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Butter was the one major dairy product where export volume growth outpaced value growth


First and foremost, I wish you a happy and blessed Christmas and New Year’s. There is a reason for the season and I hope you know it’s true joy and peace.Farm milk output remains above a year ago but not gushing, likely due to high feed prices and other rising input costs. The preliminary data shows November output at 18.25 billion pounds, up 1.3% from November 2021, the fifth month in a row to top year ago output. The 24-state total, at 17.48 billion pounds, was up 1.4%. Revisions lowered the 50-state October total by 16 million pounds to 18.8 billion, up 1.1% from a year ago, instead of the 1.2% increase originally reported.November cow numbers totaled 9.42 million, up 1,000 head from the October head count which was revised 1,000 head higher. November’s herd was up 38,000 head from a year ago, 53,000 more than in January, and the largest since Aug. 2021. The 24-state count was up 48,000 head from a year ago and up 62,000 from January.Output per cow averaged 1,937 pounds, up 17 pounds or 0.9% from November 2021.California put 3.3 billion pounds in the tank, down 18 million pounds or 0.5% from a year ago. Cow numbers were up 4,000 but output per cow was down 15 pounds. Wisconsin produced 2.58 billion pounds, up 32 million or 1.3% from a year ago. Cow numbers were down 6,000 but output per cow was up 35 pounds.Idaho was up 2.3% with 12,000 more cows and a 35 pound gain per cow. Michigan was up 1.6%, thanks to a 55 pound gain per cow offsetting the loss of 4,000 cows. Minnesota inched 0.9% higher, thanks to a 45 pound per cow gain offsetting a 7,000 cow drop. New Mexico was down 4.3% on a 13,000 cow drop. Output per cow was unchanged.New York was up 3.2%, thanks to a 55 pound gain per cow and 3,000 more cows. Oregon was off 0.5%, on a five pound drop per cow. Cow numbers were unchanged. Pennsylvania was unchanged. Output per cow was up 10 pounds but there were 3,000 fewer cows milked.South Dakota was up 10.8%, thanks to 19,000 more cows and a 10 pound gain per cow. Texas was up 6.3% on 30,000 more cows and a 30 pound gain per cow. Vermont was up 1.5%, thanks to a 55 pound gain per cow offsetting the loss of 2,000 cows. Washington State was down 2.0% on 6,000 fewer cows. Output per cow was up 5 pounds.Dairy cow culling was down in November but above November 2021, according to the USDA’s latest Livestock Slaughter report. An estimated 250,900 head were sent to slaughter under federal inspection, down 1,900 head from October but 5,600 or 2.3% above November 2021. Culling in the 11 months totaled 2.78 million head, down 57,600 or 2.0% from a year ago.Checking stocks, the November U.S. butter inventory saw an unimpressive drawdown from October, likely due to prices which peaked in October at a record high $3.2675 per pound. The United States Department of Agriculture’s latest cold storage report shows November 30 stocks totaled 199.7 million pounds, down 40 million pounds or 16.7% from October and 10.8 million or 5.1% below those a year ago.StoneX points out “Domestic butter disappearance was really terrible in September and October.” November may have followed that trend.American type cheese stocks fell to 815.7 million pounds, down 15.6 million pounds or 1.9% from October and 19.1 million or 2.3% below a year ago.The “other” cheese slipped to 592.6 million pounds, down just 2.3 million pounds or 0.4% from October, but were up 25.8 million or 4.5% above a year ago.The total cheese inventory fell to 1.429 billion pounds, lowest since November 2021, down 18.3 million pounds or 1.3% from October, but were 7.6 million pounds or 0.5% above a year ago. Both HighGround Dairy and StoneX see the report as bearish toward butter and neutral on cheese.The last main Global Dairy Trade event of 2022 saw its weighted average plunge 3.8%, following the 0.6% gain on December 6, which followed a 2.4% jump on November 15. Traders brought 63.4 million pounds of product to market, down from 65.2 million on December 6, and the average metric ton price fell to $3,493.00 U.S., down from $3,610.00 last time.Skim milk powder led the declines, down 4.8%, after climbing 1.7% on December 6. Whole milk powder was down 4.0%, after inching 0.1% higher. Butter was down 2.6%, which followed a 1.9% descent and anhydrous milkfat was down 2.2% after a 1.8% gain. Cheddar was off 0.7% after gaining 