Milk is flowing in the U.S. but perhaps not as much as might have been thought
Milk is flowing in the U.S. but perhaps not as much as might have been thought. The Agriculture Department’s preliminary data reports U.S. output in the first month of 2021 totaled 19.2 billion pounds, up a somewhat bullish 1.6% from January 2020. Output in the top 24 states, at 18.3 billion pounds, was up 1.8%.
Revisions reduced the December 50-state total by 90 million pounds to 18.85 billion pounds, up 2.6% from December 2019, instead of the 3.1% increase originally reported.
January cow numbers increased for the seventh consecutive month, totaling 9.45 million head in the 50 states, up 8,000 from December’s count, which was revised down 1,000 head. The January herd was up 85,000 from January 2020.
Output per cow averaged 2,029 pounds, up 13 pounds or 0.6% from a year ago.
The report showed 2020 total milk output at 223 billion pounds, up 2.2% from 2019, with cow numbers at 9.39 million head, up 0.5% from 2019.
California’s January output was reportedly down 0.7% from a year ago on a 10 pound loss per cow and 4,000 fewer cows. The number 1 milk producer’s December total was revised 77 million pounds lower, resulting in a 0.5% drop from December 2019, instead of the originally reported 3.2% increase.
Wisconsin was up 3.1% in January, on a 60 pound gain per cow and 2,000 more cows.
Idaho was off 0.3%, on a 10 pound drop per cow, though cow numbers were up 1,000 head. Michigan was up 4.3%, on a 30 pound gain per cow and 13,000 more cows. Minnesota was up 5.7%, on a 55 pound gain per cow and 12,000 more cows, and New Mexico was up 1.4%, on a 5 pound gain per cow and 4,000 additional cows.
New York was up 0.7%, thanks to a 15 pound gain per cow, though cow numbers were unchanged. Oregon was down 1.3% on 2,000 fewer cows but output per cow was up 5 pounds. Pennsylvania was off 0.1%, on a drop of 5,000 cows, though output per cow was up 15 pounds.
Indiana took honors for the biggest gain, up 10.1%, but South Dakota was right behind, up 9.6%, on 13,000 more cows and 10 more pounds per cow. Texas was up 5.3%, on 30,000 more cows and 5 more pounds per cow.
Vermont was one of nine states showing a decline, down 2.7% on 4,000 fewer cows, though output per cow was up 5 pounds. Washington State was down 1.9% on 4,000 less cows, and output per cow down 10 pounds.
StoneX Dairy’s Feb. 24 Early Morning Update stated; “If farmers can keep the production restrained, commercial demand stays decent, and the government purchases ramp up in February, March, and April, the fundamentals start to look a lot more supportive than they did on Feb. 22.”
Some of the Milk Production report’s data is suspect however, according to Lucas Fuess, director of dairy market intelligence for HighGround Dairy (HGD).
Speaking in the Mar. 1 Dairy Radio Now broadcast, Fuess said most analysts were expecting something like a 3% gain in milk output, comparable to what was seen in November and December, so the smaller gain was bullish. However, the downward revisions in the California data is questionable, he said, and not consistent with what farmers and processors in the region have been saying.
California aside, Fuess pointed to the growth in the upper Midwest, particularly Wisconsin, Minnesota, and Michigan especially, which saw an all-time record high in January milk output. Fuess said he still expects a strong spring flush ahead and expects upward revisions of the January data in the February report.
The Cold Storage report was welcomed by the cheese market, according to Fuess, because natural American stocks declined slightly in January versus December, when the growth was ten times the norm. He said “It was a relief that stocks did not surge into the new year” and the decline indicates demand was strong into January, especially considering American production was likely high.
The growth in butter stocks was expected, he concluded, and “We will have significant volumes of butter in storage by spring and that will fundamentally weigh on prices throughout the remainder of the year.”
