Michigan milk output was up 3.9% on 17,000 more cows
Falling cow numbers driven by higher feed costs and tightening farm margins, plus intense hot weather impacting output per cow, resulted in a smaller increase in August milk output than expected and the weakest year over year gain since June 2020.
The Agriculture Department’s preliminary data shows production at 18.84 billion pounds, down 282 million pounds or 1.5% from July, but 208 million or 1.1% above August 2020. It was the 15th consecutive month to top year ago output. The 24-State total hit 18.0 billion pounds, also up 1.1% from a year ago. Revisions lowered the July 50-State estimate by 18 million pounds from last month’s report, to 19.1 billion pounds, up 2.0% from 2020.
Cow numbers totaled 9.48 million, down 19,000 from July (15,000 from New Mexico alone), third month in a row cow numbers fell from the previous month, but still 106,000 above a year ago. July numbers were revised down 1,000 head.
August output per cow averaged 1,987 pounds, down 1 pound from 2020.
California was up 0.7% on a 15 pound gain per cow offsetting 1,000 fewer cows. Wisconsin was up 2.6% on a 20 pound gain per cow and 21,000 more cows. Idaho was up 1.1% on 9,000 more cows offsetting a 5 pound drop per cow.
Michigan milk output was up 3.9% on 17,000 more cows. Output per cow was unchanged. Minnesota was up 2.3% on 16,000 more cows but output per cow was down 25 pounds. New Mexico was down 9.3%, biggest decline in the country, due to a 100 pound drop per cow and 15,000 fewer cows milked.
New York was up 0.3%, on 2,000 more cows, though output per cow was unchanged. Oregon was up 0.5% on 1,000 more cows but output per cow was down 5 pounds. Pennsylvania output was unchanged. Cow numbers were down 7,000 head but output per cow was up 25 pounds.
South Dakota posted the biggest gain, up 16.2%, on 22,000 more cows and a 5 pound gain per cow. Texas was held in check due to a 45 pound drop per cow but cow numbers were up 32,000 head.
Vermont was down 0.9% on a loss of 1,000 cows. Output per cow was unchanged. Washington State had the second biggest decline, down 6.6%, following a 7.2% drop in July. Output per cow was down 65 pounds and cow numbers were down 10,000 head.
HighGround Dairy’s Lucas Fuess stated in the Sept. 27 ‘Dairy Radio Now’ broadcast that he expects cow numbers to continue to decline and believes they will fall below those a year ago, “sooner than anticipated.” He said the drop in output per cow is rare, and while it occurred last year during the pandemic, the last time it happened prior to that was in 2015. Those factors could portend total milk output will drop below a year ago some time in 2022.
August dairy cow culling was well above the previous month and year, according to the USDA’s latest Livestock Slaughter report. The data shows an estimated 261,400 head were sent to slaughter under federal inspection, up 13,500 from July and 36,100 or 16.0% above August 2020. Culling in the eight month period totaled 2.07 million head, up 21,300 or 1.0% from the same period a year ago.
StoneX cautions however that slightly more imports and an extra kill day this year means the daily pace of domestic dairy cow slaughter was up about 11.1% but “We’re still killing them faster than we can replace them. This isn’t fresh news but it’s worth repeating because $1.65 cheese and $5.00 corn will do little to change this dynamic. Also it’s worth mentioning that while corn prices have been high all year, for many dairy producers the increase is really only starting to be felt in the last month or so. All things equal, this dynamic has the potential to accelerate on farm changes and propel slaughter rates in fourth quarter.”
August U.S. butter stocks fell below those a year ago for the first time since June 2019, according to the USDA’s latest Cold Storage report. The August 31 inventory stood at 367.0 million pounds, down a bullish 29.5 million pounds or 7.4% from July, and down 4.5 million or 1.2% below August 2020.
American type cheese crept up to 823.6 million pounds, up 6 million or 0.7% from July and 33.7 million pounds or 4.3% above a year ago. The “other” cheese category saw its number slip to 582.6 million pounds, down 26.8 million pounds or 4.4% from July, but 19.8 million or 3.5% above a year ago.
