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Football season helped grow cheese demand and thus cheese production


You’ll recall USDA’s preliminary data showed August milk production totaled 18.8 billion pounds, up just 1.1% from Aug. 2020. While school milk pipelines got filled, drawing milk away from manufacturing, limiting butter and powder output, the football season helped grow cheese demand and thus cheese production.

August cheese output totaled 1.14 billion pounds, down 0.3% from July but 4.4% above Aug. 2020. Year to date (YTD) cheese output hit 9.05 billion pounds, up 3.4% from the same period in 2020. 

Wisconsin produced 294 million pounds of that cheese, up 0.8% from July and 5.1% above a year ago. California output, at 201.7 million pounds, was down 0.6% from July but 5.4% above a year ago. Idaho produced a tad under 78 million pounds, down 9.5% from July and 4.2% below a year ago. 

Italian style cheese totaled 484.8 million pounds, up 0.3% from July and 8.8% above a year ago. American type cheese, at 451.9 million pounds, was down 3.1% from July but 1.5% above a year ago. Mozzarella totaled 379.4 million pounds, up 6.7% from a year ago.

Cheddar, the cheese traded daily at the CME, totaled 318.4 million pounds, down 5.8 million pounds or 1.8% from July, and 4.8 million pounds or 1.5% below a year ago. YTD Cheddar was at 2.6 billion pounds, up 4.0% from 2020.

Churns produced 148.4 million pounds of butter, down 2.2 million pounds or 1.5% from July, and 2.5 million pounds or 1.7% below a year ago. YTD butter output was at 1.4 billion pounds, down 2.0% from 2020. 

Yogurt totaled 401.1 million pounds, up 4.9% from a year ago.

Dry whey output slipped to 76.2 million pounds, down 4.9 million pounds or 6.1% from July, and 2 million pounds or 3.3% below a year ago. YTD dry whey output hit 620.0 million pounds, down 4.5% from a year ago. Dry whey stocks inched higher to 68.1 million pounds, up 1.1 million or 1.7% from July but were 19.9 million pounds or 22.6% below those a year ago.

Nonfat dry milk output fell to 122.1 million pounds, down 35.6million pounds or 22.6% from July and were down 25.1 million or 17.0% below a year ago. Powder production YTD totaled 1.4 billion pounds, up 6.4% from 2020. Stocks fell to 284.6 million pounds, down 28.1 million pounds or 9.0% from July, but were up 7.7 million pounds or 2.8% above those a year ago.

Skim milk powder production totaled 60.5 million pounds, up 9.3 million pounds or 18.1% from July but 8.7 million pounds or 12.7% below a year ago. YTD skim milk powder, at 345.1 million pounds, is down 20.7% from 2020.

Traders were looking for strength in Tuesday’s Global Dairy Trade auction but the weighted average was unchanged, following the 1.0% increase on Sept. 21 and 4.0% jump on Sept. 7. Traders brought 63.2 million pounds of product to market, up from 54 million on Sept. 7, and the highest since Feb. 2.

Buttermilk powder led the gains, up 9.7%. GDT Cheddar was up 0.7%, following a 1.2% drop on Sept. 21, and skim milk powder inched up 0.5%, after gaining 0.9% last time. Lactose was up 0.4%, as were both butter and anhydrous milkfat, following butter’s 1.9% decline last time and anhydrous milkfat being unchanged. Whole milk powder was down 0.4%, following a 2.2% rise

StoneX Dairy Group says the GDT 80% butterfat butter price equates to $2.1587 per pound U.S., up almost a penny from the last event and compares to CME butter which closed Friday at $1.72. GDT Cheddar, at $1.9493, up from $1.9387, and compares to Friday’s CME block Cheddar at $1.81. GDT skim milk powder averaged $1.5038 per pound, up from $1.4979. Whole milk powder averaged $1.7005 per pound, down from $1.7131. CME Grade A nonfat dry milk closed Friday at $1.46 per pound.

GDT prices were stable, according to broker Dave Kurzawski in the Oct. 11 ‘Dairy Radio Now’ broadcast, but “stable at higher prices” and “the stability of the GDT is not bearish.” He said the GDT may “chop around for a few sessions, but we’ll see where the tides take us in fourth quarter. If buyers need to get more done, you’ll start to see that GDT price go up.” 

As the Asian countries come out of the COVID lockdowns, Kurzawski believes there will continue to be strong demand for dairy. When asked about the port congestion and the lack of help and shipping supplies, he said he doesn’t know how that will play out. It needs to be addressed, he said, but “Watch the money. If there’s money behind this, the darkest days may be behind us.” He said he remains optimistic, concluding; “We have brighter days ahead.”

Meanwhile, U.S. dairy industry exports continue to excel. August cheese exports totaled 80.6 million pounds, up 18.1% from August 2020 and was a record high for the month, following a record-breaking July, according to HighGround Dairy, which listed Mexico, Japan, and Chile as the top destinations.

HGD reports that trade with Mexico improved and marked the seventh consecutive month of year-over-year gains, adding that “While 2020 figures are skewed to the downside, shipments to Mexico were higher versus 2019 levels as well during June, July, and August.”

The biggest jump was in nonfat dry milk. The U.S. shipped almost 73 million pounds to Mexico. Total nonfat and skim milk powder exports amounted to 174 million pounds, up 15.4% from a year ago, with year to date (YTD) up 15.4%.

Whey exports totaled 38.8 million pounds, down 17.3% from a year ago as well as YTD, however they were up 27.7% from 2019.

Butter totaled 7 million pounds, up 90.5% from a year ago, with YTD up 130.1%. Canada was the biggest destination, followed by South Korea, and Bahrain. 

Interestingly, butter imports amounted to 10.9 million pounds, up 29.9% from a year ago, with YTD imports up 8.1%. Cheese imports totaled 35.5 million pounds, up 8.8% from a year ago, with YTD up 16.6%.

Dairy prices here at home were mixed the first week of October. After jumping 14.25 cents the previous week, the CME Cheddar blocks closed Friday at $1.81 per pound, 4 cents lower than the previous Friday and 83.75 cents below a year ago. 

The barrels closed at $1.79, up 4.50 cents on the week, fifth consecutive week of gain, but 26.50 cents below a year ago. The spread narrowed to 2 cents. 7 cars of block were traded on the week at the CME and 9 of barrel.

Spot milk was more available this week in the Midwest, according to Dairy Market News, as seasonal weather promoted stronger output. But cheese plant contacts say staffing shortages and plant maintenance ahead of the holiday season are a definitive factor in more milk being dispersed. Butter plant managers report slight improvements in hiring but cheese plants are mixed. Some are very concerned about upcoming holiday schedules with skeleton crews. Others say wage increases enabled them to maintain sufficient staffing. 

Western cheese demand is mixed. Some contacts report strong demand in retail and food service markets. Others report a decline. International demand remains strong but transportation continues to be delayed due to port congestion. Strong demand for cheese barrels in recent weeks has, reportedly, contributed to the higher prices. Some plants are running full schedules, as milk is available, but others are running under capacity due to labor shortages, says DMN.

Butter fell to $1.69 per pound Monday, lowest since Aug. 20, but closed Friday at $1.72, 2.75 cents lower on the week and 30.75 cents above a year ago, on 31 sales for the week. 

Butter plant managers continue to report production being hampered by staffing shortages. Many say hiring has increased but new employees are undergoing the training process which takes time. Cream is available from the West, but locally sourced cream is priced too high for some. Butter market tones softened a bit but with the limited output during the busier demand season, “some foresee more bulls than bears for the short term.”

Cream was tighter in the West this week but meeting needs. End users reported some delays in receiving packaging supplies including boxes, paper, and foil. Production at some supply-making factories is hampered by staffing issues and construction of shipping boxes for high levels of online consumer shopping is said to be monopolizing corrugated cardboard. These supply snags are not yet indicated to be limiting butter production but, with the holiday season on the horizon, butter makers are monitoring packaging supplies extra closely. Butter inventories are “sturdy.” Retail sales are picking up. Food service orders are steady to lower. Restaurant demand, in particular, has declined as some areas experience higher COVID case counts or dine-in restrictions, according to DMN.

Grade A nonfat dry milk shot up to $1.46 per pound, up 6.25 cents on the week, highest since Aug. 13, 2014, and 33.50 cents above a year ago, with 27 sales.

Dry whey saw its Friday finish at 59.50 cents per pound, up 1.50 cents on the week, highest since June 21, and 20 cents above a year ago, with only 1 sale.

StoneX Oct. 7 Early Morning Update summed things up well: “There are more and more questions about the impact of labor issues. The impact depends on where the lack or labor is most acute: Farm level, bulk commodity on plant, packaging plant, retailer, restaurant, port, or at any of the transportation links in between. We could have too much milk and not enough bulk product, too much bulk product and not enough finished product, or too much finished product in warehouses and empty refrigerators at home. It could have very different price impacts depending on where the biggest disruption is seen.”

The costs of producing milk aren’t going down. The Daily Dairy Report’s Sarina Sharp pointed out in the Oct. 1 Milk Producers Council newsletter that, according to the Dairy Margin Coverage program income over feed calculation, the average dairy producer spent $12.45 on feed to produce 100 pounds of milk in August. 

Sharp says “That’s the highest national average feed cost since 2013, on the heels of the devastating 2012 drought. Even at eight-year highs, the index likely understates feed costs because it fails to account for this year’s stiff markups due to regional scarcity and expensive freight. Other costs are higher too. Wages and fuel are taking an especially big bite out of dairy producer incomes,” says Sharp.

She adds that “Rising expenses are pushing dairy producers to take a hard look at their less productive cows, and high beef prices make culling more attractive. Today, the beef check from a heavy cull cow will generally cover the cost of a springer to fill her stall,” says Sharp. 

“Dairy cow slaughter volumes are high and likely to remain so, which will continue to chip away at the massive milk-cow herd. That could slow growth in milk production in the months to come. But the weather has turned and milk yields are once again strong,” according to Sharp.

In the week ending Sept. 25, 60,400 dairy cows were sent to slaughter, down 2,000 from the previous week, but 1,100 or 1.9% above that week a year ago. 

Dairy margins did improve the second half of September as stronger milk prices combined with steady to weaker feed costs strengthened projected profitability, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC. “A slowdown in milk production was considered supportive for the market,” the MW stated, “although dairy stocks remain high from a historical perspective.” 

You’ll recall I detailed August milk production and cold storage data two weeks ago but the MW adds that the drop of 19,000 dairy cows from July to August tied the largest month to month decline dating back to September 2018.

The MW attributed the 30 million pound drop in August butter stocks to “an earlier than normal drawdown” and stated that the 4% higher cheese inventory than a year ago was the largest August level on record. 

The MW concluded on a positive note; “Despite this, both block and barrel cheese markets advanced sharply this past week, as availability of fresh cheese remains limited due to labor shortages at processing plants.”

The U.S. corn harvest was 29% complete, as of the week ending Oct. 3, according to this week’s Crop Progress report. That’s 5% ahead of a year ago and 7% ahead of the five year average. 59% of the crop is rated good to excellent, 3% behind a year ago.

The soybean harvest is at 34%, 1% behind a year ago but 8% ahead of the five year average. 58% is rated good to excellent, 6% behind a year ago

In politics; National Milk Producers Federation CEO Jim Mulhern says “Dairy farmers welcome the launch of the administration’s new approach to the U.S.-China trade relationship given China’s tremendous importance to global dairy markets. To date, China has delivered on the multiple dairy regulatory commitments they made in the Phase 1 agreement. But retaliatory tariffs continue to put a drag on our sales, and our market share in key dairy commodities such as milk powder and cheese lags far behind our competitors. We urge the administration to press China for substantial progress on these two fronts so that dairy farmers and cooperatives are better positioned to supply China’s growing dairy needs.”  

USDEC President and CEO Krysta Harden added that “What China does impacts dairy markets all around the world given what a large purchaser of dairy products they are. American dairy farmers and manufacturers count on the ability for our products to meet China’s appetite for dairy, yet retaliatory tariffs continue to weigh down our prospects there. 

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 lkmielke@juno.com.