lee mielke

This column was written for the marketing week ending Jan. 24.

Preliminary December milk output was pegged at 18.3 billion pounds in the U.S. Department of Agriculture’s latest Milk Production report. This is up 0.7 percent from December 2018. Output in the top 24 states totaled 17.4 billion pounds, up 0.9 percent. Revisions added 35 million pounds to the original 50-state November total, now put at 17.5 billion pounds, up 0.7 percent from November 2018.

The preliminary data would indicate 2019 milk output totaled 218.3 billion pounds, up 700 million pounds or 0.3 percent from 2018. Cow numbers were down 67,000 from 2018, but output per cow was up 246 pounds.

Cow numbers were unchanged in December. The 50-state count totaled 9.34 million head, though the November count was revised up 8,000 head, but is 14,000 head below December 2018. Output per cow averaged 1,957 pounds, up 86 pounds or 4.6 percent from November and 16 pounds or 0.8 percent above a year ago.

Wisconsin was down 29 million pounds in December or 1.1 percent, on a 10-pound drop per cow and 8,000 fewer cows milked. Revisions added 12 million pounds to its November output, still down 1.1 percent from a year ago.

Minnesota was down 0.1 percent on a loss of 5,000 cows. Output per cow was up 20 pounds.  

US dairy cow culling was up in December according to the USDA’s latest Livestock Slaughter report. An estimated 265,400 head were sent to slaughter under federal inspection. This is up 9,300 head from November and 4,200 or 1.6 percent above December 2018. The 12-month cull count stands at 3.2 million head, up 71,200 head or 2.3 percent from a year ago.

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The second Global Dairy Trade auction of 2020 seemed to affirm the first session’s reversal with a 1.7 percent rise in the weighted average of products offered. Though down from the 2.8 percent rise on Jan. 7, you’ll recall the last GDT average of 2019 dropped 5.1 percent.

The uptick was led by butter, up 5.5 percent, which followed a 3.7 percent rise last time. Rennet casein was up 4.7 percent and whole milk powder was up 2.4 percent, following a 1.7 percent rise. Skim milk powder was up 0.7 percent after a 5.4 percent boost, and GDT cheddar inched 0.6 percent higher after jumping 3.7 percent. Lactose rounded out the gains, up 0.5 percent.

The only product in negative territory was anhydrous milkfat, down 2.6 percent after it gained 2.3 percent in the last event.

FC Stone equated the GDT 80 percent butterfat butter price to $1.8807 per pound U.S., up 9.8 cents from the last event. Chicago Mercantile Exchange butter closed Jan. 24 at $1.86. GDT cheddar cheese equated to $1.8363 per pound, up 1.5 cents, and compares to Jan. 24’s CME block cheddar at $1.9950. GDT skim milk powder averaged $1.3770 per pound and compares to $1.3724 last time. Whole milk powder averaged $1.4663, up from $1.4288. CME Grade A nonfat dry milk closed Jan. 24 at $1.2875 per pound.

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Cooperatives Working Together member cooperatives accepted nine offers of export assistance this week to help capture sales of 282,192 pounds of cheese and 337,307 pounds of cream cheese. The product is going to customers in Asia, Central America and Oceania, and will be delivered through March.

Dairy exports remain a vital part of the U.S. dairy industry, according to the Dairy and Food Market Analyst’s Matt Gould. Speaking in the Jan. 27 Dairy Radio Now broadcast, Gould stated, “Market access to parts of the world with a growing consumer base or a growing group of people who can afford dairy products is the engine of growth for the U.S. dairy industry.”

He added the United States has repaired relations with Mexico and we’ll get a little bit of access to Canada through the new U.S.-Mexico-Canada free trade agreement. He adds that while the Phase I agreement with China doesn’t really give the United States more access to China’s dairy market because of the retaliatory tariffs, it is promised down the road. Lastly, the trade agreement with Japan and a possible trade agreement with India promises additional opportunities.

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Meanwhile, looking at the home front, U.S. butter supplies are plentiful. The USDA’s latest Cold Storage report shows Dec. 31 stocks at just under 190 million pounds. This is up 9.4 million pounds or 5.2 percent from November; 10.7 million or 5.9 percent above December 2018; and the sixth consecutive month butter stocks topped year-ago levels.

You’ll recall November butter output was up 4.4 percent from a year ago. But Gould points out that, while December inventories the last several years have seen record highs, “We’re eating more butter so we need more in inventory.”

When asked if planted-based spreads maybe chipping away at butter sales, Gould said plant-based beverages have hurt fluid milk and yogurt sales. However, “We’ve had a plant-based product in butter for a long time. It was called margarine and consumers have strongly rejected that of late.”

American cheese stocks totaled 743.5 million pounds, up 3.2 million pounds or 0.4 percent from November, but 56.8 million pounds or 7.1 percent below a year ago.

The “other” cheese category fell to 547.9 million pounds, down 9.7 million pounds or 1.7 percent from November, but up 33.2 million or 6.4 percent from a year ago.

Total cheese stocks fell to 1.316 billion pounds. This is down 6.9 million pounds or 0.5 percent from November; 29.2 million pounds or 2.2 percent below December 2018; and the fourth consecutive month that total cheese stocks were below a year ago.

Cash cheese prices strengthened in the shortened Martin Luther King Day holiday week. The blocks topped $2 per pound for the first time since early November, but finished Jan. 24 at $1.9950. This is up 3.25 cents on the week and 60.5 cents above a year ago, with 16 cars exchanging hands on the week. The barrels climbed to $1.63, but closed at $1.61. This is 4.75 cents higher on the week, 43 cents above a year ago, but 38.5 cents below the blocks. Twenty-three cars sold on the week.

