Monday Morning Huddle
28 December 2020

Highlights From Last Week

President Signs $2.3 Trillion COVID-19 Relief & Government Spending Bill

The president’s decision to sign the package into law will avert a government shutdown, restore unemployment benefits, stop evictions, provide rental assistance, add additional funding to the Small Business Administration’s Paycheck Protection Program and invest in vaccine distribution, among other items in the bills (source). $26 billion was appropriated for various nutrition, food, and agricultural programs. Half of that sum, $13 billion, was provided for nutritional assistance. SNAP benefits will increase by 15% for six months while food banks will receive hundreds of millions of dollars. $1.5 billion is available for USDA to purchase food and agricultural products, including dairy, and distribute to nonprofit organizations or directly to those in need. This money cannot be spent until USDA completes a preliminary review of COVID-19 related food assistance given to date, with the goal of improving food purchasing in this round. $400 million is available for a Dairy Product Donation Program, with dairy processors and/or distributors to be reimbursed by USDA after donating fluid milk or processed dairy products to non-profit organizations.

Volatility Ensues on Government Spending But Fundamentals Remain Bearish

When government spending is removed from the equation, dairy supply and demand fundamentals are quite bearish. Class IV inventories are burdensome, well above year ago levels, and cheese productivity continues to be paired with subdued domestic demand as milk availability will ramp up into Q1 2021. Milk is burdensome already with spot milk prices sinking as low as $8.50 per underweight under Class last week, as reported in the USDA’s weekly reporting system. There is some optimism surrounding the vaccine as more than one million people have now received their first shot. The government has said it intends to distribute 20 million first doses of the Pfizer-BioNTech and Moderna vaccines in the coming weeks. So far, about 9.5 million doses have been distributed. However, December has been the nation’s deadliest month with more than 63,000 Americans lost to the virus as of Sunday, a reminder that the country still remains far off from returning to normalcy.

Last Week’s Reports & Analysis

November 2020 US Cold Storage
While the November stocks drawdown was the steepest of the year to date, as is usual in the month, the decline was less than the five-year average. 47.9 million pounds of butter left warehouses in the month versus the five-year average… Full Report

COVID-19 Stimulus Bill Analysis
While a stimulus bill passed Congress with strong bipartisan support, President Trump has hinted that he will not sign the bill, throwing confusion into the process. The bill contains billions of dollars nutrition and agriculture programs and has impacted dairy markets. Full Report

Reports This Week

National Dairy Products Sales Report (NDPSR) – Wednesday, December 30
Announcement of Class and Component Prices – Wednesday, December 30
Agricultural Prices – Wednesday, December 30
Fonterra Pre-GDT Offer Volume Analysis – Thursday, December 31
USDA Biweekly International Prices – Thursday, December 31
USDA Dairy Market News Midpoint Prices – Thursday, December 31
USDA Weekly Dairy Cow Slaughter – Thursday, December 31

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