That put total cheese at 1.43 billion pounds, down 21.1 million pounds or 1.5% from July, but still a bearish 55.4 million pounds or 4.0% above a year ago.
Cheese demand is still outperforming 2019 and 2020 levels, according to StoneX, which suggests; “We can attribute a good chunk of that to strong exports thus far and with global cheese prices pushing higher over the past month that could continue to be the case since U.S. prices sit at a discount.”
Strength remained in this week’s Global Dairy Trade which saw the weighted average up 1.0%, following the 4.0% jump on Sept. 7. Traders brought just under 54 million pounds of product to market, down from 55.3 million on Sept. 7.
Whole milk powder led the gains, up 2.2%, which followed a 3.3% rise last time. Skim milk powder was up 0.9%, after leading the gains last time, with a 7.3% advance. Lactose was up 1.3%, after jumping 6.4% last time.
Butter and cheese were down 1.9% and 1.2% respectively. Butter was up 3.7% in the last event and Cheddar was up 3.6%.
StoneX says the GDT 80% butterfat butter price equates to $2.1492 per pound U.S., down 4 cents, after advancing 7.9 cents last time, and compares to CME butter which closed Friday at $1.7275. GDT Cheddar, at $1.9387, was down 2.4 cents, and compares to Friday’s CME block Cheddar at $1.7075. GDT skim milk powder averaged $1.4979 per pound, up from $1.4850. Whole milk powder averaged $1.7131 per pound, up from $1.6740. CME Grade A nonfat dry milk closed Friday at $1.36 per pound.
Chinese demand at the GDT remained subdued, according to StoneX, but South East Asia and the Middle East picked up the slack.
Meanwhile, China’s August imports continue to impress. Whole milk powder totaled 163 million pounds, up 146.6% from August 2020 and up 41.9% year to date. Volume expanded from every key supplier, according to HighGround Dairy.
Skim milk powder imports, at 74.5 million pounds, were up 22.8% and topped year ago numbers for the eighth consecutive month and marked a new all-time record high for the month, according to HGD.
Butter totaled 12 million pounds, up 8.4%, and cheese imports amounted to 34.5 million pounds, up 50.1% from a year ago.
Fluid milk and cream import growth was the second strongest, says HGD, following whole milk powder, “and that despite anecdotal chatter that milk production is strong throughout China.”
Whey imports, at 137 million pounds, were up 12.1% from a year ago, with YTD up 33.3%, most coming from the U.S. and up 32% from a year ago.
HGD says “The inventory situation within China is a hot topic at present but the holiday season will help to absorb heavy stocks and result in strong import volumes through the end of the year. As shipping container shortages remain widespread, China is likely ramping up purchases earlier than normal to make sure product hits their borders by January without interruption. There is also an increased need to keep inventories well above prior year to meet the rising internal demand that has been propelled by the pandemic.”
CME Cheddar block cheese closed Friday at $1.7075 per pound, down 8.50 cents on the week and 84.75 cents below a year ago.
The barrels finished at $1.60, up 9 cents, 6 cents below a year ago, and the spread narrowed to 10.75 cents. 10 cars of block and 19 of barrel were sold.
Cheesemakers told Dairy Market News that spot milk was steady this week and prices were slightly over Class III but staffing shortages remains a challenge. Retail and food service cheese demand remains steady in the West, as is International demand. Cheese production is strong in the region, as milk continues to be available for plants to run busy schedules, says DMN.
Butter fell to $1.7225 per pound Wednesday, lowest since Aug. 30, regained 3 cents Thursday, then closed Friday at $1.7275, down 6.25 cents on the week but 22.50 cents above a year ago. 48 sales were reported for the week.
Butter makers tell DMN that cream was more available later in the week but butter production remains stunted by employee shortages. Export demand is strong, food service demand healthy, and retail demand is seasonally increasing.
