The downturn in U.S. milk production was bigger than we thought but is likely over. The U.S. Department of Agriculture’s latest preliminary data put September output at 18.21 billion pounds, down a somewhat bullish 32 million pounds, or 0.2%, from September 2022. The top 24-state total, at 17.465 billion, was down 0.03%. It was the third consecutive month that output lagged a year ago as low milk prices and high feed costs took their toll.
The August 50-state total was revised down 119 million pounds from last month’s estimate, which put output down 0.8% from 2022 instead of the 0.2% originally reported. The 24-state revision was down 73 million pounds, 0.7%, instead of the 0.3% loss originally reported.
The Oct. 19 Daily Dairy Report said, “USDA made important revisions to data in prior months, suggesting that since April, milk supplies have been lighter than previously believed. USDA revised lower year-over-year production for each of the last five months by at least 0.1% and revised cow numbers downward in July and August by 11,000 and 14,000 head, respectively.”
September cow numbers totaled 9.370 million head, down 6,000 from the August count which was revised down 14,000 head. The herd is 36,000 below a year ago and the smallest since January 2022. The 24-state count was down 2,000 from August, which was revised up 1,000 head, but is 16,000 below a year ago.
Output per cow in the 50 states averaged 1,943 pounds, down 68 pounds from August, but 4 pounds, or 0.2%, above September 2022. The 24-state output averaged 1,960 pounds, down 70 pounds from August but 3 pounds, or 0.15%, above a year ago. Revisions lowered August output per cow by 10 pounds in the 50 states and lowered it 8 pounds in the 24-state data.
California cows put 3.2 million pounds in the tank, down 60 million, or 3.7%, from a year ago. Cow numbers were down 9,000, and output per cow was down 25 pounds. California hasn’t posted a gain since August 2022.
Wisconsin, with 2.6 billion pounds produced, was up 30 million, or 1.1%, from a year ago, thanks to a 25-pound gain per cow offsetting the loss of 1,000 cows.
Idaho was off 0.6% on a 30-pound drop per cow although cow numbers were up 5,000. Michigan was up 2.7% on 11,000 more cows and 5 pounds more per cow. Minnesota was off 0.6% on 3,000 fewer cows. Cow output was unchanged.
New Mexico was down 7.2% on 19,000 fewer cows and 10 pounds less per cow. New York was up 2% on 5,000 more cows and 25 pounds more per cow. Oregon was down 4.2% on 5,000 fewer cows. Output per cow was unchanged. Pennsylvania was off 0.1% on 2,000 fewer cows. Output per cow was up 5 pounds.
South Dakota was up 5.9%, thanks to 12,000 more cows; however, output per cow was down 10 pounds. Texas was down 1%, despite a 45-pound gain per cow. Cow numbers, still hurting from the disastrous fire, were down 20,000. Vermont was down 1.9% on a 20-pound drop per cow and 1,000 fewer cows. Washington was down 1.2% on a 20-pound drop per cow. Cow numbers were unchanged from a year ago.
Culling continues to slow. The livestock slaughter report showed an estimated 240,500 dairy cows sent to slaughter under federal inspection in September, down 34,700 head from August and 20,000, or 7.7%, below September 2022.
The week ending Oct. 7 saw 57,100 dairy cows go to slaughter, up 500 from the previous week but 2,900, or 4.8%, below a year ago. Year-to-date, 2,435,200 head have been culled, up 93,900, or 4%, from a year ago.
Checking the fields, the U.S. corn harvest is 45% complete according to USDA’s latest crop progress report, as of the week ending Oct. 15. That’s up from 34% the previous week and 2% ahead of a year ago. 53% was rated good to excellent, unchanged from the previous week and a year ago.
Soybeans were at 62% harvested, up from 43% the previous week and 2% ahead of a year ago. 52% were rated good to excellent, up 1% from the previous week but 5% below a year ago.
USDA announced the November Federal Order Class I base milk price at $19.75 per hundredweight, up 28 cents from October, $4.34 below November 2022, but the highest Class I since February. It equates to $1.70 per gallon, down from $2.07 a year ago. The 11-month average stands at $19.15, down from $23.76 a year ago, and compares to $16.61 in 2021.
