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Weekly Digest: Retail dairy sales reveal impact of COVID variant

Progressive Dairy Editor Dave Natzke Published on 21 September 2021

Digest Highlights

August retail dairy sales reveal impact of COVID-19 variant

Increased concern over the COVID-19 delta variant is affecting where and how consumers are purchasing dairy products. For the first time since March, August brought an increase in both visits and purchases at grocery stores, according to a monthly update from the International Dairy Deli Bakery Association (IDDBA).

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Prior to August, a return to pre-COVID-19 consumer behavior pushed the value of dairy retail sales down from peaks reached in 2020, although those sales remained well above the same period during pre-pandemic 2019.

However, August 2021 retail dairy sales moved above levels seen in both August 2020 (up 0.5%) and August 2019 (up 11%), as Information Resources Inc. (IRI) consumer surveys showed an increase in home-prepared meals, steady restaurant takeouts and deliveries, but less on-premises dining.

Within the dairy category, the values of August 2021 retail sales were mixed. Sales of fluid milk and natural cheese were still down versus August 2020. However, led by yogurt, nearly every other product category posted gains. On a unit sales and volume basis, sales increased from recent months but trended below 2020 levels for most dairy categories.

After tracking lower than year-earlier levels, sales of cheese in the deli area of the store improved in August. Pointing to a demand for convenience, grab-and-go and pre-sliced cheeses remain an area of interest versus standing in line for a cut-to-order purchase.

What’s ahead? The mix of food service and retail remains tipped to the retail/at home side for the foreseeable future. As of August, more students were returning to classrooms, and more employees were again back in their offices instead of working at home, putting an increased emphasis on lunchboxes and on-the-go, single-serve packaging. An uptick in e-commerce orders and less actual time spent in stores during each trip can also affect “impulse areas” of grocery stores.

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July 2021 fluid sales lower

Fluid milk sales slumped further in July. Here’s an update on U.S. fluid milk sales data from the USDA Agricultural Marketing Service.

  • Total sales: July 2021 sales of packaged fluid milk products totaled 3.47 billion pounds, down about 6.5% from the same month a year earlier. At 25.6 billion pounds, year-to-date (January-July 2021) sales of all fluid products were down 5.3%.

  • Conventional products: July sales totaled 3.25 billion pounds, down 6.2% from July 2020. Sales of flavored milks grew slightly, with flavored whole milk up 1.1% and flavored fat-reduced (2%) milk up 2.3% from the same month a year earlier. Those two flavored milk categories made up about 9% of total conventional fluid product sales volume during January-July 2021. Year-to-date sales of conventional products were down 5.5% at 23.95 billion pounds.

  • Organic products: Monthly sales totaled 221 million pounds, down 9% from a year earlier. As with conventional products, sales of organic flavored milks increased: Flavored whole milk rose to 11 million pounds, a 114% increase from extremely lows sales the year before, and 2% flavored milk posted a sales gain of 11% compared to July 2020. At 1.65 billion pounds, 2021 year-to-date sales of organic products were down about 2%. Organic represented almost 6.4% of total fluid product sales in January-June 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.

Another ‘solid’ month for exports

With U.S. fluid milk sales continuing to decline, dairy exports again utilized a greater percentage of total milk solids produced by U.S. dairy farms during July, based on USDA and U.S. Dairy Export Council (USDEC) data analyzed by Progressive Dairy.

In its latest monthly Milk Production report released Sept. 20, the USDA revised July 2021 U.S. milk production to 19.12 billion pounds. Monthly statistics show all milk marketed through FMMOs averaged 3.82% butterfat, 3.1% protein and 5.78% other solids, yielding total solids of 12.62% (12.62 pounds per hundredweight [cwt] of milk). Calculated across all milk production in July, the total solids produced would be about 2.43 billion pounds.

U.S. sales of packaged fluid products totaled 3.474 billion pounds in July 2021, representing about 18.2% of total milk production during July. With some of the components removed, those fluid products averaged 2.32% butterfat and 8.99% nonfat solids, for a total solids average of 11.31% (or 11.31 pounds per cwt). That represents 392.9 million pounds of total solids, or 16.2% of July total solids production.

The USDEC estimated July exports of total solids at 195,029 metric tons, or about 430 million pounds (a metric ton equals about 2,205 pounds). Thus, exports represented about 18.1% of all total solids produced in July.

