This column was written for the marketing week ending July 23.
U.S. dairy farmers are still putting plenty of milk in the tank, but not quite as much as expected. The U.S. Department of Agriculture’s preliminary June estimate was 18.96 billion pounds, up 2.9 percent from June 2020 and the 13th consecutive month to top the previous year. The 24-state total was 18.1 billion pounds, up 3.2 percent. Revisions added 5 million pounds to the May 50-state estimate, now put at 19.86 billion pounds, up 4.7 percent from a year ago, instead of the originally reported 4.6 percent.
June cow numbers were down 1,000 head from May, the first time in 11 months they didn’t top those a year ago. The herd totaled 9.51 million head in the 50 states, up 153,000 from June 2020 and up 63,000 from January. May cow numbers were revised up 4,000 head.
June output per cow averaged 1,994 pounds, up 26 pounds or 1.3 percent from 2020.
California was up 103 million pounds or 3.1 percent from a year ago, thanks to a 60-pound gain per cow. Cow numbers mirrored those a year ago. Wisconsin was up 73 million pounds or 2.8 percent, on a 30-pound gain per cow and 17,000 more cows.
Idaho was up 3.6 percent on 14,000 more cows and 30 pounds more per cow. Michigan was up 4 percent on 17,000 more cows. Output per cow was unchanged. Minnesota was up 3.2 percent, despite a drop of 25 pounds per cow, but the additional 20,000 cows made up the difference. New Mexico was up 4.3 percent on a 90-pound gain per cow, but cow numbers were down 1,000 head.
New York produced 3.1 percent more milk than a year ago, thanks to a 50-pound gain per cow and 4,000 more cows. Oregon was up 0.5 percent on 2,000 more cows; but output per cow was down 20 pounds. Pennsylvania was down 1.2 percent on a drop of 7,000 cows, and output per cow was only up five pounds.
South Dakota again had the biggest gain, up 14.7 percent, on 20,000 more cows; though output per cow was unchanged. Second place went to Indiana, up 8.3 percent, thanks to 16,000 more cows milked. Output per cow was down 10 pounds. Texas was up 7 percent, inspired by 34,000 more cows and a 25-pound gain per cow.
Vermont was up 0.5 percent on a 65-pound gain per cow, but cow numbers were down 4,000. Washington State had the second-largest decline of the five states showing a loss, second only to Virginia, and down 2.7 percent, despite a 35-pound gain per cow. Cow numbers were down 3,000.
StoneX points out that solids content is still running strong with fat and protein up 1.3 percent from last year.
Dairy cow culling picked up in June and topped that of a year ago. The USDA’s latest Livestock Slaughter report shows an estimated 237,500 head were sent to slaughter under federal inspection, up 14,100 head from May and 10,500 or 4.6 percent above June 2020. Culling in the half of the year totaled 1.56 million head, down 29,100 or 1.8 percent from the same period a year ago.
Growing U.S. butter stocks remain a concern, though the growth slowed some in June. The USDA’s latest Cold Storage report showed the June 30 butter inventory at a whopping 414.5 million pounds. This is up 2.6 million pounds or 0.6 percent from May, which was revised up 10.1 million pounds, and was a weighty 52 million pounds or 14.4 percent above June 30, 2020. We’ll learn what June butter output looked like in the next Dairy Products report issued Aug. 4.
American-type cheese fell to 809.4 million pounds, down 18.3 million or 2.2 percent from the May level, which was revised down 3 million pounds from last month’s report; but stocks are up 16.4 million pounds or 2.1 percent from a year ago.
The “other” cheese category stocks slipped to 603.0 million pounds, down 5.5 million pounds or 0.9 percent from May, but was 4.1 million or 0.7 percent above a year ago. Revisions reduced the May inventory by 4.3 million pounds.
The total cheese inventory fell to 1.435 billion pounds, down 23.1 million pounds or 1.6 percent from May, but 19 million pounds or 1.3 percent above a year ago.
Just as renewed Covid fears regarding the Delta variant started the week of July 19 by puling markets lower, dairy economics did not improve on the world market as powdered products pulled the week’s Global Dairy Trade auction lower for the seventh consecutive session. The GDT’s weighted average was down 2.9 percent, which followed the 3.6 percent plunge on July 6.
