U.S. milk production continued to lag that of a year ago in April, the sixth month in a row to do so, as cow numbers and output per cow paused. The Agriculture Department’s latest preliminary data shows April output at 19.15 billion pounds, down 1.0% from Apr. 2021, and follows a revised 0.4% drop in March. April output in the top 24 producing states totaled 18.3 billion pounds, down 0.9%. Only five of the top 24 producing states showed an increase in milk output.
Revisions raised the original 50-State March estimate by 23 million pounds to 19.7 billion, 0.4% below a year ago, instead of the 0.5% originally reported.
Farmers added 13,000 cows to the milking string in February, and 22,000 in March, following a 7,000 head revision, hitting 9.4 million head. The April count was unchanged from March, but was 98,000 below a year ago.
April output per cow averaged 2,037 pounds, unchanged from April 2021.
California output totaled 3.6 billion pounds, down 21 million or 0.6% from a year ago, despite 2,000 additional cows in the string but output per cow was down 15 pounds. Wisconsin, at 2.6 billion pounds, was down 3 million or 0.1%. Cow numbers were down 1,000. Output per cow was unchanged from a year ago.
Idaho was again unchanged across the board. Michigan was down 3.4% on 17,000 fewer cows, though output per cow was up 10 pounds. Minnesota was down 1.4% on a 9,000 cow loss, while output per cow was up 10 pounds. New Mexico was down 12.9% on 41,000 fewer cows and a 15 pound loss per cow.
New York was off 0.8% on 6,000 fewer cows. Output per cow was up 5 pounds. Oregon was up 2.7% on a 20 pound gain per cow and 2,000 more cows. Pennsylvania was down 2.2%, on 8,000 fewer cows and a 10 pound drop per cow. South Dakota was up 16.7%, thanks to 25,000 more cows and a 5 pound gain per cow.
Texas remained the nation’s Number 3 producer, putting 4.7% more milk in the tank than a year ago, thanks to 23,000 more cows and a 20 pound gain per cow. Vermont was off 0.9% on a 5 pound drop per cow and 1,000 fewer cows. Washington State was down 5.4% on 12,000 fewer cows and a 20 pound drop per cow.
High milk prices are incentivizing dairy farmers to keep cows in the milking string. Dairy culling dropped in April, according to the USDA’s latest Livestock Slaughter report. An estimated 237,800 head were sent to slaughter under federal inspection, down 59,400 or 20% from March, and 19,700 head or 7.7% below Apr. 2021. Culling in the first four months of 2022 totaled 1.06 million head, down 39,900 or 3.6% from the same period a year ago.
In the week ending May 7, 56,400 dairy cows were sent to slaughter, up 4,800 head from the previous week, but 400 or 0.7% below a year ago.
Tuesday’s Global Dairy Trade auction saw its fifth consecutive decline. The weighted average was down 2.9%, following the 8.5% drop on May 3. Traders brought 53.5 million pounds to the market, down from 55.5 million on May 3, and the average metric ton price was at $4,432 U.S., up from $4,419.
Event 308 was led by whole milk powder dropping 4.9%, following the 6.5% decline on May 3. Skim milk powder was down just 0.6%, after dropping 6.5%. GDT butter was down 1%, after leading the losses last time with a 12.5% plunge. Anhydrous milkfat inched up 0.6% after a 12.1% plunge last time. Cheddar rounded out the losses, down 0.1%, after dropping 8.6% las time.
StoneX says the GDT 80% fat butter price equates to $2.5446 per pound U.S., down 2.5 cents after dropping 36.9 cents in the last event, and compares to CME butter which closed Friday at $2.85. GDT Cheddar, at $2.5559, was down 0.8 cents, after losing 24.2 cents last time, and compares to Friday’s CME block Cheddar at $2.38. GDT skim milk powder averaged $1.8669 per pound, down from $1.8731. Whole milk powder averaged $1.7845 per pound, up from $1.7764. CME Grade A nonfat dry milk closed Friday at $1.80 per pound.
