U.S. milk production continues to rev higher. Preliminary data in the September Milk Production report shows output at 18.0 billion pounds, up a bearish 2.3% from September 2019, the biggest increase since March.
Output in the top 24 producing states totaled 17.2 billion pounds, up 2.4% from 2019. Revisions lowered the original August 50-state total 5 million pounds. However, the 24 state total was revised up 1 million, now put at 17.8 billion, up 1.9% from August 2019.
Third quarter output totaled 55.3 billion pounds, up 2.0% from a year ago. Cow numbers averaged 9.36 million head in the quarter, up 39,000 from the same period last year.
September cow numbers totaled 9.366 million head in the 50 states, up 5,000 from August and 33,000 above a year ago. Output per cow averaged 1,923 pounds, up 38 pounds from a year ago, or 2.0%.
California’s September output was up 3.2% from a year ago, thanks to a 65-pound gain per cow offsetting 4,000 fewer cows milked. Wisconsin was up 0.7%, despite 10,000 fewer cows. Output per cow was up 30 pounds.
Idaho was up 2.9%, thanks to 15,000 more cows and 10 pounds more per cow. Michigan was up 2.3%, on a 50-pound gain per cow. Minnesota was up 2.7%, thanks to a 70-pound gain per cow offsetting 5,000 fewer cows. New Mexico was off 0.9%, on a 5-pound drop per cow and 2,000 fewer cows milked.
New York was up 1.4%, thanks to a 30-pound gain per cow but had 1,000 fewer cows. Oregon was down 1.4%, on 1,000 fewer cows and a 10-pound loss per cow. Pennsylvania was up 1.9%, thanks to a 40-pound gain per cow offsetting a loss of 3,000 cows from a year ago.
South Dakota again showed the biggest increase, up 12.3%, thanks to 13,000 more cows milked and 35 pounds more per cow. Texas was up 6.5%, on 28,000 more cows and a 30 pound gain per cow. Vermont reported the biggest drop, down 5.5% on a 25-pound loss per cow and 5,000 fewer cows.
Washington state was down 1.1%, due to a 10-pound loss per cow and 2,000 fewer cows.
Gap narrowing
CME block Cheddar closed Columbus Day Week at $2.72 per pound, up 7.25 cents on the week and 75.25 cents above a year ago.
The barrels kept trying to close the price gap and saw their Friday close at $2.2050, up 15 cents, following a 10-cent jump last week and 29.5 cents the week before last, and are 20.50 cents above a year ago. The spread slipped to 51.5 cents. There were only 4 cars of block that exchanged hands last week at the market of last resort and 2 of barrel.
Monday’s trading took the blocks up 2 cents and stayed there Tuesday at $2.74 per pound, highest since July 15, as traders awaited the afternoon’s September Milk Production report and Thursday’s Cold Storage data.
The barrels gained a nickel Monday and were up 4.50 cents Tuesday, hitting $2.30 per pound, highest since July 30, and a still too high 44 cents below the blocks.
Lots of eyes are on cheese prices but, in the not very distant future lies the end of the government’s Food Box program and, as the Dairy and Food Market Analyst warned, “Hundreds of million pounds of milk per month will be searching for a home.”
The program could be extended to Round 4, but won’t likely be funded as much and, with the higher dairy product price, won’t buy as much.
Other clouds on the horizon include the rise in U.S. COVID-19 cases and what impact that might have on recovering restaurant purchases of dairy products. Another cloud is the likely failure of Congress to agree on another stimulus package before the election.
DFMA editor and analyst, Matt Gould, talked about dairy’s latest commercial disappearance data in view of current high dairy prices in Monday’s "Dairy Radio Now" broadcast.
He pointed out that the data looks backward from present reality and the latest data is from August, when butter disappearance was down about 9.5%, which followed a 3.6% fall the month before. American type cheese disappearance was down 3.3%, according to Gould, “So if you looked at current price movements you’d be saying demand must be flying off the charts.” It likely is right now, he said, but when you look back at the end of summer when kids were not going back to college, etc., demand was anything but normal.
