Concern over the falling global milk supply wasn’t enough to pause the slippage
The Agriculture Department raised its estimate for 2022 milk production in Friday’s World Agricultural Supply and Demand Estimates report, citing expected higher dairy cow numbers.
Price forecasts for cheese and butter were raised from the previous month on tighter stocks and firm demand. Non-fat dry milk prices were raised fractionally while whey prices were lowered, as U.S. prices are expected to become competitive with international prices. Milk price projections were also raised.
2022 production and marketings were estimated at 226.3 and 225.3 billion pounds respectively, up 300 million pounds on both. If realized, 2022 production would mirror output in 2021. I’ll have more details next week.
Meanwhile; U.S. cheese vats “got milk” in February, despite milk output being down 1.0% from February 2021. The Dairy Products report shows total cheese production slipped to 1.109 billion pounds, down 5.3% from January, but was up a bearish 6.3% from February 2021. Cheese stocks you’ll recall were up 2% from a year ago, according to the month’s Cold Storage report. Cheese output for the first two months of 2023 totaled 2.3 billion pounds, up a hefty 4.7% from the same period a year ago.
Wisconsin produced 278.3 million pounds of the February total, down 2.9% from January but 5.3% above a year ago. California provided 201.6 million pounds, down 3.4% from January but 4.0% above a year ago. Idaho vats added 73.0 million pounds, down 16.6% from January but unchanged from a year ago.
Italian cheese totaled 469.9 million pounds, down 6.7% from January but 6.0% above a year ago. YTD Italian stands at 973.5 million pounds, up 5.3% from a year ago.
American type cheese, at 444.4 million pounds, was down 5.8% from January but 4.3% above a year ago. YTD output, at 916 million pounds, was up 1.7%. Mozzarella output totaled 360.8 million pounds, up 4.4% from a year ago, with YTD at 755.6 million, up 4.9%.
Cheddar, the cheese traded at the CME, totaled 312.3 million pounds, down 20.2 million pounds or 6.1% from January’s output, which was revised down 4.9 million pounds, but was up 11.8 million pounds or 3.9% from February 2021, ending four consecutive months that Cheddar output was below that of a year ago.
Butter churns produced 183.6 million pounds, down 10.4 million pounds or 5.4% from January, and 2.7 million or 1.4% below a year ago, eighth consecutive month output was below a year ago. YTD butter stands at 377.7 million pounds, down 4.6% from a year ago. Butter stocks were down 26% from February 2021.
Yogurt output totaled 373.0 million pounds, down 2.1% from a year ago, with YTD output at 745.9 million pounds, down 2.7%.
Dry whey production fell to 75.0 million pounds, down 5.4 million pounds or 6.7% from January and 300,000 pounds or 0.4% below a year ago. YTD is at 155.4 million pounds, down 2.5%.
Dry whey stocks climbed to 63.0 million pounds, up 6.4 million or 11.4% from January, but were 6.9 million pounds or 9.9% below those a year ago.
Nonfat dry milk output totaled 171.0 million pounds, up 700,000 pounds or 0.4% from January, but was down 12.6 million or 6.9% from a year ago. YTD powder was at 341.3 million pounds, down 10.6%. Stocks climbed to 288.8 million pounds, up 27.2 million pounds or 10.4% from January, but were down 54.9 million pounds or 16.0% below those a year ago.
Skim milk powder output fell to 29.6 million pounds, down 13.8 million pounds or 31.8% from January, but were down 2 million or 6.4% below a year ago. YTD SMP was at 73 million pounds, up 8.0% from a year ago.
Chicago-based StoneX Dairy Group stated in its April 4 Early Morning Update; “When we peel back the layers it either looks like the USDA has overstated cheese and butter production or understated February milk production.”
Concern over the falling global milk supply wasn’t enough to pause the slippage in the Global Dairy Trade auction. Event number 305 saw its weighted average fall 1.0%, after slipping 0.9% on March 15.
Traders brought 47.4 million pounds to market, down from 51.5 million on March 15, and the smallest since May 18, 2021. The average metric ton price fell to $4,981 U.S., down from $5,039 in the last event.