StoneX’s Dustin Winston says volume purchased by the North Asia region, which includes China, was again lower from the last event and last year. Every other region experienced an increase from last year’s volume with only Africa and North America declining from the last event.
HighGround Dairy points out that buyers were taking advantage of China’s pullback while they can as China focuses on its Zero-COVID policy. To no one’s surprise, China’s April imports were down on just about every product except three, one of them ironically being infant formula. I’ll report details next week.
In other trade news; the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) called on the U.S. government this week to levy retaliatory tariffs on Canada after Ottawa made clear that it refuses to meet its signed treaty obligations under the U.S.-Mexico-Canada Agreement (USMCA) concerning dairy market access.
A USMCA dispute resolution panel initiated by the U.S. in January found that Canada’s dairy tariff-rate quotas (TRQs) system violated terms of USMCA. Canada issued a new proposal in March which included “inconsequential changes,” says NMPF, and “This week’s announcement shows no indication that Canada intends to comply with its USMCA commitments on dairy TRQs.
“Canada made a clear choice to thumb its nose at both the U.S. government and its international treaty obligations,” said NMPF’s Jim Mulhern.
Michael Dykes, president of the International Dairy Foods Association, stated; “Canada’s publication clearly shows they are ignoring their trade commitments agreed to in the USMCA and refusing to administer their dairy TRQs in a manner compliant with the agreement.”
Back home, the June Federal order Class I base milk price set another record high at $25.87 per hundredweight, up 42 cents from May, $7.58 above a year ago, and equates to $2.22 per gallon, up from $1.57 a year ago. The six month Class I average is at $23.32, up from $16.13 a year ago and $15.84 in 2020.
In other milk price news, dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Missouri, warns that, after plugging the latest WASDE data into the DMC formula, “2023 will be a tighter margin year for dairy producers. The first look at 2023 shows the margin over feed costs at $9.33 versus $12.58 for 2022. The 2022 $12.58 from this month’s report is down from April’s $12.85 due to lower milk prices and higher feed costs,” says Brooks.
Production costs are hitting “remarkable levels,” according to the May 13 Dairy and Food Market Analyst, “most notably in California where hay prices have risen to around $440 per ton. For a dairy purchasing 100% spot feed, we estimate breakeven milk prices are around $24.50 per hundredweight,” the Analyst stated.
The latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging, says “With the exception of spot second quarter, dairy margins weakened further over the first half of May as a combination of lower milk prices and steady to slightly higher feed costs weighed on forward profitability. Class III prices have been pressured by falling whey prices as export demand slows.”
The MW detailed March export data, which I previously reported, and pointed to dairy exports to China being down 12% from last year and 9.5% lower for the first quarter. It stated; “A combination of China’s zero-tolerance Covid-19 policy with aggressive lockdowns and logistical issues have negatively impacted demand.” “Slumping profitability in China’s domestic hog sector during first quarter significantly pressured whey demand,” the MW stated, and “Each 6-cent decline in the price of whey equates to 30 cents for Class III milk, so the recent drop in whey prices equals almost $2.00 per cwt. loss in value.”
U.S. feed prices remain elevated, according to the MW, and planting is behind year ago levels, with “Significant delays in both Minnesota and North Dakota.”
The USDA’s latest Crop Progress report showed some progress in the fields as 49% of the U.S. corn crop was in the ground, as of the week ending May 15.
That’s up from just 22% the previous week, but still 29% behind a year ago and 18% behind the most recent five year average. The report shows 14% of the corn emerged, down from 38% a year ago, and 18% behind the five year average.
Soybean plantings are at 30%, up from 12% the previous week, but 28% behind a year ago, and 9% behind the five year average. The report adds that 9% have emerged, 10% behind a year ago, and 3% behind the five year average.