Butter churning remains mixed across the West and plant managers report that cream supplies are meeting needs. Retail sales are steady and some say food service orders are trending level to higher while others note spottier demand as some restaurants deal with staffing shortages, reduced hours of service, and/or dine-in restrictions from COVID.
Grade A nonfat dry milk got to $1.37 per pound Thursday, highest since Oct. 17, 2014, but closed Friday at $1.36, up a penny on the week and 26 cents above a year ago. There were 15 carloads that exchanged hands on the week.
Whey also had a good week, closing at 57.25 cents per pound, 3.75 cents higher on the week, highest since June 28, and 19.50 cents above a year ago. 4 sales were reported on the week at the CME.
The October Federal order Class I base milk price was announced by USDA at $17.08 per hundredweight, up 49 cents from September, $1.88 above October 2020, and equates to $1.47 per gallon, up from $1.31 a year ago. The ten month average stands at $16.48, down from $16.50 a year ago and $16.64 in 2019.
U.S. fluid milk sales continue to plunge. USDA’s latest data put July sales of packaged fluid milk products at 3.5 billion pounds, down 6.3% from July 2020, after plummeting 6.7% in June.
Conventional product sales totaled 3.3 billion pounds, down 6.2% from a year ago. Organic products, at 221 million pounds, were down 9.0%, and represented 6.4% of total sales for the month.
Whole milk sales totaled 1.2 billion pounds, down 4.8% from a year ago, with year to date consumption down 7.5%. Whole milk represented 33.1% of total milk sales for the seven month period.
July skim milk sales, at 200 million pounds, were down 12.2% from a year ago and down 14.1% year to date.
Total packaged fluid milk sales for the first seven months 2021 amounted to 25.6 billion pounds, down 5.3% from 2020. Conventional product sales totaled 23.95 billion pounds, down 5.5%. Organic products, at 1.7 billion, were down 2.1%, and represented 6.4% of total milk sales for the period.
Dairy margins were steady to slightly stronger over the first half of September with limited price movement in the milk and feed markets, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.
The MW stated that “strength in dairy exports has been a vital source of support for the market.” July dairy product exports, which I reported previously, totaled 504.3 million pounds, according to the MW, up 7.9% from last year with year-to-date exports running 11.6% ahead of 2020. Exports to Mexico totaled 114 million pounds and were 14.3% higher than 2020 while exports to China of 88.4 million were likewise strong with the YTD total on pace to exceed 2017’s record.
The MW reported “USDA increased yield projections for both corn and soybeans in the September World Agricultural Supply and Demand Estimates report which put slight pressure on both markets. The corn yield was raised to 176.3 bushels per acre from 174.6 in August, with harvested area also increased by 600,000 acres to 85.1 million. Corn production of 14.996 billion bushels was up 246 million from last month and about 100 million higher than the average trade forecast with ending stocks of 1.408 billion bushels up 150 million from August. Soybean ending stocks of 185 million bushels were up 30 million from August, although the balance sheet remains historically tight.”
The USDA’s latest Crop Progress report shows 59% of U.S. corn was rated good to excellent, as of the week ending Sept. 19, down 1% from the previous week, and 2% below a year ago. 58% of the soybeans had a good to excellent rating, up 1% from the previous week, but 5% below a year ago.
In politics, the Wisconsin-based American Dairy Coalition (ADC) called for a temporary return to the previous Class I milk pricing formula using the ‘higher of’ Classes III or IV, until a USDA hearing process can evaluate other ideas including a change made in the 2018 Farm Bill to an averaging method plus 74 cents, which was implemented in May 2019.
“We know calling for a temporary return to the previous Class I formula, while various ideas about Federal Milk Marketing Orders are sorted out, isn’t going to happen overnight, but the process needs to begin. We are also looking futuristic and beyond a recent short-term shift and what the futures markets currently show us because a lot of dairy farmers have suffered severe loss of revenue due to milk being removed from the federal orders. Subsequently farmers have lost confidence in the functioning of the FMMOs and question the value of purchasing available risk management programs under the average of pricing formula,” said ADC CEO Laurie Fischer.
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 email@example.com.