The losses were led by lactose, down 8.9 percent, after not trading on July 6. Skim milk powder was down 5.2 percent following a 7 percent downfall on July 6. Whole milk powder was down 3.8 percent after a 3 percent descent. Butter inched 0.8 percent lower after falling 3.2 percent, and anhydrous milkfat was off 0.3 percent after it slipped 0.9 percent last time. The good news was that cheddar was up 1.3 percent after dropping 9.2 percent last time.
StoneX says the GDT 80 percent butterfat butter price equates to $1.9554 per pound U.S., down 1.7 cents, and got a little closer to Chicago Mercantile Exchange butter which closed July 23 at a bargain $1.6950. GDT cheddar, at $1.8246, was up 3.3 cents, after plunging 17.2 cents last time, and compares to July 23’s CME block cheddar at a bargain $1.5850. GDT skim milk powder averaged $1.3476 per pound, down from $1.4182. Whole milk powder averaged $1.6920 per pound, down from $1.7525. CME Grade A nonfat dry milk closed July 23 at $1.2525 per pound.
StoneX’s Dustin Winston says North Asia, which includes China and Africa, were the only regions to purchase less volume on July 20, compared to year-ago levels. North Asia also purchased less volume than the last event.
Speaking of China, June dairy imports remained strong and record breaking, according to Lucas Fuess, Director of Dairy Market Intelligence for Chicago-based HighGround Dairy in the July 26 “Dairy Radio Now” broadcast.
Whole milk powder totaled 149.5 million pounds, up 86.9 percent from June 2020, with year-to-date up 28.2 percent. Skim milk powder imports, at 75.5 million pounds, were up 46.6 percent from a year ago and up 46.7 percent year-to-date.
Whey imports totaled 121.5 million pounds, down 1.1 percent from a year ago. However, year-to-date, whey is up 44.3 percent. HighGround Dairy says this was the first decline since January 2020, with volume dropping to the weakest of any month since May 2020. Imports from the United States weakened slightly, but the United States again claimed the most market share.
Butter imports, at 18.9 million pounds, were up 79.6 percent from 2020, with year-to-date up 21.3 percent. Cheese totaled 32.5 million, up 18.5 percent from 2020 and up 56.6 percent year-to-date.
Fuess said Covid has spurred China’s purchases as it builds inventory to meet its growing demand and to stay ahead of logistical and shipping challenges that resulted from the pandemic.
Speaking to the continuing declines at the GDT, Fuess said he believes China is buying product off of the GDT and, with other regions not stepping up to buy, it caused prices to falter; but reminds us those prices are off multi-year highs. He says he expects continued good dairy demand internationally. However, it remains to be seen if that demand will keep up with the world’s growing milk supply.
Meanwhile, the July 20 Daily Dairy Report detailed a new free trade agreement in principle between Australia and the United Kingdom. The post-Brexit plan would eliminate tariffs on dairy products within five years and establish interim quotas. “The United Kingdom, the world’s second-largest importer of dairy products, purchased 1.3 million metric tons in 2019, with EU members supplying 99 percent of those products, according to Dairy Australia.”
CME dairy prices saw ups and downs, though perhaps encouraged some by the Milk Production and Cold Storage reports. The cheddar blocks fell to $1.5225 per pound on July 21 (the lowest since June 28), but rallied to close July 23 at $1.585. This is still down 3 cents on the week and 95.5 cents below a year ago.
The barrels fell to $1.3725 on July 20 (the lowest since Aug. 24), but finished July 23 at $1.4025. This is 3.75 cents lower on the week, $1.0475 below a year ago, and 18.15 cents below the blocks. The week’s trading consisted of one car of block and 35 of barrel.
Midwestern cheesemakers tell Dairy Market News that market tones are not matching demand and their respective inventory levels and a number say customer interests are strengthening. Barrel producers say they are slightly over-committed and told customers that availability into August would be more limited.
Western retail and food service cheese demand is holding steady, as are exports, thanks to the lower prices. Contacts report a need to move product quickly, as warehouse space is limited. Delays have led to a stock buildup thanks to a shortage of truck drivers, limited shipping supplies, and port congestion.
Cash butter saw its July 23 finish at $1.695 per pound, up 1.75 cents, but 3.5 cents below a year ago, with 20 carloads exchanging hands on the week.