Anhydrous milkfat led the declines, down 2.5%, after it inched up 0.4% last time. Butter was off 0.6%, following a 1.8% descent. Whole milk powder was down 1.5%, after dropping 2.1%, and lactose rounded out the losses, off 0.6%.
Buttermilk powder led the gains, up 6.3%, after not trading last time. GDT Cheddar was up 2.7%, after inching 0.3% higher, and skim milk powder was up 1.0%, after a 1.6% rise on March 15.
StoneX Dairy Group says the GDT 80% butterfat butter price equates to $3.1258 per pound U.S., down 3 cents, after losing 5.7 cents on Mar. 15, and compares to CME butter which closed Friday at a bargain $2.7825. GDT Cheddar, at $2.9355, was up 2.7 cents, and compares to Friday’s CME block Cheddar, a steal at $2.32. GDT skim milk powder averaged $2.0859 per pound, up from $2.0615. Whole milk powder averaged $2.0558 per pound, down from $2.0849. CME Grade A nonfat dry milk closed Friday at $1.8225 per pound.
Volume purchased by the North Asia region, which includes China, has been running weak since July, says StoneX, and weakened even further in this event. Purchases by North and South America were also down.
A big factor in global dairy trade is and will be milk output. The April 4 Daily Dairy Report warned; “The global slowdown in milk production worsened as input costs increased in the world’s major dairy exporting regions. Combined output in the United States, Europe, Australia, New Zealand, and Argentina fell 1.8% in January, compared to year-earlier levels. Year-over-year milk collections in the EU-27 fell 0.7% in January, the seventh straight month of contraction, according to data from the Milk Market Observatory.”
The April 7 DDR adds that Australian milk production fell 6.1% in February from February 2021 to just under 1.3 billion pounds, according to Dairy Australia. Season-to-date production of 13.5 billion pounds, is 3.1% lower than the comparable period in the previous season, according to the DDR, and Dairy Australia expects production to drop between 1% and 3% for the season. Poor weather and declining cow numbers are to blame, according to the DDR.
February U.S. dairy exports looked strong except for the powders. Cheese, exports totaled 72.6 million pounds, up 9.2% from February 2021. HighGround Dairy attributes the strength to demand from a variety of countries, led by Mexico, up 5%, then South Korea and Japan. Year to date cheese exports are up 12.4% and up 10.8% from two years ago, according to HGD.
Butter exports hit 11.2 million pounds, up 46.3%, and the strongest February shipments since 2014, according to HGD. YTD butter exports were up 37.3% and up 222.6% from two years ago.
Nonfat dry milk-skim milk powder exports, at 139.7 million pounds, were down 11.5%. February was the third consecutive month they were below a year ago, “negatively impacted by port congestion and shipping challenges,” says HGD, even as US-sourced product remained a value buy versus other global exporters. Year to date exports are down 8.8% but are still up 21.6% from two years ago.
Shipments to Mexico were down slightly, 5%, says HGD, but Southeast Asian demand was mostly healthy, with exports up 8% to the Philippines, up 30% to Malaysia, and 10% to Thailand. China saw a sharp 82% increase.
The U.S. exported 32.5 million pounds of dry whey, down 20.1%, as shipments to China were down 59%, however demand from Indonesia, Vietnam, and Japan helped offset some of the declines. YTD dry whey exports are down 26.6% from a year ago but up 0.8% from two years ago.
Fundamental data is a “mixed bag,” according to Matt Gould, analyst and editor of the Dairy and Food Market Analyst newsletter. Speaking in the April 11 Dairy Radio Now broadcast, he said cheese and butter exports are soaring because “the cheapest products in the world are in the U.S.” and international customers are calling U.S. suppliers, sometimes for the first time, to secure product.
Milk output in Europe is faltering, he said, and supplies have contracted. The invasion of Ukraine has caused disruptions for grains and fertilizers, subduing our biggest competitor in the world, Europe, and preventing them from supplying those international customers so they’re coming to the U.S., according to Gould.
