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Weekly Digest: April dairy cow slaughter high despite meat plant challenges

Progressive Dairy Editor Dave Natzke Published on 26 May 2020

Digest Highlights

April dairy cow slaughter high despite meat plant challenges

With COVID-19 causing shutdowns and slowdowns at meat processing plants, overall U.S. cattle slaughter slowed in April. However, even though dairy cull cow slaughter was down slightly from March 2020, it was the highest April total dating back to the government’s whole-herd buyout program in 1986.

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April 2020 dairy cull cow slaughter at federally inspected plants was estimated at 279,400 head, down about 8,600 from March but 10,900 more than April 2019. Year to date, 2020 cow slaughter is down about 16,300 head from January-April 2019, according to the USDA’s Livestock Slaughter report.

Based on the USDA’s Milk Production report estimate of 9.381 million dairy cows in U.S. dairy herds in April, the monthly culling rate would be about 2.9%. That report indicated U.S. dairy cow numbers fell by about 4,000 head in April.

Meat plant closures and slowdowns had a bigger impact on fed cattle. Overall cattle slaughter totaled 2.24 million head, down 21% from April 2019. President Donald Trump issued an executive order, April 28, designating meat processing plants as "critical infrastructure" and directing the USDA to ensure U.S. meat and poultry processors continue operations. In late April, it was estimated at least 22 meat plants had at least temporary closures due to the COVID-19 pandemic.

Heaviest dairy culling during April 2020 occurred in the Southwest (Arizona, California, Hawaii and Nevada), where 77,400 dairy cows were removed. That was followed by 51,400 in the Upper Midwest (Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin); about 40,300 head in Arkansas, Louisiana, New Mexico, Oklahoma and Texas; 34,100 head in Alaska, Idaho, Oregon and Washington; and about 33,300 head in Delaware, Maryland, Pennsylvania, West Virginia and Virginia.

2020 graduates getting 500,000 pizzas from DMI, Pizza Hut

Dairy Management Inc. (DMI) and its dairy checkoff partner Pizza Hut are joining forces to give away 500,000 pizzas to class of 2020 high school graduates. The promotion was announced on The Tonight Show Starring Jimmy Fallon, May 21. (See announcement at about 6:55 in the video link.)

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“We are so excited to partner with Pizza Hut to help high school seniors and their families celebrate this special milestone in their lives,” said Marilyn Hershey, a Pennsylvania dairy farmer and DMI chair of DMI.

“Our brand has a long history of celebrating moments that matter – like graduations – and Pizza Hut takes pride in being a part of our customers’ big days,” said George Felix, chief marketing officer, Pizza Hut. “We’re proud to partner with America’s hard-working dairy farmers to bring students who are missing out on their chance to cross the stage with their diploma an opportunity to celebrate with their favorite Pizza Hut pizza.”

2020 graduates can claim a coupon for a free medium, one-topping pizza by creating an account at the Pizza Hut website. Coupons will be valid for online redemption through June 4.

CFAP: What about crop payments?

Applications for direct producer payments under the Coronavirus Food Assistance Program (CFAP) will be accepted, May 26-Aug. 28. Applications are being administered through USDA Farm Service Agency (FSA) offices.

Progressive Dairy previously summarized dairy and cattle payment calculations under the CFAP. Read: CFAP application period to open May 26; dairy payment is about $6.20 on 1Q production.

However, for some producers it may be beneficial to include specialty or non-specialty crops that are eligible for payments. Several ag economists have compiled information discussing CFAP crop payments. Contributing to the article were Nick Paulson, Gary Schnitkey, Jonathan Coppess and Krista Swanson with the University of Illinois, and Carl Zulauf with Ohio State University. Read: Coronavirus Food Assistance Program (CFAP) rules announced.

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Like dairy, crop payment calculations may seem fairly complicated because funding for the payments comes from two federal pools of money and at two different rates. The source of the funds received in the overall payment likely has little significance.