July butter sales softened according to some Midwest producers. June was a better month for food service sales than July, while June and July retail interests were seasonally quiet. Cream was more available this week, according to Dairy Market News.
Cream was a little lighter in the west though persistent hauler shortages make availability seem even tighter. Butter production is seasonally active depending on cream supplies. Some plants report that production has already exceeded 2020 output. Retail sales are steady to slightly higher. Food service demand is also seeing an uptick as fine dining establishments return to normal operation.
Grade A nonfat dry milk fell to $1.23 per pound on July 20, but closed the week at $1.2525. This is unchanged on the week, but 26.25 cents above a year ago on 10 sales.
Dry whey lost a half-cent on July 21, gained it back the next day to close July 23 at 53.75 cents per pound. This is 19.75 cents above a year ago, on three sales for the week.
The August Federal order Class I base milk price is $16.90 per hundredweight, down 52 cents from July, $2.88 below August 2020, and the lowest Class I since April. It equates to $1.45 per gallon, down from $1.70 a year ago. The eight-month average stands at $16.39, down from $16.42 at this time a year ago and compares to $16.34 in 2019.
Dairy farm margins improved over the first half of July. Weakness in feed costs more than offset milk prices which were relatively flat (though very volatile) in the past couple weeks, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.
“Nearby Class III Milk futures have traded in approximately a $1.00 per cwt. range, particularly nearby contracts as the market rallied sharply in early July than came crashing back down,” the Margin Watch stated, and “Federal Orders showed positive PPD’s for the first time in over a year, possibly the function of a weaker dairy product market recently.”
“Milk and dairy supply generally remain plentiful throughout the United States, and the only major concern that could impact that horizon is a heat wave moving through the northern half of the United States. The U.N. Food and Agriculture Organization’s dairy price index fell in June following 12 consecutive months of increases. At 119.9 points, the June index value was down 1 percent from May, but 22 percent higher than the previous year. According to the FAO, softness in all major dairy product prices contributed to the decline, with the largest decreases in the butter markets as global inventories accumulated. FAO’s June Dairy Price Index was also the highest since 2014,” according to the Margin Watch.
“Corn and soybean meal prices have retreated recently,” Margin Watch stated, ”following better weather and increased precipitation across previously parched regions of the northwestern Corn Belt. The market will likely remain range bound ahead of the USDA August World Agriculture Supply and Demand Estimates report, with prices trading slightly above recent lows earlier this month.”
This week’s Crop Progress report showed 8 percent of the U.S. corn crop is at the dough stage, as of the week ending July 18, equaling a year ago, and 1 percent ahead of the five-year average. Sixty-five percent was rated good to excellent, unchanged from the previous week, but 4 percent below a year ago.
Sixty-three percent of U.S. soybeans were blooming, up from 46 percent the previous week, 1 percent ahead of a year ago, and 6 percent ahead of the five-year average. Sixty percent were rated good to excellent, up 1 percent from the previous week, but 9 percent below a year ago.
The USDA’s latest Livestock, Dairy, and Poultry Outlook reports the drought situation for most of the west and much of the northern plains has become more severe in recent weeks. “For the United States as a whole, the U.S. Agriculture Drought Monitor indicated that approximately 50 percent of the milk cow inventory, 64 percent of the alfalfa hay acreage, 36 percent of corn acreage, and 31 percent of the soybean acreage was in an area experiencing drought as of July 13.”
Dairy supply and use data were not yet available for June or July, but Dairy Market News reported that for the week of July 5-9, milk yields were lower than expected in California and the Pacific Northwest. There were also temporary heat-related closures of some manufacturing plants.
The upward trend in milk cow numbers projected for 2021 is expected to continue into 2022. The number of cows was forecast to average 9.5 million head in 2022, an increase of 20,000 from last month’s forecast and 15,000 head more than 2021. The forecast for milk per cow is 24,335 pounds, unchanged from last month’s forecast, but 315 pounds higher than 2021.
Cooperatives Working Together members accepted 12 offers of assistance this week on sales of 1.8 million pounds of cheese, 524,700 pounds of butter and 74,957 pounds of cream cheese headed to the Middle East, Asia, South America, and Oceania.
Lee Mielke is a syndicated columnist who resides in Everson, Wash. His weekly column is featured in newspapers across the country and he may be reached at firstname.lastname@example.org.