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CapitalPress.com
Friday, December 25, 2020
Dairy
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Analyst expects tighter milk margins in 2021 Chobani expands into
Feed costs are moving
higher, and Idaho’s feed
costs will move towards $11
per hundredweight into the
middle of 2021. Margins in
Idaho in the first part of 2021
will be in the $6 to $7 range,
which should contract the
herd — depending on base
programs, he said.
Prices for Class III milk
are in the mid to lower range
of the five-year average.
Without stimulus, prices are
going to be below average
in the first quarter and push
higher in the second and
third quarters, depending on
stimulus and milk produc-
tion, he said.
Class III futures in 2021
and 2022 are around $16,
with the market unwilling
to take any major directional
position, he said.
The Class IV price “has
just been an absolute dog,”
under $14 most of 2020 and
under $12 a lot of that time.
Futures prices for 2021 are
a little better but not great,
recovering to at least break
even in the latter half of the
year, he said.
Unfortunately, producers
and processors connected to
Class IV got left in the dust
in the food box program,
which focused on cheese,
he said.
By CAROL RYAN DUMAS
Capital Press
The COVID-19 pan-
demic whipsawed dairy
markets in 2020, with food-
service shutdowns tanking
demand and government
stimulus propelling cheese
prices and spurring milk
production.
“You can’t talk about
2020 unless you talk about
volatility,” said James Carr,
director of Dairy West for
StoneX Financial.
The volatility was driven
by a collapse in foodser-
vice sales, which dropped
by more than 50% in March
and April. Retail sales were
up 30% but nowhere near
making up for the losses in
foodservice, and the block
cheese price dropped to $1
a pound, he said during the
University of Idaho’s virtual
Idaho Ag Outlook Seminar.
Then the government
food box program was
announced,
restaurants
started to reopen, stimulus
checks went out to farm-
ers and consumers and the
dairy market recovered sig-
nificantly and quickly —
with prices blowing by nor-
mal pricing to all time highs,
he said.
The question ahead is
Capital Press File
Cows feed at a Wendell, Idaho, dairy. An analyst says
milk price volatility is likely to continue and margins
are likely to shrink.
what’s going to replace
government purchases. If
that doesn’t get replaced,
dairy prices will move sig-
nificantly lower. Netting
out government purchases,
dairy demand has been flat
to lower, he said.
“Without
government
purchases, we don’t think
the U.S. can support the cur-
rent milk production and
prices and we expect mar-
gins will move lower,” he
said.
Producer margins in 2020
were both below $9 per hun-
dredweight of milk — which
correlates with herd contrac-
tion — and above $11.50,
which signals expansion, he
said.
“We do believe that we’ll
see a significant drop in mar-
gins moving into the first
quarter, which should also
slow down or at least pause
that growth,” he said.
But a lot can happen,
including another stimulus
package, he said.
“We don’t know at this
point, but our expectation
is we’re going to see more
(foodservice) shutdowns,
which is going to push
prices lower, which is going
to reduce margins, which
will eventually reduce pro-
duction and probably help
prices going into the third
and fourth quarters,” he said.
probiotic products
By CAROL RYAN DUMAS
Capital Press
Greek yogurt maker
Chobani has announced
a full portfolio of probi-
otic yogurts and drinks,
kids pouches and shakes
and non-dairy beverages
with immunity-supporting
probiotics.
The new yogurts and
yogurt drinks have a diverse
blend of scientifically con-
firmed probiotic strains
with multiple benefits for
immune system, digestive
and gut health, bringing a
proactive approach to a new
generation of probiotic con-
sumers, according to the
company.
Today,
consumers
are looking for immuni-
ty-boosting products but
few understand what probi-
otics are. An estimated 60%
of consumers say support-
ing their immune system
will continue to be import-
ant after COVID-19.
“Today we’re in four
exciting growth categories,
adding delicious nutritious
new oat milks, creamers,
and functional beverages to
our expanded yogurt port-
folio,” said Peter McGuin-
ness, president and COO of
Chobani.
“There’s no question that
the importance of immunity
has taken on new meaning
in these times and that’s why
so many of our foods and
drinks have benefits of pro-
biotics to support immunity,
digestive and gut health,” he
said.
Measured
probiotics
(supplements and yogurt)
are a $1.38 billion category,
but yogurt only represents
40% of the market, accord-
ing to the company.
In 2020, the total yogurt
category’s U.S. dollar sales
have increased 4.4% year-
to-date from a year ago,
while total Greek Yogurt
dollar sales over the same
period have jumped 8.1%.
Like all Chobani prod-
ucts, the probiotic yogurts,
drinks and pouches are
made with only non-GMO
ingredients and no artificial
sweeteners, artificial preser-
vatives, starches or artificial
flavors.
The company also added
new items to its oat-based
line and dairy coffee creamer
offerings.
Global dairy markets balanced for now
By CAROL RYAN DUMAS
Capital Press
While the global milk sup-
ply among the “Big 7” dairy
exporters saw a large increase
in the third quarter of 2020
and a lesser but still sizable
increase in the fourth quarter,
it’s only expected to increase
0.8% in 2021.
Markets have already
worked through the additional
milk in the third and fourth
quarters and global markets
remained resilient during that
period, Mary Ledman, global
strategist for Rabobank, said
during a webinar hosted by
the American Dairy Coalition.
“The growth in milk sup-
plies for Q3 and Q4 have been
manageable, and our outlook
for further growth in 2021 is
muted verses 2020,” she said.
Typically, when the year-
over-year increase is less
than 1 billion liters a quar-
ter, global markets are in bal-
ance, she said. The good news
is Rabobank’s outlook for
growth is less than that. The
bank is expecting an increase
of 2.7 billion liters in all of
2021, considerably less that
the 4.5 billion liter increase in
2020, she said.
“Whether the markets
remain in balance is yet to
be determined. There are tre-
mendous market uncertain-
ties as we continue to adjust
to the pandemic’s impact on
the global economy,” she
said.
Those
uncertainties
include the level of gov-
ernment support in sev-
eral countries that has
influenced consumers’ pur-
chasing power. In the U.S.
in particular, the availabil-
ity of dairy products for
food-aid programs and how
those programs might shift
in 2021 is another unknown,
she said.
Another uncertainty is
dairy stocks in Europe, as the
European Union provided
support for building them.
Future trade relations are
also an uncertainty, including
finalizing Brexit and issues
with China impacting the
U.S., New Zealand, Australia
and Europe, she said.
On the demand side,
global dairy trade through
the pandemic has fared much
better than Rabobank had
earlier expected, she said.
Trade was up 5% year
over year through Septem-
ber, largely due to significant
demand in China. But trade to
other countries — including
Algeria, Indonesia, Malay-
sia, the Philippines and Viet-
nam — has also been higher
despite lower oil revenue and
weaker currencies versus the
U.S. dollar, she said.
“This is really a situation
where the desire for food
security outweighed poor
domestic economic condi-
tions,” she said.
But there were some signs
of weakness in the third quar-
ter, with some of it due to
large purchases in the second
quarter, she said.
“So we’re watching this
closely because a prolonged
downturn in trade would not
be good even in light of our
modest increase in global
milk production,” she said.
China is the largest dairy
importer in the world. Its
2020 imports through Octo-
ber were up 19% and con-
tinue to be robust. That’s
largely due to a 46% increase
in whey imports for its recov-
ering swine industry follow-
ing African swine fever.
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