Cheesemakers tell Dairy Market News demand is meeting expectations so far in 2020. Barrel producers say they are not building inventories and are focusing on producing other varieties and clearing out holiday inventories of process cheese. Regionally, cheese inventories are in good balance. However, more cheese has been and is being produced with milk at post-holiday availability levels. Milk prices have come up, but some cheesemakers reported flat Class III purchases. Discounts are still reported, but cheese market tones remain in a state of “unease” with the large block over barrel price spread.

Barrels are more available than blocks in the west, according to Dairy Market News, because some processors have changed their emphasis from blocks to barrels. Sales for both are active however, some buyers are taking a breather hoping cheese prices decline. Inventories remain available to fulfill all orders. Cheese outputs are in line with seasonal norms, with many plants operating close to full.

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Cash butter continued heading south, closing Jan. 24 at $1.86 per pound. This is 2 cents lower on the week, the lowest since November 2016, and 38.5 cents below a year ago. Only six cars traded hands on the week.

January has been much of the same, according to butter makers, on multiple fronts. There is plenty of cream and more than enough is coming from the western mountain states — but still at affordable prices. Churning rates are very active and directed for spring demand increases, as demand is expectantly seasonally quieter in current markets. Most contacts expect the range-bound status to remain this year but at the sub-$2 average that emerged in December.

Western butter makers say retailers are replenishing stocks following the winter holidays and preparing for the spring holidays. Bulk butter buyers, prompted by lower prices, are laying on coverage for near-term needs. But other end-users are slow to go after butter offers, feeling content with their current holdings and noting the wide availability of cream. Manufacturers report cream multiples are low; and Dairy Market News says, “The weekly average cash butter price on the CME is below the price of the previous four years at this time.” Butter stocks are “comfortable.”

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Grade A nonfat dry milk closed at $1.2875 per pound, down a quarter-cent on the week and 27.5 cents above a year ago, with 20 carloads sold on the week.

FC Stone reports there’s “chatter” that India may import 30-40,000 metric tons of skim milk powder “due a poor (or less than ideal) Monsoon season.”  

The Jan. 21 Daily Dairy Report adds, “Historically, when India enters the world market as a buyer, they tend to source more products from Oceania. But Oceania’s milk powder inventories are likely scant due to strong demand from China and a milk production deficit.”

CME dry whey closed the week at 36.50 cents per pound, down a quarter-cent on the week and 4 cents below a year ago, with 39 sales reported.

The USDA announced the February Federal order Class I base milk price at $17.55 per hundredweight, down $1.46 from January but is $2.25 above February 2019 and the highest February Class I since 2014. It equates to about $1.51 per gallon, up from $1.32 a year ago. The two-month Class I average is $18.28, up from $15.21 a year ago.

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“With the exception of the spot first quarter period, dairy margins improved modestly over the first half of January,” according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC., “as deferred milk futures contract prices continued to strengthen relative to nearby months.”

The Margin Watch stated, “Forward optimism is rising as ratification of the USMCA trade agreement and signing of the Phase One trade deal between the U.S. and China should provide a positive tailwind to the market. In addition, the global supply/demand balance continues to tighten which is likewise price supportive.”

“Measured by value, U.S. November dairy product exports were up 22.1 percent on a daily average basis relative to the prior year, and the strongest month since April 2015. Cheese and nonfat dry milk exports drove the overall gains, with cheese exports rising 7.4 percent compared to 2018; while skim milk powder and nonfat dry milk exports were up 40.4 percent — the highest November total on record.”

Declining milk production in Oceania is a principal factor behind the stronger powder prices and tightening global supply/demand balance. Australia continues to struggle with brutal brushfires which encompass about a third of the nation’s milk production and the nation has experienced its driest spring on record dating back 120 years. Drought and poor margins have pushed overall milk production to a 22-year low, with total milk output in Oceania falling short of the prior year in every month since February,” the Margin Watch states.

“A January-November 2019 deficit of 1.7 billion pounds has offset 90 percent of the gains in milk production between the U.S. and EU during the same period at 561 million and 1.33 billion pounds, respectively. Meanwhile, strong demand from China has driven Oceania to devote an increasing share of its milk supply to whole milk powder at the expense of skim milk powder, leading to strong world prices for skim milk powder and supporting the premium of Class IV milk relative to Class III,” the Margin Watch concluded.

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In politics, the USDA has made changes to the school lunch standards implemented during the Obama Administration and will give schools more choices when serving fruits, vegetables and meat.

Bob Gray reports in his Jan. 22 Northeast Dairy Farmers Cooperatives newsletter the changes include slices of pizza and hamburgers and even French fries and that “The food police are going nuts over that!”

“You would think that the kids were being fed food that would kill them,” says Gray, but “USDA’s argument is that these increased options for schools is not being forced down their throats and will result in less food waste.”

Gray calls on the USDA to give school kids the option of having whole and 2 percent milk in the lunch line. He says, “They have the regulatory authority to do this. The Secretary has already restored 1 percent flavored milk back in the school lunch line through the regulatory process. Why not do the same for whole and 2 percent milk?”

Last of all, USA Today and Fox News reported water and milk were the only beverages allowed in Senate chambers during the ongoing impeachment trial.

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 lkmielke@juno.com. v