1.8% last time.StoneX Dairy Group says the GDT 80% butterfat butter price equates to $2.0367 per pound U.S., down 5.4 cents, after losing 4.6 cents last time. That compares to CME butter which closed Friday at $2.3950. GDT cheddar, at $2.1775, was down 1.2 cents and compares to Friday’s CME block cheddar at $2.1225. GDT skim milk powder averaged $1.3447 per pound, down from $1.4072 (6.3 cents) and whole milk powder averaged $1.4723 per pound, down from $1.5424 (7 cents). CME grade A nonfat dry milk closed Friday at $1.33 per pound.StoneX’s Dustin Winston says “It is tempting to blame the weaker prices on the COVID outbreak in China, but North Asia purchases (which includes China) were up from the last event and last year and the regional share of volume was larger than the previous event and last year too. The weakness on volume was driven by SE Asia, Middle East and Europe,” according to Winston.YiFan Li, head of Asia Dairy for StoneX, is traveling in China and reports that “COVID is spreading rapidly, shopping centers are empty and it is hard to get fever reducing medicine and home COVID tests.” He is “pessimistic about economic activity and demand short-term, but that should shift in first quarter.” The big question, he concludes, is how strong Chinese milk output will be.”China’s latest import data was filled with a lot of declines. November whole milk powder imports were down 46.3% from November 2021. Skim milk powder was down 18.9%. Combined year to date, those imports were down 20.3%.On a brighter note, whey product imports totaled 124.7 million pounds, up 16.3% as China’s pigs make a comeback, and much of that whey is from the U.S.Butter imports amounted to 14.9 million pounds, up 40.4%, but cheese imports totaled just 22.6 million pounds, down 36%. Fluid milk and cream was down 18.4%, while infant formula imports were up 2%.Speaking in the December 26 Dairy Radio Now broadcast, HighGround Dairy’s Lucas Fuess warned that “Dairy markets are looking a little bit weaker, entering the New Year as northern hemisphere supplies increase.”Meanwhile, the USDA’s dairy, world markets and trade report says, “Thus far in 2022 record exports on a value basis are being set across all dairy commodities, driven by strong international dairy product prices. Through October, dairy export values are up 25%, with robust growth across the major products including skim milk powder (NDM/SMP), whey, lactose, cheese and butter; however, from a volume perspective, average export growth is a more modest 5%.”“Nowhere is this dichotomy more prevalent than with NDM, where export quantities have fallen 8% over this period while export values have increased 27%. For the current year, NDM exports are forecast to fall about 8% to 819,000 tons due to slowing shipments to China where consumption of SMP has shifted to whole milk powder (WMP) in response to higher prices and higher domestic WMP production. NDM/SMP exports are expected to rebound in 2023 as higher milk output drives production higher for a number of dairy products.”“Through October, whey and cheese exports saw similar activity with volume growth of 7% and 13%, respectively, while values grew 38% and 26%, respectively.”“Butter was the one major dairy product where export volume growth outpaced value growth, reflecting significantly lower unit values to Mexico and Canada.”The first Federal order class I base milk price of 2023 was announced by the United States Department of Agriculture’ at $22.41 per hundredweight, down 17 cents from December, lowest Class I since Feb. 2022, but is $2.70 above January 2022. It equates to $1.93 per gallon, up from $1.69 a year ago.Dairy margins weakened slightly the first half of December as milk prices slipped while trends in feed markets were mixed, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.“Corn prices dropped slightly,” the MW stated, “while soybean meal posted a sharp rally on oil/meal spread unwinding. Disappointment with the EPA biodiesel blending mandate proposals in upcoming three years led to a sharp selloff in the soybean oil market that subsequently supported soybean meal on spreads.”The MW warned “The milk market has been supported by strong demand, although high dairy product prices and the threat of recession in the U.S. next year cloud the outlook moving into 2023.”