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Global Dairy Trade index inches higher

Global Dairy Trade (GDT) dairy product prices were mixed in the latest auction held Sept. 21, posting an overall gain of 1%. Prices for major product categories follow:

  • Skim milk powder was up 0.9% to $3,302 per metric ton (MT, or about 2,205 pounds).
  • Butter was down 1.9% to $4,857 per MT.
  • Whole milk powder was 2.2% to $3,777 per MT.
  • Cheddar cheese was down 1.2% to $4,274 per MT.
  • Anhydrous milk fat was unchanged at $5,962 per MT.

The next GDT auction is Oct. 5.

Northeast officials seeking options for organic producers

Efforts to find a long-term home for milk produced organically in the Northeast continues.

In August, Horizon Organic, a subsidiary of Danone, notified 89 dairy producers in four states that their milk supply contracts would not be renewed beyond August 2022. Of the 89 organic dairy farms, 45 are located in New York, 28 in Vermont, 14 in Maine and two in New Hampshire.

Immediately after the notices were received, Vermont Ag Secretary Anson Tebbetts convened a four-subgroup task force, with a goal of identifying as many possible options for the impacted farmers by January or February of 2022. The subgroups are focused on farmer resources, processor manufacturing and marketing capacity, organic origin of livestock standards, and a panel monitoring and coordinating efforts across the four states.

According to task force meeting notes as of Sept. 10, one Vermont dairy ceased operations in August. Of the remaining 27, seven are independent and 20 are associated with cooperatives. A survey completed of 22 of those farms indicated total annual milk production of about 22.2 million pounds, with herd sizes ranging between 25-300 cows and an average annual production per herd of 1.3 million pounds of milk.

On Sept. 15, Maine Gov. Janet Mills asked the USDA to provide support to the affected organic dairy farms. In her letter to U.S. Ag Secretary Tom Vilsack, Mills requested a three-month grace period for repayment of USDA loans and targeted federal financial relief for impacted farms as they transition to new opportunities. Mills also noted in her letter to the USDA that her administration requested Danone commit to paying the organic producers premium payments in their final-year contracts, make monetary donations to both the Northeast Dairy Innovation Center, to support farm transition, business planning and investment; and to donate funds to any company in Maine willing to increase in-state organic dairy processing capacity.

On Sept. 16, the Organic Farmers Association launched a petition drive asking Danone officials to reconsider the nonrenewal of milk supply contracts, charging the action ran counter to “Certified B Corporation” standards that assess companies based on economic, social and environmental activities.

Organic dairy advocates contend the Horizon issue is tied to a loophole in a USDA “origin of livestock” rule and have repeated calls for USDA action. Proponents of the rule charge that inconsistent enforcement has plagued organic producers by creating leniency for those transitioning from conventional production methods to organic production, leading to large-scale production and an oversupply of organic milk.

In 2015, the USDA’s Agricultural Marketing Service proposed amending the requirements under federal organic regulations. However, the proposal was withdrawn in 2018. After indicating it planned to release a new rule in 2019, the USDA decided instead to reopen the older rule for public comment. The public comment period closed on Dec. 2, 2019.

As originally proposed, the rule clarifies requirements for organic dairy farms transitioning conventionally raised animals to organic production. After completion of a one-time transition, any new dairy animals that a producer adds to a dairy farm would need to be managed organically from the last third of gestation or sourced from dairy animals that already completed their transition into organic production.

While some organic certifiers strictly adhere to the policy, others have allowed farmers to remove calves from organic herds, raise them using practices prohibited under organic regulations, and then transition them back to organic management when they are ready to be milked.

Read: Study finds loophole puts organic dairies at a disadvantage when raising heifers.

USDA seeks bids for process cheese, cancels call for butter

The USDA solicited bids to supply 50.65 million pounds of process cheese products for delivery during 2022. Bids close Sept. 28.

The USDA also announced the cancellation of a previous solicitation for 738,720 pounds of butter for delivery in December 2021 because the agency received no bids.

USDA details plan to help cover feed-related transportation costs

The USDA has released details of a plan to help cover the cost of transporting feed for livestock that rely on grazing and are located in regions affected by the drought.

The original plan announcement covered states in the West and Great Plains but has recently been expanded to include Wisconsin. Eligibility is based on areas identified by the U.S. Drought Monitor as being in D2 (for eight weeks or more) and D3 or greater drought intensity, or in areas where the USDA has determined a shortage of local or regional feed availability.

