Predicting milk output in the coming months will be a challenge
The Agriculture Department raised its estimate on 2021 milk production and gave us our first peak at 2022 output in the latest World Agricultural Supply and Demand Estimates (WASDE) report. The report cited higher cow inventories for the gain in 2021 output and continued gains in milk per cow more than offsetting a slight reduction in the dairy cow herd for 2022.
Predicting milk output in the coming months will be a challenge, considering the rising costs of feed. Many operations are already pinched from recent high producer price differentials and de-pooling. Eyes will be on culling rates and if they climb much, U.S. milk output could slip but no one can guess how much.
The WASDE’s 2021 production and marketings were estimated at 227.9 and 226.8 billion pounds respectively, up 200 million pounds on production and up 100 million pounds on marketings. If realized, 2021 production would be up 4.7 billion pounds or 2.1% from 2020.
2022 production and marketings were estimated at 230.3 and 229.2 billion pounds respectively. If realized, 2022 production would be up 2.4 billion pounds or 1.1% from 2021.
Fat basis exports were raised on higher expected exports of butterfat products. The skim-solids basis export forecast was lowered as weaker-than-previously expected nonfat dry milk/skim milk powder (NDM/SMP) sales more than offset higher expected whey-product exports. Fat basis and skim-solids basis import forecasts were raised from last month on recent import data and higher expected second-quarter butterfat imports.
Cheese, NDM, and whey prices were raised from last month’s report, but butter was lowered. Class III and Class IV milk prices were raised. The 2021 Class III average was pegged at $17.70 per cwt., up 60 cents from last month’s estimate, and compares to $18.16 in 2020 and $16.96 in 2019. The 2022 average is projected at $16.85, due to expected weaker cheese and whey prices.
The 2021 Class IV price is estimated to average $15.75, also up 60 cents from a month ago, and compares to $13.49 in 2020 and $16.30 in 2019. The 2022 average was projected at $15.70, as lower NDM prices more than offsets higher butter prices, according to the USDA.
Commercial fat basis exports for 2022 were forecast lower as the department believes higher domestic butter prices will reduce competitiveness in world markets but strong global demand and weaker domestic prices for cheese, NDM, and whey are expected to support slightly higher exports on a skim-solids basis.
Fat basis imports were forecast lower on lower expected imports of butterfat products and cheese, while skim-solids basis imports are expected to decline, mainly on lower cheese imports.
Butter prices were forecast higher, but cheese was forecast lower as an increased proportion of milk is expected to move into cheese production. NDM and whey prices were lowered reflecting competition in international markets.
Switching to the crop and feed side of the report, some of the USDA’s data differed from what many had expected and may have shifted the market tone slightly lower, according to HighGround Dairy’s Lucas Fuess. Speaking in the May 17 Dairy Radio Now broadcast, Fuess warned that dairy producers will likely see the highest costs in almost a decade.
The U.S. feed-grain outlook for 2021/22 is for greater production and domestic use, lower exports, and increased ending stocks. The corn crop was projected at 15.0 billion bushels, up 5.7% from last year, with a yield projection of 179.5 bushels per acre. With beginning stocks down sharply from a year ago, total corn supplies were forecast to increase only modestly to 16.3 billion bushels.
Total U.S. corn use was forecast to decline from a year ago as greater domestic use is more than offset by lower exports. Food, seed, and industrial use was projected to rise 220 million bushels to 6.6 billion. Corn used for ethanol was projected to increase based on expectations of higher gasoline consumption. U.S. corn exports were forecast to decline 325 million bushels but unfavorable production prospects were forecast to limit exports out of Argentina and Brazil.
With the total U.S. corn supply rising and use declining, ending stocks are up 250 million bushels from last year. Stocks relative to use at 10.2% would be above a year ago, says USDA, but still below the average in 2016/17 to 2019/20. The season-average corn price was projected at $5.70 per bushel, up $1.35 from a year ago.
The outlook for U.S. soybeans is for lower supplies, lower exports, higher crush, and higher ending stocks. The soybean crop was projected at 4.4 billion bushels, up 270 million or 6.5% from last year. With lower beginning stocks, soybean supplies are projected down 3% from 2020/21. Total U.S. oilseed production was forecast at 130.3 million tons, up 7.9 million. U.S. soybean crush was projected at 2.2 billion bushels, up 35 million from the 2020/21 forecast.
U.S. soybean exports were forecast at 2.1 billion bushels, down 205 million from 2020/21. With lower soybean supplies and higher crush, the U.S. export share of global soybean trade is expected to decline to 33% from 36% in 2020/21. U.S. soybean ending stocks were projected at 140 million bushels, up 20 million from the 2020/21 forecast. With prices for fall delivery above $14.00 per bushel in some locations, the season-average soybean price was projected at $13.85 per bushel, up $2.60. Soybean meal prices were forecast at $400 per short ton, according to the USDA, down $5.00 from the revised forecast for 2020/21.
HGD’s Lucas Fuess also cited the USDA’s May hay stocks data. He warned that western hay stocks are lower than a year ago, and signifies some tightening, driven by draught conditions, exports to China, and a variety of other factors.
Meanwhile, the latest Crop Progress report shows good momentum in the field. 67% of the U.S. corn crop has been planted, as of the week ending May 9, up from 46% the previous week, 2% ahead of a year ago, and 15% ahead of the five year average. 20% is emerged, down 2% from a year ago, but 1% ahead of the five year average.
Soybean plantings are at 42%, up from 24% the week before, 6% ahead of a year ago, and 20% ahead of the five year average.
The report showed 25% of the cotton crop planted, 5% behind a year ago, and 1% below the five year average.