Cotton is 37% planted, 1% ahead of a year ago, and even with five year average.
CME block Cheddar closed Friday at $2.38 per pound, up 7.25 cents on the week, and 81 cents above a year ago when they dropped 15.50 cents to $1.57.
The barrels climbed to $2.45 per pound Tuesday, highest since Nov. 5, 2020, but closed Friday at $2.3475, down 4.75 cents on the week, 74 cents above a year ago. There were 6 sales of block on the week at the CME and 21 of barrel.
Concern over milk supply appears to be outweighing concern about any slowdown in demand. The National Oceanic and Atmospheric Administration’s latest 90-day forecast of above normal temperatures is not helping.
Storms slammed the Northern Plains with high winds and heavy rain the week of May 9 and the Daily Dairy Report’s Sarina Sharp wrote in the Milk Producers Council newsletter that three cheese plants in South Dakota and Iowa were shuttered by power outages. She said the plants can process more than 12 million pounds of milk per day. Some producers dumped milk and the plants will have to discard the cheese they were in the process of making before the shut down so “There may be a little less cheese for sale in Chicago over the next 30 days, which could briefly lift the spot Cheddar market,” according to Sharp..
Meanwhile, cheese demand is mixed according to Midwestern cheesemakers who told Dairy Market News that “The previous weeks’ block market dips may have affected customers’ approaches. This week’s markets buoyed, so some buyers may look to get ahead of potentially bullish markets in the next weeks.” Cheddar makers are finding milk at levels similar to previous weeks and production is active. Mid-week prices ranged from $2.50 under to 75 cents over Class III, according to DMN, but “May has been a very active month in regards to spot milk making its way into cheese vats.” Cheese availability is balanced to tight, says DMN, “But as notable amounts of milk clear to the vats, with Class I demand ebbing, inventories could continue to increase.”
Domestic demand for cheese is steady to higher in the West. Retail sales were unchanged from the previous week but food service purchasing was trending higher. International demand is strong, though port congestion continues to cause delays. A shortage of truck drivers and available shipping containers also remains troublesome.
Cheese inventories are available and plants are running busy schedules, as milk is available but some continue to run below capacity due to labor shortages and delayed deliveries of production supplies, says DMN.
Butter closed at $2.85 per pound, up 14.50 cents on the week, highest since Feb. 5, and 98 cents above a year ago, with 37 cars sold, most since mid-December 2021.
Butter plant managers say spot cream availability has begun to shift from pricey to out of reach for churning, particularly from sources within the region. Butter demand has quieted down the past few weeks. Butter production remains active as plants focus on inventory for the late summer upticks and fall demand season.
Cream inventories are available in the West, with purchasers from other regions looking to buy cream but ice cream makers are running busy schedules and pulling cream. Churns are active, though some plants are limited by labor shortages. Retail butter demand is steady to lower, while food service is steady.
Grade A nonfat dry milk saw its Friday finish at $1.80 per pound, 7 cents higher on the week, highest since Apr. 18, and 50.25 cents above a year ago on 6 sales
StoneX cited a Reuters story entitled “Mexico to Suspend Import Duties on Food Staples to Tackle In?ation.” Dairy is included, warned StoneX. “At ?rst blush this looks to invite competition as Mexico doesn’t have a tarif on U.S. product thanks to NAFTA/USMCA, but they did have tarifs on product from New Zealand and the EU. It looks like the tarif on powdered and liquid milk are going to zero for all countries for the next year,” according to StoneX.
Dry whey fell to 48.50 cents per pound Monday, lowest since Aug. 4, 2021, but closed Friday at 50.75 cents, down 2.50 cents on the week and 13.75 cents below a year ago, on 21 sales, highest total since the week of Jun. 22, 2020.
Demand for dry whey has been lower, largely led by China hitting the brakes, says StoneX, “But production is also likely higher and manufacturers remain looking for a home for this excess dry whey.”