Payments will be made through the Emergency Assistance for Livestock, Honey Bees and Farm-raised Fish Program (ELAP), administered by the USDA’s Farm Service Agency (FSA), and will cover feed transportation costs where grazing and hay resources have been depleted. Cost share assistance will also be made available to cover eligible cost of treating hay or feed to prevent the spread of invasive pests like fire ants.

Under the revised policy for feed transportation cost assistance, eligible ranchers will be reimbursed 60% of feed transportation costs above what would have been incurred in a normal year. Producers qualifying as underserved (socially disadvantaged, limited resource, beginning or military veteran) will be reimbursed for 90% of the feed transportation cost above what would have been incurred in a normal year.

A national cost formula, established by the USDA, will be used to determine reimbursement costs, which will not include the first 25 miles and distances exceeding 1,000 transportation miles. The calculation will also exclude the normal cost to transport hay or feed if the producer normally purchases some feed. For 2021, the initial cost formula of $6.60 per mile will be used (before the percentage is applied) but may be adjusted on a state or regional basis.

To be eligible, livestock must be intended for grazing, and producers must have incurred feed transportation costs on or after Jan. 1, 2021. Although producers will self-certify losses and expenses to the FSA, producers are encouraged to maintain good records and retain receipts and related documentation in the event these documents are requested for review by the local FSA county committee. The deadline to file an application for payment for the 2021 program year is Jan. 31, 2022.

The FSA will provide more application details and tools here.

In a related matter, the University of Nebraska – Lincoln has launched a Crop Residue Exchange, a free online tool designed to link cattle producers to other producers with available grazing resources. The exchange makes it possible for producers in Nebraska, Iowa, Missouri, Kansas, Colorado, Wyoming and South Dakota to list fields of crop residue, pasture and other forage resources they have available for grazing and for cattle producers to connect with them.

DFA, regional brands launch $1 million ‘Fuel the Drive’ promotion

Dairy Farmers of America (DFA), along with 13 of its regional milk brands, launched the $ 1 million “Fuel Their Drive” promotion designed to help fund high school athletic programs.

The promotion will award over 250 grants, ranging from $1,000 to $10,000, across 13 of DFA’s brand communities in 26 markets. Dollars can be used to update a sports field, revamp the school gym, purchase much-needed athletic equipment or whatever the athletic department’s greatest need is.

To participate, shoppers who buy milk from one of DFA’s participating regional brands are asked to take a photo of the receipt and upload it to the link of the local brand, located on the Fuel the Drive website, and vote for their local high school. The program runs through Oct. 15. Additional eligibility rules are available here.

High schools in each market with the most votes will win $10,000, with some winners chosen at random for $2,000 awards. Community members and high schoolers have an additional chance to win $1,000 for their local school by showing and sharing their school pride on social media using the hashtag #FuelTheirDriveSweepstakes.

Participating regional brands include Alta Dena Dairy, Cass-Clay Creamery, Country Fresh Dairy, Guida’s Dairy, Kemps, Lehigh Valley Dairy Farms, Mayfield Dairy Farms, Meadow Gold Dairy, Oak Farms Dairy, PET Dairy, Reiter Dairy, T.G. Lee Dairy and Tuscan Dairy Farms.

Things you might have missed

  • Milk marketing and processing cooperative California Dairies Inc. (CDI) will hold a groundbreaking ceremony, Sept. 29 in Kern County, California, for Valley Natural Beverages, a new ultra-high-temperature (UHT) and extended shelf-life (ELS) milk processing facility. CDI is the largest member-owned milk marketing and processing cooperative in California, with its 300 dairy farmers producing approximately 17 billion pounds of milk annually, 40% of the state’s total.

  • Fuel Up to Play 60, created by the dairy checkoff and National Football League (NFL), launched a new website, educator dashboard and enhanced student app to help students and educators navigate the school year. It includes the Fuel Up to Play 60 Learning Plan; access to greater Fuel Up to Play 60 learning resources, such as the Homeroom; a refreshed Educator Dashboard; and an upgraded Student Zone App that allows students to create accounts, complete activities, collect badges and be named Fuel Up to Play 60 Champions.

Additionally, “Coach Terry’s Touchdown! powered by Fuel Up to Play 60” is a new two-player game launched in partnership with GoNoodle, an “edutainment” platform for teachers and parents. The free game has students racing down a virtual football field to reach the end zone while avoiding objects such as flying foam fingers trying to tackle them. Students collect “power ups,” including milk, yogurt and smoothies, to keep their energy up and they earn bonus points as they try to score touchdowns in 60 seconds.  end mark

Dave Natzke
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