“The November consumer price index rose 7.1% from last year which was down from October’s 7.7% increase and the smallest year-over-year comparison so far this year in an indication that inflation is slowing down,” the MW concluded.Dairy prices in Chicago were mixed in the week leading up to Christmas. After losing 25.50 cents the previous four weeks, the cheddar blocks closed Friday at $2.1225 per pound, up 14.50 cents on the week, and 25 cents above a year ago.After plunging 21 cents the previous week, the barrels fell to $1.6550 Tuesday, lowest since December 28, 2021, but rallied to finish Friday at $1.7950, up 5.50 cents on the week 14.50 cents above a year ago and a huge 32.75 cents below the blocks. Sales totaled four cars of block and 16 of barrel for the week at the CME.Midwest cheese sales softened, according to Dairy Market News. Heavy snow was expected in parts of the region late week, so milk haulers were attempting to have orders delivered sooner, which likely contributes to backups at processors. Cheesemakers were running steady schedules, though the backups and other maintenance issues contributed to unplanned down time. Milk is plentiful and spot loads were being sold for discounted prices as low as $10 under class.Cheese demand is softening at retail and food service in the West while export demand is mixed due to lower priced cheese from international markets. Some milk was sold below class, as volumes remain plentiful. Cheesemakers are therefore running busy schedules, though labor shortages, unplanned downtime and delayed deliveries of supplies continues to hamper running at capacity.CME butter saw huge declines, not helped by the week’s cold storage data. It closed Friday at $2.3950 per pound, down 46 cents, lowest since December 27, 2021, but still 14.50 cents above a year ago, with only eight sales reported on the week.Midwest butter demand continued to soften as the holidays approached and the lower prices were expected for this time of the year. Cream volumes are plentiful and expected to be heavy due to the bad weather and transportation delays which caused some plants to offer it at lower multiples than previous weeks. Churns were running active schedules, despite the holidays, says DMN.Looking westward, cream demand saw ups and downs as the holidays approached. Cream is ample and discounts were being offered due to difficulties with tanker availability. Winter weather in the Pacific Northwest is giving concern. Available cream is being used for heavy butter production, but labor and transportation issues are preventing some from running even busier schedules.Grade A nonfat dry milk finished Friday at $1.33 per pound, down two cents on the week and 34 cents below a year ago, on five sales for the week.The whey fell to 36.50 cents per pound Wednesday, lowest since September 21, 2020, but closed Friday at 38.50 cents per pound, down seven cents on the week and 36.50 cents below a year ago. There were 19 sales reported on the week at the CME.In politics, the National Milk Producers Federation and U.S. Dairy Export Council gave a thumbs up to an announcement this week that the U.S. Trade Representative is filing a new request for dispute settlement consultations with Canada “in order to expand the scope of the second U.S.-Mexico-Canada Agreement (USMCA) dairy dispute to include additional elements necessary to ensure that Canada fully complies with its USMCA obligations.”The initial dispute panel, launched by the U.S. in May 2021, found Canada in violation of USMCA’s tariff-rate quota (TRQ) provisions by reserving most of its preferential dairy TRQs for Canadian processors. In March 2022, Canada released its revised approach to USMCA TRQs, which still violated the USMCA, by providing inequitable advantages to Canadian processors and failing to administer TRQs in a manner to ensure full use of TRQs as intended by USMCA.Cooperatives Working Together (CWT) members accepted 23 offers of export assistance this week to capture sales of 5.8 million pounds of American type cheese and 37,000 pounds of cream cheese. The product is going to customers in Asia, Central America and Oceania through June 2023.CWT’s year to date exports total 99.1 million pounds of American type cheeses, 657,000 pounds of butter, 30.7 million pounds of whole milk powder and 8.8 million pounds of cream cheese. The products are going to 21 countries and are the equivalent of 1.223 billion pounds of milk on a milkfat basis.Lee Mielke is a graduate of Brown Institute in Minneapolis, Minnesota. 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.