Cash dairy prices looked for direction the second week of May as talk escalated of rising inflation in the U.S. and the resulting shortages of various commodities sought by many consumers with plenty of cash due to government’s “generosity.”
The Cheddar blocks started the week falling 2 cents, then climbed to $1.8125 per pound Wednesday, but ended Friday at $1.7250, down 2.25 cents on the week and 5.50 cents below a year ago when they pole vaulted 47.50 cents.
The barrels fell to $1.69 per pound Tuesday, hit $1.78 Thursday, but closed Friday at $1.73, 0.25 cents higher on the week and a penny above a year ago when they gained 45 cents. The week saw 35 cars of block find new homes, highest since the week of Jan. 4, 2021, and 19 of barrel.
Some cheese plants have been running six-day workweeks throughout 2021 to keep up with orders, according to Dairy Market News, and milk availability is “holding steady.” Some contacts expect milk to remain available until the Memorial Day holiday. School districts in parts of the region are finishing up the schoolyear. Therefore, even as flush milk levels start to decline, more milk will move into cheese production. Cheese market tones are “uncertain,” says DMN.
Western retail cheese demand is holding steady with mixed reports on food service demand. There is steady demand for cheese for export to Mexico and Asia. The driver/truck shortage is increasing freight costs and are a concern for cheese buyers, warned DMN, and some have begun to look for other avenues of transportation. With the high availability of milk in the region cheese plants are running full schedules but market tones are “firm,” says DMN.
Dairy farmers remain grateful to pizza, in particular pizza restaurants, which have upheld cheese sales. Pizza outlets fared the best in the COVID-driven demise of a huge percentage of U.S. restaurants that closed their doors last year.
The pizza industry is still doing well. The May 7 Dairy and Food Market Analyst reported; “Papa John’s system-wide sales were up 26% year over year in North America and up 23% in international markets. Compared to two years ago, North American sales grew by 33% and international sales increased by 26%. Domino’s said their sales were up 15% YOY in the USA and up 13% in international markets during the quarter.”
But, U.S. cheese output is increasing due to expanded existing plants as well as new ones being built around the country. The investment is huge however American cheese consumption is rising and hopefully stays ahead of production.
Cash butter had a good week climbing daily to a week’s end close of $1.8750 per pound, up 10.50 cents and 23 cents above a year ago when it gained 35.50 cents. There were 5 sales reported on the week.
Butter producers tell DMN that inquiries for bulk salted butter have increased. Cream is not regarded as tight but butter plant managers do not report it as loose, either. Some butter makers are clearing cream from Western suppliers, despite increasing freight costs. Food service butter demand has rebounded some but general demand is mixed as retail sales are seasonally quiet. Butter producers are using the time to churn ahead for fall demand. Some contacts expect butter market tones to continue strengthening for the near-term.
Cream is steady in the west, says DMN, albeit gradually constricting as ice cream makers absorb ample volumes. Some ice cream makers say they are facing both high year-over-year and seasonal demand and cannot make enough ice cream. Some butter manufacturers are selling a few spot loads of cream and running decreased butter output. Others, particularly in the Southwest, are maintaining seasonally active butter output, trying to stash extra butter in the coolers now for later this year, when cream may be harder to come by.
Inventories throughout the region are stable. Retail demand is steady to lower. Food service orders are trending strong but level, although there is some variation at the state and even county level. Butter sellers note their food service partners placing either smaller and more frequent just-in-time replenishment orders or placing and working through, larger and less frequent orders. Accurately forecasting butter demand remains a challenge, says DMN, for both dairy manufacturers and food service customers.
Grade A nonfat dry milk had some ups and downs but softened to a Friday close at $1.30 per pound, down 2.25 cents on the week but still 36.50 cents above a year ago when it jumped 11 cents. There were 12 sales reported for the week.
Dry whey finished the week at 64 cents per pound, up 1.25 cents and 25 cents above a year ago, with 2 sales reported at the CME.
U.S. fluid milk sales took a hit. USDA’s latest data shows 3.9 billion pounds of packaged fluid products were sold in March, down 7.5% from March 2020.
Conventional product sales totaled 3.7 billion pounds, down 8.0% from a year ago. Organic products, at 255 million pounds, were up just 0.2%, and represented 6.5% of total sales for the month.
Whole milk sales totaled 1.25 billion pounds, down 14.5% from a year ago, with year to date consumption down 7.1% from a year ago. It represented 32.6% of total milk sales for the three month period.
Skim milk sales, at 224 million pounds, were down 13.9% from a year ago and down 15.5% year to date.
Total packaged fluid milk sales for the three months amounted to 11.4 billion pounds, down 5.3% from 2020. Conventional product sales totaled 10.6 billion pounds, down 5.9%. Organic products, at 736 million pounds, were up 4.8%, and represented 6.5% of total milk sales for the period. The figures represent consumption in Federal milk marketing order areas, which account for approximately 92% of total fluid milk sales in the U.S.
In the week ending May 1, 55,700 dairy cows were sent to slaughter, down 3,400 from the previous week and 2,900 or 4.9% less than that week a year ago.
Cooperatives Working Together (CWT) member cooperatives accepted seven offers of export assistance this week from CWT to capture sales of 403,446 pounds of Cheddar and Monterey Jack cheese, and 524,700 pounds of butter.
The product is going to customers in Asia, the Middle East, and Oceania during the period from May through October and raised CWT’s 2021 exports to 14.9 million pounds of American-type cheeses, 10.4 million pounds of butter (82% milkfat), 7.1 million pounds of Anhydrous Milk Fat, 15.7 million pounds of whole milk powder, and 5.5 million pounds of cream cheese. The products are going to 29 countries in six regions and are the equivalent of 722.3 million pounds of milk on a milkfat basis, according to CWT.
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.