For non-specialty crops (corn, soybeans and nine others), required application information includes total 2019 production and unpriced inventories as of Jan. 15, 2020. A single payment will be made based on 50% of a producer’s 2019 total production or the 2019 inventory as of Jan. 15, 2020 (whichever is smaller), multiplied by 50%, and then multiplied by the commodity’s applicable payment rates determined by the USDA. For corn, that’s 35.5 cents per bushel; for soybeans, it’s 47.5 cents per bushel.

The authors of the farmdoc paper offer the following example, calculated on a per-acre basis:

A farmer produced 200 bushels of corn per acre in 2019, meaning that the maximum bushels available for CFAP payments is 100 bushels per acre (200 bushels of production times 50%). The producer had 140 bushels of unpriced inventory on Jan. 15, which means that the producer’s eligible corn inventory is 100 bushels per acre. The total CFAP payment is $33.50 per acre (100 bushels multiplied by 33.5 cents average rate).

As with other commodities, payments will be made in two installments. The initial installment covers 80% of the total, with the second 20% installment to be distributed at a later date, contingent on available funds.

Additional information and forms are available from USDA’s CFAP website.

Dairy retails sales started May strong

Grocery stores sales during the second week of May reflected some changes in shopping patterns as states began to allow the reopening of restaurants. However, dairy products remain a major item on consumers’ shopping lists, according to weekly updates from the International Dairy Deli Bakery Association (IDDBA).

In the most recent IDDBA report, which covers weekly sales between March 1-May 10, U.S. grocery store dairy sales gains have been up double digits over comparable weeks in 2019 for nine consecutive weeks, said Abrielle Backhaus, research coordinator with IDDBA. Year-over-year gains for the week ending May 10 were up more than 26% for the overall dairy category, driven by continued strong demand for cheese (up more than 35%) and butter (up more than 58%), while fluid milk sales extended recent trends (up 17%). Yogurt (up 3.5%) continued to be the weakest growth area in the dairy category, but sales were up for a third straight week.

Natural cheese had the highest increase in absolute dollars with year-over-year sales up $87 million, followed by milk that sold an additional $43 million.

IDDBA is a nonprofit membership organization serving the dairy, deli, bakery, cheese and supermarket food service industries.

California FMMO: Fluid milk sales move back to pre-COVID-19 trends

Changes in consumer buying habits due to the spread of COVID-19 and the shelter-in-place regulations provided a strong boost to demand for Class I (fluid) dairy products in March. However, demand for those products fell to more normal patterns in April, according to information contained in the California Federal Milk Marketing Order (FMMO) market administrator’s bulletin.

The analysis looks at monthly percentage changes in daily average Class I sales volume by product for February, March and April 2020, based on handler-reported data. The total Class I sales volume of products sold in the California FMMO increased more than 10% from February to March, from just over 14 million pounds to more than 15.5 million pounds.

Class I products that experienced particularly significant increases from February to March were whole milk (14.9%), reduced-fat (16.9%), low-fat (10.3%) and organic milk products (9.6%).

The increase in sales of whole milk accounted for nearly half of the overall effect in fluid milk sales volume from February to March. Additionally, while fluid sales in most categories surged from February to March, not all Class I products experienced gains on a daily average basis. Sales of flavored milk and drinks fell by more than 18%, and sales volume of fat-free milk declined more than 8%.

March’s impressive gains proved to be unsustainable, however, as April’s sales volume in the California marketing area shrunk by more than 7% on a daily average basis, declining in every category.

Although Class I sales in March were a bright spot in the face of declines in prices and critical demand channels, the data demonstrates that much of the “panic buying” has tapered off, and Class I sales have retreated accordingly, according to the bulletin.

Survey reveals COVID-19 impact on specialty cheese industry

A survey of cheese producers across the Americas found an average decrease of 58% in overall sales due to the coronavirus pandemic. As a result, 71% applied for debt relief or financial assistance to stay afloat, according to results of a recent member survey conducted by the American Cheese Society (ACS).

The survey, “COVID-19 pandemic impact on the American cheese industry: Business operations,” was conducted in May. Results were compiled from nearly 1,000 ACS members including producers, distributors and buyers.

