cows in field
NODPA Logo

Feed and Pay Price January/February 2021

By Ed Maltby, NODPA Executive Director

The growth in sales of organic dairy product continues to increase at a steady rate and retail prices remain stable. The Agricultural Marketing Service (AMS) reports that estimated US sales of total organic milk products for November 2020 were 235 million pounds, up 6.1 percent from November 2019, and up 10.6 percent year-to-date.

Organic whole milk sales for November 2020, 104 million pounds, were up 2.3 percent compared to a year earlier, and up 11.5 percent compared with year-to-date 2019. Reduced fat milk (2%) sales were 82 million pounds, up 14.0 percent from the previous year, and up 15.3 percent year-to-date.

The year to date figure is distorted by the peak in COVID-19 sales in March, April and May. USDA reports that “one of the largest U.S. organic cooperatives” announced that organic milk demand is increasing across the country. They reported that recent data that they had collected showed that organic milk demand grew 11.3 percent in the last year and 8.4 percent the past 6 months. This cooperative referred to organic milk demand in general terms with no reference to actual sales either in manufacturing or retail.

Interestingly, utilization of Class 1 organic milk has fallen year-over-year in one of the biggest markets, the Federal Milk Marketing Order 1 (FMMO 1), the Northeast. The reduction in utilization by as much as 14% between 2018 and 2019 was followed by a further drop in utilization of organic milk. There was no increase in utilization during the peak COVID 19 shutdown. Utilization of Class 1 organic milk in December 2020 increased by 12% over December 2019 with the highest increase in Reduced Fat milk, 14.65 million pounds in December 2020 compared to 11.59 million pounds in 2019.

Utilization of organic Class 1 milk in FMMO 1

Year

Million pound of organic milk

Year by year change

2018

422.32

2019

363.50

-14%

2020

322.50

-11%

There has been no movement in pay price that has been reported. At this time of year, CROPP Cooperative Board meets to set the pay price for the year ahead. At the time of going to press, we have heard nothing of any increase or changes from the 2020 pay price. The published farmgate pay price for CROPP Cooperative, as a national year round average for 2020, was $31.55 per hundred pounds. There was a low of $27.13 in March, April, May, June and July, and a high of $32.42 in January, February, March, and December. The farmgate pay price is the price received by farmers minus the selling costs (transport costs, marketing costs). In 2009 the average pay price was $27.13 and in 2012 it was $31.70. The average retail price for organic half gallons as recorded by USDA AMS has changed very little since 2008 when they started to collect the retail prices across the country. There will be highs and lows by location, and store brand milk is usually up to $1 less expensive per half gallon, but the average retail price has always been between $3.70 and $4.00 per half gallon. Store brand and private label organic milk is now the biggest seller at retail, ahead of Horizon, the previous highest seller.

Organic corn prices have yet to react to the large upswing in conventional prices and with plenty of organic corn around, the upside might be limited in the short-term. Over the next season, prices might experience an upside, as the drought in Argentina and the rise in conventional prices could make achieving similar import levels year-over-year challenging. The volume of organic corn imported from South America could be down 25-30% year-over-year.

There are several different prices the Jacobsen Report has seen recently in the Midwest area. With transportation, the prices seem to converge. Organic corn in Illinois is bid at $7.25 delivered. Prices are a little lower in the Wisconsin area, but some trades have traded in the middle $6 range for small quantities. The Jacobsen reports that organic soybean meal prices are moving higher. At Baltimore, imported organic soybean meal customs cleared and trans-loaded is currently near $820/$825 per short ton for the balance of the first quarter 2021. This puts Pennsylvania prices close to $850 per short ton for imports and close to the same level for domestically crushed organic soybeans.

The price for imports of organic soybean meal in the Midwest would be near $900 per short ton, which is well above prices offered for domestically crushed soybeans in the Midwest. The lack of imports going from the East coast to the Midwest will eventually put upward pressure on organic soybean meal prices in the mid-west. Organic corn prices remain stable in the Midwest, hovering just above the $7 level. Prices in Illinois are priced as high at $7.35 and closer to the $7.1 level in the Western Iowa region. Organic corn prices in the Pennsylvania region are trading near the $9.50 level, bid near $9.25, and offered at $9.75. With rail costs from the Midwest to the East coast near $2.25 per bushel, this level appears to be in line with value.

The Jacobsen reports that organic corn imports remain in an upwards trend. According to official customs data, organic corn imports eased in November 2020, declining 41% year over year compared to the same period in 2019. The rise in organic corn imports was in line with The Jacobsen’s expectations. For the 12 months ending November of 2020, organic corn imports rose 8% year-over-year, hitting 206K metric tons.

Attached Files: