U.S. milk production was slightly below that of a year ago
U.S. milk production was slightly below that of a year ago in December, according to the USDA’s latest Milk Production report. Preliminary data put output at 18.8 billion pounds, down just 0.15% from December 2020. The top 24 producing state’s total was 18.0 billion pounds, down 0.2%. Revisions lowered the original 50-State November estimate by 11 million pounds, now put at 18.0 billion, down 0.4% from a year ago.
December cow numbers totaled 9.375 million, down 7,000 from November, seventh consecutive month they were down from the previous month, and were 67,000 head below a year ago. The November count was revised 3,000 head lower. The U.S. milking herd has dropped 132,000 head from its peak in May.
Output per cow averaged 2,008 pounds, up 11 pounds or 0.6% from a year ago.
The preliminary data shows 2021 milk output totaled 226.3 billion pounds, up 1.4% from 2020. Cow numbers averaged 9.45 million head, up 60,000 or 0.6% from 2020, with output per cow up an average of 173 pounds or 0.7% from 2020. USDA’s latest projections show 2022 milk output will be up 0.7% from 2021.
December milk output in the Number 1 producing state, California, totaled 3.5 billion pounds, up 75 million or 2.2% from a year ago, thanks to a 45 pound gain per cow offsetting 1,000 fewer cows. Wisconsin put 2.65 billion pounds in the tank, up 46 million or 1.8%. Cow numbers were up 16,000 and output per cow was up 10 pounds.
Idaho was up 1.7%, on 6,000 more cows and 15 pounds more per cow. Michigan was down 1.2% on 5,000 fewer cows and unchanged output per cow. Minnesota was up 1.7% on 5,000 more cows and a 10 pound gain per cow. New Mexico was down 15.0%, on a drop of 45,000 cows and 40 pounds less per cow.
New York was down 1.7% on 6,000 fewer cows and a 15 pound drop per cow. Oregon was up 0.5% on a 10 pound gain per cow and no change in cow numbers. Pennsylvania was down 2.6%, on 8,000 fewer cows and 15 pounds less per cow. South Dakota was up 20.0%, thanks to 29,000 more cows offsetting a 10 pound drop per cow. Texas was up 3.4% on 12,000 more cows and a 30 pound gain per cow. Vermont was down 1.4% on a 25 pound drop per cow. Cow numbers were unchanged. Washington State was down 7.3% on a loss of 18,000 cows and 20 pounds less per cow than a year ago.
The Jan. 24 Daily Dairy Report points out that herds in New Mexico and Washington State shrunk “as co-ops began to manage supply and cows were relocated to states with fewer restrictions and newer facilities.” No doubt, weather and local economics also contributed.
StoneX viewed the report as slightly bullish but pointed out that components were very strong, with protein up 3.32% versus 3.28% last year, and butterfat at 4.16% versus 4.11% a year ago.
In the week ending Jan. 15, 62,100 dairy cows were sent to slaughter, down 900 from the previous week, and 5,300 head or 7.9% below a year ago.
The amount of market share that dairy cows account for in the total cattle market has shifted slightly lower but still account for just over 10% of the beef market, according to StoneX, and may signify the end of the dairy herd decline.
Americans chewed through plenty of butter in December, as evidenced in the Agriculture Department’s latest Cold Storage report. The December 31 butter inventory fell to 199.1 million pounds, down 11.4 million or 5.4% from November, sixth consecutive month to lose ground, and were at the lowest level since December 2019. Stocks were 74.7 million pounds or 27.3% below those in December 2020, third month in a row to fall short of the previous year.
American type cheese added 11.5 million pounds or 1.4% from November, and was 44.6 million pounds or 5.6% above a year ago.
The “other” cheese category grew to 576.8 million pounds, up 10 million or 1.8% from November, and 2.1 million pounds or 0.4% above a year ago.
The total cheese inventory hit 1.445 billion pounds, up 22.8 million pounds or 1.6% from November, and a plentiful 48.8 million or 3.5% above a year ago.
StoneX viewed the data as neutral to cheese but bullish for butter, adding “As an industry we weren’t putting expensive butter into inventory and that likely continued into the ﬁrst half of January but there are indications that stocks are now starting to build seasonally.”
Broker Dave Kurzawski said the market did what it was designed to do in the Jan. 31 ‘Dairy Radio Now’ broadcast, especially on butter. Physical demand pushed it to top $2.90 per pound, he said, and then plunged, but the futures market never went up with the spot market.
Some believe that, if the spot market is well above the futures market; that means the futures market is right and the price has to come down, he said, and in this case that was kind of true. “There was physical tightness and the spot market should be the highest price on the board to dis-incentivize anybody who makes the product from putting it in storage. Bring it to the market now, we need it,” he said. “We can debate why the price up where we had it, but bring the butter, bring the cheese to the market.”
The Milk Production and Cold Storage reports likely fed the bulls more than the bears however Kurzawski suspects they were “already baked into the market.” He explained that cheese and butter had moved higher through the middle of January, and the news was bullish for butter, but the cheese side saw stocks build from November to December, which is typically when we draw stocks down by about 14-15 million pounds. Cheese was neutral to slightly bearish, he said.
Add to that, “Milk production has not fully recovered here so, yes the bulls were fed a little but the markets had already adjusted to the upside. Now we had to take some of that premium out,” he concluded.
Dairy prices and milk futures end January weaker but still above a year ago. After losing 11.25 cents the week before, the Cheddar blocks fell to $1.73 per pound Wednesday, but the brakes got applied Thursday and they actually regained 6 cents Friday on a sale to close at $1.79, down 1.75 cents on the week but 21.50 cents above a year ago.