The survey results revealed cheese distribution channels were negatively impacted by the closure of restaurants and other food service markets. About 71% of respondents said they sought debt relief or financial assistance to manage cash flow – 38% either laid off or furloughed employees, and 48% reduced employee hours.

On the positive side, more than 57% of respondents said they had identified new distribution methods for their products, with 51% seeing an increase in overall e-commerce sales.

The 2,300-member ASC is a a 501(c)6 nonprofit association headquartered in Denver, Colorado. It represents artisan, farmstead and specialty cheesemakers across the Americas.

USDA buying dairy products, soliciting bids

The USDA’s Agricultural Marketing Service (AMS) continues to make dairy product purchases for distribution through domestic feeding and nutrition programs. Contracts were recently announced for:

  • 15.36 million pounds of ultra-high-temperature (UHT) pasteurized 1% milk in cases of 32-ounce containers and 1.14 million pounds of UHT pasteurized 1% milk in boxes of 8-ounce containers – bids were accepted from Gossner Foods, Logan, Utah; Industria Lechara, Puerto Rico; and JEC Consulting and Trading Company, Charlotte, North Carolina.

  • About 186,000 pounds of skim evaporated milk in cases of 12-ounce cans – bids were accepted from O-AT-KA Milk Products Cooperative, Batavia, New York.

  • About 84,200 pounds of salted butter in cases of 1-pound packages – bids were accepted from Associated Milk Producers, New Ulm, Minnesota; and Darigold Inc., Seattle, Washington.

  • 198,000 pounds of American cheese blends in 5-pound packages – bids were accepted from Schreiber Foods, Green Bay, Wisconsin.

  • 505,440 pounds of shredded pepper jack cheese in 5-pound containers – bids were accepted from Dairy Farmers of America, Kansas City, Kansas.

  • 112,300 pounds of sliced cheddar cheese – bids were accepted from Masters Gallery Foods, Plymouth, Wisconsin.

  • 251,000 pounds of flavored yogurt in cases of 4-ounce containers – bids were accepted from Upstate Niagara Cooperative, Buffalo, New York.

The USDA also announced bidding periods for dairy products for federal food and nutrition assistance programs. Solicitations covered nearly 2 million pounds of shredded cheddar cheese in 5-pound packages to be delivered to multiple locations in July and August. Bids close May 27.

USDA boosts rural business, producer loan guarantees

The USDA will make available up to $1 billion in loan guarantees to help rural businesses meet their working capital needs during the coronavirus pandemic. Additionally, agricultural producers who are not eligible for USDA Farm Service Agency loans may receive funding under the USDA Business & Industry (B&I) CARES Act Program.

Under the program, the USDA provides 90% guarantees on B&I CARES Act Program loans. The application and guarantee fee is 2% of the loan, with a maximum term of 10 years.

B&I CARES Act Program loans must be used as working capital to prevent, prepare for or respond to the effects of the coronavirus pandemic. The loans may be used only to support rural businesses, including agricultural producers, that were in operation on Feb. 15, 2020. Program funding expires Sept. 30, 2021. Eligible applicants may contact their local USDA Rural Development state office.

The USDA is developing application guides for lenders and borrowers and will host two webinars on May 27 and June 3 to provide an overview of program requirements.

Progressive Dairy COVID-19 resources

Progressive Dairy frequently provides updates on COVID-19 news and resources on a special webpage.

Updates for May 26 include a link to a comprehensive list of stories of how dairy farmers, companies and organizations across the country stepped in to provide milk and other dairy products to food banks and others in need during the COVID-19 crisis. There’s information on an FSA provision allowing eligible farmers with USDA farm loans to use the Disaster Set-Aside (DSA) provision due to the financial impacts of COVID-19, a Wisconsin plan to direct some federal COVID-19 funds to dairy and other producers, a pilot program in Michigan to provide food banks with milk refrigeration units, Texas guidance for environmentally responsible milk disposal and more.

There’s also information on event changes and cancellations; a list of recent dairy organization podcasts related to COVID-19; a comprehensive list of other state, regional and national resources; and helpful articles previously appearing on the Progressive Dairy website.  end mark

Dave Natzke
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