As to the near all-time record high cheese prices we are seeing, Gould says you can’t ignore the government’s intervention in the marketplace in the form of the Food Box Program. He said that people do not fully appreciate how much Uncle Sam has been buying through that program, a figure he calculates at about 4% of the U.S. milk supply. And when it comes to cheese specifically, he believes that percentage is closer to 7% or 8% or even more, of all the cheese made in the U.S.
Retail sales are not the biggest demand driver of dairy products, according to Gould, prompting the question: If the Food Box Program is not renewed after Oct. 31, will holiday demand step in to make up the difference? Gould says no one has the answer but “that would be a tall order.”
Cheese producers continue to report busy schedules, according to Dairy Market News. Mid-week spot milk prices remained similar to the previous week's prices, but the potential was there for offers under class, says DMN.
Demand for some producers has been a little quieter as cheese prices pushed higher, leaving some customers on the sidelines, according to DMN. That said, however, contacts suggest that “regardless of market prices, buyers will return out of necessity as pipelines dwindle.”
Western cheese manufacturers are running facilities at or above design capacity, as milk is plentiful. Demand is active with consistent pulls from retail and the Food Box program. Pizza cheese demand is solid but most foodservice and specialty cheese accounts are weaker than previous years.
Butter strengthened last week, closing 9.75 cents higher, at $1.51 per pound, but was 60.50 cents below a year ago; 21 cars were sold on the week.
Monday’s butter lost 1.25 cents and stayed put Tuesday at $1.4975 per pound, with no activity.
Butter schedules are busier, says DMN. Cream is still available, especially for those looking for it from the West and or those using internally sourced supplies. Expectations of cream shortages were short-lived or have yet to happen. Retail customers are busy but food service continues its slow incline week after week.
Western retail butter demand is fueling both active ordering and lingering nervousness from those concerning yearend availability. Some retailers project a 20% jump in holiday sales and weekly features.
Grade A nonfat dry milk jockeyed some but closed Friday at $1.14 per pound, up 1.50 cents on the week but 3 cents below a year ago, with 22 carloads finding new homes on the week.
The powder was unchanged Monday but gave up 1.25 cents Tuesday, slipping to $1.1275 per pound.
Global powder demand has been strong, says StoneX, and “has kept domestic supplies in check but with exports lower than expected and a COVID demand story that still brings uncertainty, it seems like NFDM could have some limited upside.”
Dry whey saw little movement last week, closing at 38.75 cents per pound, 0.75 cents lower, but 10.25 cents above a year ago, with 2 sales on the week.
CME dry whey was unchanged Monday and Tuesday.
GDT inches higher
Butter and cheese nudged this week’s Global Dairy Trade auction weighted average up 0.4%, following the 2.2% advance on Oct. 6, and 3.6% on Sept. 15. Sellers brought 76.4 million pounds of product to the market, down from 77.4 million on Oct. 6.
GDT butter was up 3.3%, following the 8.4% gain on Oct. 6, however, anhydrous milkfat was down 0.5% Tuesday, after climbing 5.4% in the last event. Cheddar was up 3.0%, after inching 0.4% higher, and whole milk powder crept up 0.3%, after a 1.7% rise last time.
Lactose again led the losses, down 8.0% after dropping 7.4% last time, and skim milk powder was off 0.2%, after slipping 0.9% lower last time.
StoneX Group equated the GDT 80% butterfat butter price to $1.6277 per pound U.S., up 5.2 cents from the last event. CME butter closed Tuesday at a bargain $1.4975. GDT Cheddar cheese equated to $1.7249 per pound, up 4.9 cents, and compares to Tuesday’s CME block Cheddar at globally high $2.74.
GDT skim milk powder averaged $1.2933 per pound, down from $1.2996, and whole milk powder averaged $1.3776, down from $1.3796. CME Grade A nonfat dry milk closed Friday at $1.1275 per pound.
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