“With the exception of spot fourth quarter, dairy margins were steady to slightly higher over the first half of October as strength in milk prices more than offset higher projected feed costs,” said the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.
“USDA lowered their yield forecast for both corn and soybeans in the October (World Agricultural Supply and Demand Estimates) with the corn balance sheet tightening from September and both markets moving higher following the report with ideas we may have seen the harvest lows. Milk prices have stabilized recently as strength in dairy product prices, particularly butter, is helping to support the milk market,” MW said.
MW reported on the record butter price, citing tight cream supplies this summer, particularly in the West, limiting butter production, which combined with strong demand. It also cited data from the latest dairy products report. “Combined production of nonfat and skim milk powder declined 14.4% from a year ago, lowest August figure since 2016,” MW said. “Milk powder exports in August of 145.7 million pounds were up 5.5% from last year with YTD exports 0.5% ahead of 2022 and the second highest on record behind 2021. August cheese exports of 79.5 million pounds were down 3% from last year, with the YTD pace trailing 2022 by 5.7%.”
CME block cheddar climbed to $1.8125 per pound Thursday, highest since Sept. 19, but closed Friday at $1.7875, up 8.75 cents on the week, ending six weeks of losses but still 27 cents below a year ago.
The barrels finished at $1.71, 6.50 cents higher, highest since Sept. 18, 38 cents below a year ago and 7.75 cents below the blocks. Twenty-nine loads of block were traded on the week and 15 of barrel.
Midwest cheesemakers reported mixed notes regarding demand, according to Dairy Market News. Some cheddar and pizza-style cheesemakers say orders are below average for this time of year. Others are as busy, if not busier. Cheese inventories have grown at some plants but not to a concerning level. One reason is the milk supply, which is still in line with previous weeks. Reported spot prices ranged from 25 cents to $1.75 over Class III. Last year, they were $3 under to $1 over Class. Cheese production was slightly busier than the previous week, but plants expect steadier interest as the block-to-barrel price gap narrows.
Cheese demand in the West is steady from retail and food service. Exports lag domestic demand although sentiment is that that prices are currently more competitive to attract greater interest from international buyers. Demand for Class III milk is strong to steady; however, some manufacturers report limited extra milk, making production schedules steady, said Daily Market News.
Spot butter, after plunging 14.25 cents the previous week, fell to $3.35 per pound Monday, then jumped 6 cents Tuesday, only to close Friday at $3.36, unchanged on the week and 16 cents above a year ago, with 13 loads trading hands.
Cream was somewhat tight until October, according to DMN, but butter makers said it opened up late last week and over the weekend. Cream spots are now in the low 1.20s, “within the fiscal comfort zone for churning.” Both Class II and Class III have shown slowdowns in cream end usage; therefore, butter processors say that both regional and Western region cream loads are available.
Cream is tight in the West, but spot loads are available. Some butter producers are limiting purchases of cream due to current prices. Domestic demand for butter is reported as steady. Some plants are working toward further build up for anticipated remaining 2023 holiday demand while others are waiting given prices.
Grade A nonfat dry milk climbed to $1.2350 per pound Thursday but finished Friday at $1.2325, up 1.25 cents on the week, highest since Feb. 13, but still 18.75 cents below a year ago. There were 18 sales on the week. The reduced flow of cargo trucks at the U.S.-Mexico border in El Paso, Texas, has eased.
Dry whey closed Friday at 39.50 cents per pound, up 6 cents on the week, highest since April 5, though 4.50 cents below a year ago. Thirty loads sold on the week. Every penny increase in the whey price lifts Class III futures by 6 cents.
The Oct. 17 Global Dairy Trade saw its fourth consecutive week of gain. Event 342’s weighted average rose 4.3%, following a 4.4% rise Oct. 3. Traders brought 79.3 million pounds of product to the market, down from 84.5 million Oct. 3, the lowest since Aug. 15. The average metric ton price climbed to $3,202, up from $3,104 Oct. 19, and the highest since July 18.
