and volume sales were down 2.4% and 1.7%, respectively. Butter unit and volume sales were down 6.1% and 6.3%, respectively.

The IDDBA report attributed higher yogurt volume gains, despite lower unit sales, to consumer purchases of yogurt in larger containers for home use.

Another bright spot was dairy desserts, with November 2021 value, unit and volume of sales all higher.

In the deli, cheese sales (grab-and-go, pre-sliced and specialty cheeses) all posted strong sales value gains compared to both November 2020 and November 2019.

What’s ahead? One issue facing heightened concern is that 37% of consumers surveyed said they encountered out-of-stock items when grocery shopping in November. In addition to paper towels and toilet paper, fluid milk was listed as being in short supply.

GDT price index dips

Global Dairy Trade (GDT) dairy product prices were mostly higher in the latest auction held Dec. 21. However, a decline in the whole milk powder price pressured the overall price index lower for the first time since early August.

After reaching its highest point since March 2014, the index fell 1.5% during the latest auction. Among individual product categories:

• Skim milk powder was up 0.6% to $3,745 per metric ton (MT, or about 2,205 pounds).
• Whole milk powder was down 3.3% to $3,867 per MT.
• Butter was up 1% to $5,8511 per MT.
• Cheddar cheese was up 0.5% to $5,241 per MT.
• Anhydrous milkfat was up 0.9% to $6,724 per MT.

The next GDT auction is Jan. 4, 2022.

October 2021 fluid sales reviewed

Here’s an update on U.S. fluid milk sales data from the USDA Agricultural Marketing Service for October 2021.

• Total sales: October 2021 sales of packaged fluid milk products totaled about 3.76 billion pounds, down about 5.4% from the same month a year earlier. At 36.6 billion pounds, year-to-date (January-October 2021) sales of all fluid products were down 4.5%.
  
  
• Conventional products: October sales totaled 3.54 billion pounds, down 5.2% from October 2020. Reduced-fat (2%) flavored milk was the only major category to post an increase from a year earlier. Year-to-date sales of conventional products were down 4.7% at 34.3 billion pounds.
  
  
• Organic products: Monthly sales totaled 224 million pounds, down 5.4% from a year earlier. Sales of organic flavored whole milk increased nearly 10% to 15 million pounds. At 2.33 billion pounds, 2021 year-to-date sales of organic products were down about 2.6%. Organic represented almost 6.3% of total fluid product sales in January-October 2021.

The U.S. figures are based on consumption of fluid milk products in Federal Milk Marketing Order (FMMO) areas, which account for approximately 92% of total U.S. fluid milk sales, and adding the other 8% from outside FMMO-regulated areas. Sales outlets include food stores, convenience stores, warehouse stores/wholesale clubs, nonfood stores, schools, the food service industry and home delivery.

Dairy margins start December stronger

Dairy margins strengthened noticeably over the first half of December with a surge in milk prices more than offsetting steady to slightly higher projected feed costs, according to Commodity & Ingredient Hedging LLC.

Both Class III and Class IV milk futures prices advanced, with slowing domestic and global milk production providing support amid a backdrop of strong demand. Whey price strength has been a big contributor to Class III prices.

Robust demand provided strength in the export market. However, demand is expected to slow in 2022 due to a declining birth rate in China that will limit demand for infant formulas, as well as low hog prices that will limit demand for feed-grade whey.

Class IV prices are drawing support from butter which is trading at a two-year high above $2 per pound. Butter exports helped to draw down stocks from July through October at the fastest pace since 2013.

Upcoming reports impacting milk checks include the USDA’s Cold Storage report (Dec. 22) and the November Dairy Margin Coverage (DMC) program margin and indemnity payments (Dec. 30).

USDA seeks fluid milk, butter

The USDA’s Agricultural Marketing Service is accepting bids for delivery of:

• 8,100 gallons of fluid milk to Virginia between Feb. 7-March 23, 2022 – contract specifications call for delivery of 2% fresh milk in half-gallon containers. Bids will be accepted until Dec. 29, with contracts awarded on Jan. 5.
  
  
• 92,340 pounds of print salted butter for delivery in Missouri and Idaho between Jan. 16 and March 15, 2022 – bids will be accepted until Jan. 4, with contracts awarded the same day.

Dairy replacement heifer exports likely to rise

Here’s an update to Progressive Dairy’s monthly recap of dairy-related exports (Read: October U.S. dairy export value higher).

Commenting on dairy replacement heifer exports that totaled 3,911 head in October, Tony Clayton, Clayton Agri-Marketing Inc., Jefferson City, Missouri, said the outlook for additional exports is strengthening.

Clayton expects another shipment of cattle to Pakistan before the end of the year. That will make Pakistan and Vietnam the two largest markets for U.S. dairy heifers in 2021, surpassing Canada and Mexico. Clayton said his company has also made its first shipment of Holstein bulls to Bangladesh and confirmed two more orders for dairy cattle to that country in early 2022.

Looking ahead, potential dairy cattle buyers in Asia and the Middle East are placing a higher demand on sourcing cattle that produce A2 milk, he added.

Interest rates headed higher in 2022

Meeting on Dec. 15, the Federal Reserve announced it will keep interest rates steady for now but predicted multiple rate hikes over the next couple of years. The Fed’s next Open Markets Committee meeting is Jan. 25-26, 2022.

2022 estate tax limits raised

In November 2021, the Internal Revenue Service (IRS) announced the federal estate tax limit rises from $11.7 million in 2021 to $12.06 million in 2022. The federal gift tax limit rises from $15,000 in 2021 to $16,000 in 2022.

Farm families concerned about hitting the top federal estate tax exemption or the state estate tax exemption need to begin working on farm succession and estate plans to limit potential estate taxes down the road, according to Paul Goeringer, extension legal specialist at the University of Maryland Department of Agricultural and Resource Economics. Writing in a recent Maryland Risk Management Education Blog post (Federal estate tax and gift tax limits announced for 2022), Goeringer said those who need to develop estate tax plans should discuss whether the increases in the estate tax limits impact succession plans.

According to the Tax Foundation, a tax policy nonprofit organization, 12 states impose state estate taxes: Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington. Six impose inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania.

Watch for an article on estate taxes and succession planning by Goeringer in an upcoming issue of Progressive Dairy.

USDA funds school meal programs

The USDA will distribute $1.5 billion in U.S. Commodity Credit Corporation (CCC) funds to states and school districts to help school meal program operators deal with the challenges of supply chain disruptions. A state-by-state breakdown of funds is available here.