Dairy cow culling was up in January from December but lagged a year ago, according to the latest Livestock Slaughter report. The USDA reported an estimated 277,300 head were sent to slaughter under federal inspection, up 3,800 head from December but 21,200 or 7.1% below January 2020.
In the week ending Feb.13, 66,500 dairy cows were sent to slaughter, down 1,100 from the previous week but 2,800 or 4.2% more than that week a year ago.
There’s plenty of dairy product in the cooler. The January Cold Storage report shows U.S. butter stocks grew to 328.4 million pounds, up a whopping 54.6 million pounds or 19.9% from December and 81 million pounds or 32.7% above January 2020, 19th consecutive month they topped the year ago level.
American type cheese slipped to 800.8 million pounds, down 90,000 pounds or 0.1% from December but 21.1 million pounds or 2.7% above a year ago.
The “other” cheese category climbed to 576.3 million pounds, up 1.6 million pounds or 0.3% from December and 25.3 million or 4.6% above a year ago.
The total cheese inventory amounted to 1.398 billion pounds, up 2.3 million pounds from December and 44.9 million pounds or 3.3% above a year ago.
Dairy traders had a lot to absorb from the above reports and appeared to respond positively but then reversed. The Cheddar blocks climbed to $1.66 per pound by Thursday but closed Friday at $1.6175, still up 8 cents on the week but 10.50 cents below a year ago and 3.50 cents above where they were on Feb. 1.
The barrels dipped to $1.3825 Tuesday, lowest since Aug. 24, 2020, then gained 6.50 cents Thursday, but closed Friday at $1.42, up 0.75 cents on the week, 17 cents below a year ago, 19.75 cents below the blocks, and 3 cents above their Feb. 1 perch.
There were 17 cars of block traded on the week at the CME and 59 in the month of February, down from 62 in January. Barrel sales numbered 6 for the week and 75 for the month, down from 98 in January.
StoneX’s Feb. 25 Early Morning Update stated; “Food boxes are expected to pick up delivery and provide opportunity for more sales. Recent government purchases have been in-line with solicitations. These sales numbers along with recent USDA fundamentals lead us to believe that we could see a short term bounce in the market.”
Midwestern cheesemakers report varying production schedules, some with four day workweeks one week and six days the next. Others have robust production across the board. Retail and some restaurant customer bases are somewhat active. Spot milk availability has tightened. Discounts were reported near last week's mid-point but prices of $2 under Class III were among them. Contacts suggest this could be due to more milk loads being spread out to refill depleted pipelines in the southern portion of the country, following the havoc winter systems the previous week.
Cheese market tones are “somewhat muted,” says DMN. “There are a number of questions as to which direction markets will follow, including the potential of further government awards, retail/food service replenishment after most areas of the country begin to warm up, and continuously increasing milk availability moving into spring.”
Western cheese makers say food service demand has yet to return, even as COVID restrictions relax. Retail sales are above previous year levels but “a bit lackluster.” Export demand is present but the challenges within the ports and transport channels due to container shortages make shipping difficult.
Cheese makers therefore have heavy inventories and are making a lot of spot offers. Manufacturers also have ample amounts of milk. Contacts suggest processing facilities are getting back to “normal” operations following the strong winter storms, “however, normal over the last few months has meant production that is variable,” says DMN. Some are running full schedules, others are trying to hold back and or schedule routine maintenance ahead of the spring flush.
Butter, after two weeks of gain, lost ground the last week of February, closing Friday and the month at $1.47 per pound, down 8 cents on the week, 25.50 cents below a year ago, but 26 cents above where it was on Feb. 1. 16 cars were sold on the week and 59 for the month, down from 63 in January.
Butter producers tell DMN that cream offers were plentiful as suppliers moved cream from areas hit hardest by the storms. Cream accessibility was already steady in the Midwest and West for most of the year. Plants are churning full bore throughout the region. With the CME new crop rule coming into effect March 1, market tones stepped back from the mid $1.50s the previous week. While the Cold Storage report showed continual and notable gains in stocks, DMN says domestic bulk butter demand is stepping up, as traders report a strong interest from export markets for unsalted butter.