Anhydrous milkfat led the gains, up 7.1% following a 3.7% rise Oct. 3. Butter was up 2.9%, after a 1.3% rise. Skim milk powder, after leading the gains the last two events, was up 4.3% following a 6.6% surge. Whole milk powder was up 4.2% after jumping 4.8%. Lactose and GDT cheddar were both up 0.2%, following respective 1.3% and 4.8% declines last time.
StoneX said the GDT 80% butterfat butter price equates to $2.1863 per pound, up 6 cents from the Oct. 3 event, and compares to CME butter, which closed Friday at a still pricy $3.36. GDT cheddar, at $1.7499, was up fractionally and compares to Friday’s CME block cheddar at $1.7875. GDT skim milk powder averaged $1.2062 per pound, up from $1.1604 (4.6 cents), and whole milk powder averaged $1.3877 per pound, up from $1.3296 (5.8 cents). CME Grade A nonfat dry milk closed Friday at $1.2325 per pound.
Volume purchased by North Asia, which includes China, was down from the previous event, but was up from last year. Southeast Asian purchased volume was up from last event and up sharply from last year. While North and Southeast Asia’s large share of volume likely supported the market, buying interest was decent across all the regions, reported analyst Dustin Winston.
“Weather conditions in New Zealand are far better than production levels might indicate,” said StoneX. “The NZ pasture growth index is above last season’s levels and right in line with the five-year average. Still, Fonterra is noting poor milk production on the North Island.”
Speaking of China, the September dairy import data shows lots of negatives, mirroring that of August, according to HighGround Dairy. Whole milk powder imports were down 35.6% from September 2022, and skim milk powder imports were down 22.2%. Whey imports were down 11.6% although YTD are up 13.7%. China’s butter imports were up 13.7%, and cheese imports saw a 14.8% increase.
Rabo Bank Dairy analyst Lucas Fuess reported highlights from last week’s International Dairy Federation World Dairy Summit in Chicago, stating that over a thousand people from 50 countries attended. Topics included the challenges and opportunities facing the global dairy industry in dairy trade and sustainability. Those issues face dairy farmers and processors alike, he said, as well as plant-based competitors. Paris will be the host next year, Fuess said.
Cooperatives Working Together member cooperatives accepted two offers of export assistance from CWT that helped them capture sales contracts for 355,000 pounds of American-type cheese. The product is going to customers in Middle East-North Africa and Oceania through December.
CWT-assisted sales for 2023 now total 36.8 million pounds of American-type cheeses, 908,000 pounds of butter, 26,000 pounds of anhydrous milkfat, 36.8 million pounds of whole milk powder and 7.2 million pounds of cream cheese. The products are going to 25 countries and are the equivalent of 699.7 million pounds of milk on a milkfat basis, according to the CWT.
Looking at demand, USDA’s August dairy product supply and utilization data shows total cheese utilization at 1.19 billion pounds, down 3.1% from August 2022, largest decline since April 2020, according to HighGround Dairy, primarily driven by a 4.6% drop in domestic American consumption and exports being down 16.1%.
Butter usage, at 189 million pounds, was up 0.2%, thanks to strong domestic demand over-coming a 62.9% plunge in exports, which is no surprise considering U.S. butter prices are the most expensive on the planet.
Nonfat-skim milk powder, at 189.6 million pounds, was down 14.2%, lowest monthly level since January 2020, said HGD, “as domestic demand plummeted 49.1%, lowest August volume on record with data back to 2011.” Exports were up 4.3%.
Dry whey consumption hit 82.2 million pounds, up 2.4%, thanks to a 71.1% increase in domestic use offsetting a 38.2% loss in exports. However, on a month-to-month basis, HGD says domestic usage declined while exports rose for the first time since March.
In politics, Geoff Vanden Heuvel, director of regulatory and economic affairs for California’s Milk Producers Council, updated members in his Oct. 13 newsletter on the ongoing USDA hearing on market order milk pricing.
The proposal to update and raise Class I differentials in all 3,100 counties by the National Milk Producers Federation consumed the three full days of testimony the week of Oct. 9. The hearing is on pause until Nov. 27. You can read complete details at www.milkproducerscouncil.org.
