The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Weather impacted June U.S. milk production, according to preliminary data in last Tuesday's Milk Production report. The Agriculture Department estimates output in the top 23 producing states at 16.4 billion pounds, up just .7 percent from June 2014. The 50-state total, at 17.4 billion pounds, was also up .7 percent. FC Stone dairy broker Dave Kurzawski said the increase was half what he had projected, so he views the report as a bit bullish.
June cow numbers in the 23 states, at 8.63 million head, were down 2,000 head from May but 56,000 more than a year ago. The 50-state count, at 9.3 million head, was down 7,000 from May but 50,000 more than a year ago.
Hot, humid weather kept California output below a year ago, down 4.3 percent in June on an 85-pound per cow drop and 1,000 fewer cows. May output was off 2.7 percent. Wisconsin, however, was up 3.4 percent in June on a 50-pound gain per cow and 8,000 more cows. That follows a 3.9 percent increase in May.
Michigan put a lot more milk in the tank, up 7.2 percent, thanks to 21,000 more cows and a 35-pound gain per cow. But the biggest increase was in South Dakota, up 12 percent on a 45-pound gain per cow and 9,000 more cows.
Meanwhile, dairy cow culling picked up in June, according to USDA's latest Livestock Slaughter report issued last Thursday. The data shows an estimated 221,500 dairy cows were slaughtered under Federal inspection in the month, up 7,500 head from May and 22,000 head, or 11 percent more than June 2014.
Looking at the first six months of 2015, 1.46 million dairy cows took retirement from the dairy business, up 65,400 head from the same period a year ago, or a 4.7 percent increase.
Cheese Inventory
The added milk supply surely headed to the cheese vat, adding to growing inventories. American type cheese stocks in June totaled 684.9 million pounds, according to USDA's latest Cold Storage report issued last Wednesday, up 15.4 million pounds, or 2 percent, from May and 29.6 million, or 5 percent, above June 2014. The total cheese inventory hit 1.14 billion pounds, 29.2 million pounds, or 3 percent, above May and 85.7 billion pounds, or 8 percent, above a year ago.
Butter stocks dipped to 254.7 million pounds, down 10.1 million pounds, or 4 percent, from May but were 55.4 million pounds, or 28 percent, above a year ago.
HighGround Dairy's Eric Meyer points out that all three cheese categories saw monthly stock builds that were greater than the five-year average, "suggestive that bullish conditions present in the market a few months prior have dissipated." He adds that butter stocks declined in June from May but at historically average levels from past years. The year-over-year percentage growth continues to increase with three straight months over 20 percent, so he sees the data as bearish toward cheese and neutral toward butter.
Cash traders had to digest the June Milk Production, Cold Storage and Slaughter reports last week. Cheese prices saw some ups and downs, but the block Cheddar closed last Friday at $1.6975 per pound, up 8½ cents on the week after dropping 11¼ cents the previous week. Domestic demand appears to remain strong, but they are 27¼ cents below a year ago. The barrels finished at $1.66, up 6½ cents on the week and 29¼ cents below a year ago. Seven cars of block traded hands on the week and 21 of barrel. The lagging NDPSR-surveyed, U.S. average block price fell to $1.6761, down 2.2 cents, while the barrels averaged $1.6559, down 1.6 cents.
Cash butter slipped to $1.8325 last Monday, the lowest price since May 4, but rallied and closed last Friday at $1.9550 per pound, up 11½ cents on the week and reversed two weeks of decline, but is 63½-below a year ago when the spot butter jumped 11 cents to $2.59 per pound. Twelve cars traded hands at the CME. NDPSR butter averaged $1.9301, down .6 cent.
Cash Grade A nonfat dry keeps setting records in the wrong direction, dipping to 70½ cents per pound last Thursday but inched back to 71¼ cents last Friday on two unfilled bids, down 4¼ cents on the week and 96¼ cents below a year ago.
Twenty-three carloads exchanged hands last week at the CME. NDPSR powder averaged 84.72 cents per pound, down 1½ cents, and dry whey averaged 38.94 cents per pound, down 1.6 cents. California's latest surveyed powder price averaged 85.99 cents per pound, down 3.1 cents.
USDA's latest Livestock, Dairy, and Poultry Outlook reported rising prices for alfalfa, hay and soybean meal but declining prices for corn. The alfalfa hay price increased from $184 in April to $192 in May. Corn prices declined from $3.75 per bushel in April to $3.62 in May. The soybean meal price rose from $320 per ton in May to $335 in June. The milk-feed ratio for May was 1.96, about the same as 1.95 in April, but substantially lower than the peak of 2.97 in September.
Corn price forecasts were raised from last month to $3.60-$3.80 per bushel for 2014-15 and $3.45-$4.05 per bushel for 2015-16. The soybean meal forecast for 2015-16 was raised to $315-$355 per short ton.
Cooperatives Working Together accepted four export assistance requests last week from Dairy Farmers of America, and Northwest Dairy Assn. (Darigold) to sell 1.12 million pounds of Cheddar cheese, and 44,092 pounds of whole milk powder to customers in Asia and South America. The product will be delivered through December and raises CWT's 2015 cheese exports to 41.9 million pounds plus 30.4 million pounds of butter and 30.1 million pounds of whole milk powder to 31 countries on five continents.
CWT Program Under Fire
Speaking of the CWT, the Capital Press reports that two retail companies are accusing the farmer funded CWT program of "manipulating milk prices, opening a new front in litigation over a herd retirement program."
Piggly Wiggly Midwest, a grocery chain, and Kinney Drugs, a pharmacy chain, have filed an antitrust complaint against the National Milk Producers Federation and associated dairy cooperatives.
The lawsuit claims NMPF's CWT program repeatedly paid farmers to send herds to slaughter between 2003 and 2010, thereby reducing milk output and inflating prices for dairy products. The plaintiffs characterize CWT as "an unlawfully anti-competitive conspiracy," and have requested class action status that would allow other direct dairy purchasers to join in the lawsuit to seek compensation.
NMPF's Chris Galen said they could not yet comment on the complaint.
USDA announced the August Federal Order Class I base milk price is $16.28 per hundredweight, down 25 cents from July, $7.59 below August 2014, and the lowest August Class I since 2010. The price equates to about $1.40 per gallon, down from $1.42 last month and $2.05 a year ago. The eight-month average stands at $16.33, down from $23.13 a year ago and $18.39 in 2013.