Looking westward, there’s plenty of cream to deal with there as well and, with the low multiples, western butter makers are more interested in churning butter than selling cream, says DMN. Butter production is running heavy to produce the new crop butter needed by customers for the next few months. Retail sales are reported to be strong as shoppers look to fill store shelves ahead of the spring holiday baking season.
Several processors note an increase in planned butter promotions by retailers. Manufacturers have also seen solid bulk butter demand, however this demand wavers as prices ebb and flow. Buyers are willing to jump at deals for old crop butter or to gain coverage for new crop butter needs into second and third quarter. However, recent price declines on some cash markets have given buyers pause and a desire to wait and see what direction prices take. Some think there may be better deals ahead as the industry contends with large stockpiles.
Grade A nonfat dry milk saw a Friday close at $1.1325 per pound, 4 cents higher on the week, 6.75 cents above a year ago when the powder dropped 10.50 cents, but was 2 below its Feb. 1 mark. There were 27 sales reported for the week and 120 for the month, down from 140 in January.
From a global perspective, both nonfat dry milk and butter are attractively priced, according to StoneX. “The issue is around logistics of moving the product. Lack of shipping containers and resulting increased shipping costs are not resolved issues, but for now likely priced into markets.”
CME dry whey finished February at 55.75 cents per pound, up a penny on the week, highest since Oct. 19, 2018, 21.75 cents above a year ago, and 2.25 cents above the Feb. 1 closing. There were 2 sales on the week and 7 for the month, down from 15 in January.
Cooperatives Working Together (CWT) member cooperatives accepted 16 offers of export assistance the last week of February that helped capture sales of 1.97 million pounds of Cheddar and Monterey Jack cheese, 837,757 pounds of butter, 39,683 pounds of anhydrous milkfat (AMF), and 3.456 million pounds of whole milk powder.
The product is going to customers in Asia, the Middle East, North Africa, Oceania, and South America from March through July and raised CWT’s 2021 exports to 7.46 million pounds of American-type cheeses, 6.51 million pounds of butter (82% milkfat), 2.01 million pounds of AMF, 6.495 million pounds of whole milk powder, and 2.66 million pounds of cream cheese. The products are going to 19 countries and equivalent to 338.2 million pounds of milk on a milkfat basis.
In politics Tom Vilsack was confirmed Feb. 23 as Agriculture Secretary. Vilsack led USDA under the Obama administration. He is a former governor of Iowa and more recently served as president of the U.S. Dairy Export Council (USDEC). He was replaced by Krysta Harden, USDEC’s chief operating officer.
Meanwhile, House Democrats hoped to pass a $1.9 trillion coronavirus relief bill Friday. CNBC says the Senate aims to approve the package and get it to the President to sign before Mar.14, when key unemployment programs expire.
The National Milk Producers Federation praised the legislation, stating; “NMPF is grateful to Congress for working to enact additional COVID-19 stimulus legislation. The pending bill includes critical additional agriculture and nutrition support intended to help farmers, rural communities, and food-insecure households throughout the nation.
“Throughout the COVID-19 pandemic, the federal government’s strong response has proven invaluable to dairy producers as they keep working, day-in and day-out, to sustainably provide families here at home and abroad with an abundant supply of nutritious dairy products. However, while the availability of a vaccine is cause for hope, difficult months remain ahead.
“NMPF appreciates the additional $3.6 billion Congress would provide to bolster food supply chains and facilitate additional purchases and donations of dairy and other food products to those who need them the most.”
Lee Mielke is a graduate of Brown Institute in Minneapolis, MN. He’s formerly the voice of the radio show “DairyLine,” and his column appears in agricultural papers across the U.S. Contact him at firstname.lastname@example.org.