Milk cheese butter graphic

Global markets are being rocked by coronavirus and the dairy markets are no exception. The combination of broad-based market fears and current market impacts have taken a big toll.

One of the functions of futures markets is to anticipate the worst and, not surprisingly, futures markets have taken the biggest hit, said Fred Hall, Iowa State University Extension dairy program specialist. Butter, cheese and powder markets have seen the pressure grow as the uncertainty expanded recently.

The situation with COVID-19 is another example of a “black swan” — rare, unforeseen events that have sudden, unexpected and dramatic impacts on markets, Hall said in a news release.

The current situation is not a single event, is still developing and will end over a period of time at some point. The uncertainty has not peaked yet, and the best we can hope for from a market perspective, is that there will come a time when it appears the worst is over, and we can see a path to a lengthy recovery in markets, he said.

Markets had some dairy-specific data to digest as well, and it provided little positive momentum. USDA’s Cold Storage report showed Jan. 31 butter inventories at 242.7 million pounds. That’s 14.9% greater than last year and the largest January reserve since 1994.

There were 1.35 billion pounds of cheese in cold storage warehouses at the end of last month. Although cheese stocks were 1.2% lower than the prior year, they were still the second largest Jan. 31 total on record. The December-to-January increase was the largest in 20 years. American cheese stocks grow roughly 3 million pounds from December to January in a typical year, but this year they surged 29.1 million pounds.

Cow numbers are down 6,000 head from a year ago in U.S. herds, but have climbed 5,000 from December. Total slaughter was up 33,000 head in January 2020 over December 2019.

USDA’s Dairy Market News notes spot milk is trading $1 to $5 under Class III in the Midwest, and with the spring flush just ramping up, there won’t be momentum to move prices higher. Without some market recovery, the national dairy herd will return to diminishing numbers.