That’s good news for America’s dairy farmers, he said, however powder exports were down in February and we’re seeing surprisingly strong dairy production in the U.S., both are a concern.
We would likely be exporting even more, if port congestion wasn’t still an issue. Gould said practically every U.S. exporter has lost sales because of it however the shut downs in China are actually helping improve the situation though it might just be a temporary improvement, he concluded.
Dairy prices entered second quarter mixed. The Cheddar blocks fell to $2.2625 per pound Monday but rallied to a Friday close at $2.32, up 2.50 cents on the week and 49 cents above a year ago.
The barrels closed at $2.3675, up 11.50 cents on the week, 67.50 cents above a year ago, and an inverted 4.75 cents above the blocks. There were 9 cars of block that traded hands on the week at the CME and 21 of barrel.
This week's narrative was similar for Midwest cheesemakers from the past two weeks, reports Dairy Market News. Some plants continue to run lighter schedules, adding to maintenance, due primarily to staffing shortages. Others are clearing more of the milk that would normally flow to other plants. Spot milk at midweek was mostly discounted, although some was at Class. Cheese demand remains steady to busy. Cheddar and pizza cheese producers relay that buyers have been more active in recent weeks. Cheese inventories are moving well.
International interest for cheese is strong. Western stakeholders say that some Asian purchasers are interested in buying loads to ship in early 2023. Cheese demand is steady across food service and retail but the ongoing truck driver shortage increases delivery times and export loads face further delays due to port congestion. Cheese inventories are increasing regionally. Milk is available, allowing cheese makers to run busy schedules but labor shortages are keeping some facilities below capacity, though the situation is improving, says DMN.
Spot butter closed Friday at $2.7825 per pound, up 7.25 cents on the week and 90.25 cents above a year ago, with 19 sales reported on the week.
Cream is expected to tighten due to the approaching spring holidays but butter producers continue to churn what cream they get. Regional butter makers continue to find locally sourced cream and some from the West. Butter demand remains hearty but spring demand was slower to pick up, according to some.Food service has been particularly busy in recent weeks. Bulk butter remains tight and at premiums. Export demand has notably picked up, according to DMN.
Cream demand is steady to higher in the West. Ice cream makers are increasing production, preparing for warmer weather, while butter makers are utilizing cream to build inventories. Cream has tightened in recent weeks, but remains available. Butter demand is steady at food service and trending higher at retail. Export demand is steady but port congestion prevents selling greater volumes.
Grade A nonfat dry milk saw a Friday finish at $1.8225 per pound, losing 2.75 cents on the week, but still 61.75 cents above a year ago, with 16 cars sold.
Dry whey fell to 59 cents per pound Monday, lowest CME price since Oct. 4, 2021, but closed Friday at 63.50 cents per pound, up 2.50 cents on the week, 23.25 cents below its record peak on February 8 of 86.75 cents, and is a half-cent above a year ago. There were 8 sales reported on the week at the CME.
Dairy margins weakened slightly as both the milk and feed markets traded sideways through the second half of March, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.
“Milk prices have backed off recent highs somewhat,” the MW explains, “but remains supported by declining U.S. and world milk production.” The MW detailed February milk output and cautioned; “While the pace of the decline in milk production slowed in February, high feed costs and increased operating expenses will likely temper potential expansion. New Zealand milk production also continues to decline due to similar pressures as February milk collections plunged 8.2% from last year or 159,000 MT to 1.773 MMT. The drop represented the steepest year-over-year decline in percentage terms since March 2019 and was the seventh straight season-over-season monthly drop,” the MW stated.
In the week ending March 26, 64,200 dairy cows were sent to slaughter, up 100 from the previous week, but 1,800 head or 2.7% below a year ago.
The Agriculture Department’s first Crop Progress report of the year shows 2% of the U.S. corn crop has been planted, as of the week ending April 3. That matches a year ago as well as the most recent five year average.
Texas had the biggest percentage at 54%, same as a year ago, followed by North Carolina at 3%, up 2% from a year ago.
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.