The barrels, after dropping 14.75 cents the previous week, fell to $1.6625 per pound Wednesday, lowest since Dec. 28, 2021, but were bid higher Thursday and Friday to close at $1.7425, 7 cents lower, 35.25 cents above a year ago, and 4.75 cents below the blocks. There were 5 sales of each on the week at the CME.
“Bearish cheese prices snuggled up to demand tones this week,” according to Dairy Market News, but contacts relayed that customers were waiting on further price drops before committing to anything outside their contractual needs. That said, a number of plant managers admitted that while sales have slackened, they were down only a small percentage and production was still busy. Spot milk remained under flat market and was keeping some plants busy.
Western cheese demand was holding steady at retail while food service demand was lower this week. Rising COVID cases in parts of the West are contributing to declines in food service sales. Sales of mozzarella are strong thanks to football playoffs. International demand remains steady with continuing notable interest from Asian markets. Port congestion, a shortage of truck drivers, and labor shortages continue causing delays. Cheese output is steady to higher, as plants are running busy schedules to work through available milk supplies.
After jumping 21 cents the previous week, the butter appeared to be on its way to $3 per pound plus, but it started the week dropping almost 9 cents, then kept falling. It regained a nickel Friday to finish at $2.54, down 39.50 cents on the week but $1.2950 above a year ago. 24 cars sold on the week, 19 on Friday.
StoneX reported that the USDA put out a solicitation to buy 82,080 pounds of salted print butter for April to June delivery but no one oﬀered any. “Not a market moving quantity either way,” says StoneX, “but interesting to note.”
There are likely several reasons for the price fall, according to StoneX. “The main dynamic is a slump in demand due to Omicron and seasonality coupled with supply chain issues. If shipping were easy, perhaps exports would be stronger. If people were not out with Omicron, perhaps cheese converters would be pulling more Cheese through their facilities instead of pushing back some onto manufacturers. The dynamic today isn’t necessarily long-term and eventually we’ll get to a price where buyers really want to own cheese.”
Add to that “The U.S. dollar has been strong this week and breaking out above the high water mark established in November and December 2021. The strength is a function of Fed comments about raising interest rates, but the point is a stronger dollar may be a limiting factor, not necessarily a death knell, for a basket of commodity prices. This is the point of course as the Fed gears up for battle with inﬂation,” StoneX concluded.
Cream availability remains similarly priced for butter producers from week to week, according to DMN, although offers were beginning to quiet. Butter plant managers say Midwestern loads are not as abundant as they have been since the holiday weeks. Bulk butter is tight, but there are loads available for end users willing to pay relatively hefty premiums. Some bulk loads changing hands are recently produced, which speaks to the general shortness of availability. As spring holiday preparations are underway, churning remains active, says DMN.
Cream inventories are available in the West amid steady demand as well as continued interest from Midwest purchasers. Transportation issues have caused some contracted cream loads, intended for other regions, to become available for spot purchase. Demand for butter is strong in both domestic and international markets. Inventories are tight and butter output is steady, but below capacity. Plants continue to cite labor shortages and delays to deliveries of production supplies as the reason.
Grade A Nonfat dry milk fell to $1.7750 Thursday, but closed Friday at $1.8050, down a penny on the week, but 63.25 cents above a year ago, on 17 sales.
Dry whey set another new record, closing Friday at 84 cents per pound, up 4 cents on the week and 30.50 cents above a year ago, with 4 sales reported.
Dairy producers no doubt watched the disheartening fall in Class III futures prices. The break-even milk price today is around $19.30 per hundredweight, according to estimates by the Dairy and Food Market Analyst.
That’s up from $18.77 a year ago, says the DFMA, and $3.33 higher compared to before the pandemic. Last year, with feed costs elevated, many farms lost money but now, with some Class IV futures above $24.00 per cwt, the outlook for farm-level margins in the USA is plainly positive.”
The DFMA warned “The expected farm-level profitability also means we will see a milk supply response begin to build. Anecdotally, we have heard our first indications: milk becoming modestly more available in the West. As it always does, it will take time to ramp up. We estimate by mid-year the country’s dairy herd may finally exceed 2021 levels.”
Much of the dairy industry was in California this week for the International Dairy Foods Association’s (IDFA) annual Dairy Forum. One of the highlights was an announcement by IDFA, the Port of Los Angeles, and CMA CGM, a world leader in shipping and logistics, of the formation of a “Dairy Exports Working Group aimed at identifying and addressing supply chain issues hampering U.S. dairy product exports.”
A joint press release stated “The group will focus on seaports on the West Coast of the U.S., where a majority of dairy products begin their export journey, as well as opportunities to streamline the movement of products from the interior of the U.S. to the West Coast.”
“It will also examine several ocean shipping and rail challenges and solutions,” according to the press release, “including exploring ways to aggregate and streamline U.S. dairy exports from multiple suppliers to ensure more consolidated and attractive bookings; working to increase rail availability in the interior of the U.S. to reach non-coastal exporters; determining viability of implementing a ‘fast lane’ concept for vessels agreeing to depart full or with fewer empty cargo containers; defining agreed terms for exporters using empty containers currently languishing at U.S. ports; and establishing guarantees to fix and surpass ghost bookings.”
IDFA’s Michael Dykes said “U.S. dairy exports reached a near-record $6.4 billion in 2020 and continued to set a blazing pace in 2021 due to surging global demand, but the U.S. could be exporting much more to destinations around the world if there was more reliability and predictability in the supply chain.”
Port of Los Angeles Executive Director Gene Seroka stated; “American dairy exporters have been hard hit by supply chain challenges and trade policy that have made it difficult to get their goods to global markets. I’m pleased to collaborate with our dairy industry partners and the CMA CGM Group to launch this working group and find solutions that will benefit not only the dairy industry but all American exporters.”
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.