U.S. Milk Production Continues to Grow, Despite Herd Contraction
Published: Friday, November 30, 2018
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Increased output in milk per cow nudged October production above October 2017 and was the 59th consecutive month that output topped that of the year before. Preliminary data in the top 23 states shows output at a somewhat bullish 16.9 billion pounds, up 1 percent from 2017, with the 50-state total, at 17.9 billion pounds, up .8 percent. Revisions lowered the initial 50-state September estimate by 2 million pounds to 17.4 billion pounds, up 1.3 percent from 2017.
October cow numbers in the 50 states totaled 9.37 million head, down 2,000 from September and 30,000 less than a year ago, fourth time cow numbers were below a year ago since May 2016. Output per cow averaged 1,912 pounds, up 21 pounds from the year before.
California output was up 3.2 percent, thanks to a 70-pound gain per cow that outweighed 10,000 fewer cows from a year ago. Wisconsin inched .3 percent lower on a loss of 4,000 cows. Output per cow was unchanged.
HighGround Dairy points out that milk production growth fell below 1 percent for the fourth report this calendar year, which has not occurred with such frequency since 2013. "The U.S. herd size continues to contract as U.S. farmers tighten their belts, but the strength in the milk per cow figure remains strong enough to counterbalance the smallest milking herd since February 2017."
Speaking of herd contraction, dairy cow culling jumped in October as finances tightened on the farm and many shutter their operations. The Agriculture Department's latest Livestock Slaughter report shows an estimated 288,200 head were slaughtered under Federal inspection, up 40,800 from September and 27,200 above a year ago. A total 2.6 million head have been culled in the 10-month period, up 126,300, or 5.1 percent, from 2017.
Meanwhile, dairy trade took another blow in last Tuesday's Global Dairy Trade auction (GDT), event number 224. The weighted average of products offered plunged 3.5 percent, largest decline since Aug. 21, and follows a 2 percent drop on Nov. 6, a .3 percent slip Oct. 16 and a 1.9 percent decline on Oct. 2. It is the seventh consecutive decline. Sellers brought 94.7 million pounds to market, highest amount so far this year.
The losses were led by butter, down 9.6 percent. Anhydrous milkfat was right behind, down 9.4 percent. Rennet casein was down 4.5 percent. Whole milk powder and skim milk powder were down 1.8 and 1.6 percent, respectively. Whole milk powder was down 2.9 percent last time, but skim milk powder was up 1.2 percent.
Lactose and Cheddar cheese were the only two in positive territory; lactose up 1.1 percent, and Cheddar, up .2 percent.
FC Stone equates the GDT 80 percent butterfat butter price to $1.6095 per pound U.S., down 18 cents from the last session. CME butter closed last Wednesday at $2.28. GDT Cheddar cheese equated to $1.4751 per pound U.S. and compares to last Wednesday's CME block Cheddar at $1.3450. GDT skim milk powder averaged 89.13 cents per pound and whole milk powder averaged $1.1789. CME Grade A nonfat dry milk closed last Wednesday and the week at 89¾ cents per pound.
October butter stocks saw the biggest drawdown in 25 years but remain well above October 2017 and the eighth consecutive month they topped year ago levels, according to the Agriculture Department's latest Cold Storage report.
The Oct. 31 inventory plunged to 230.7 million pounds, down 52.5 million pounds, or 18.5 percent, from September but were 12.8 million pounds, or 5.9 percent, above October 2017.
American type cheese, which includes Cheddar, grew to 813.8 million pounds, up 10 million pounds, or 1.2 percent from September, and 73.4 million, or 9.9 percent, above a year ago. Revisions added 11.4 million pounds to the September estimate, and this was the first time American stocks grew in October since 2010, according to FC Stone.
The "other" cheese category fell to 528.8 million pounds, down 14.3 million pounds, or 2.7 percent, from September but was 25.5 million pounds, or 5.1 percent, above a year ago. The total cheese inventory stood at 1.37 billion pounds, down 5.2 million pounds, or .4 percent, from September but a bearish 104.6 million pounds, or 8.2 percent, above a year ago and the 48th consecutive month stocks topped a year ago.
September fluid milk sales totaled 3.79 billion pounds, down an embarrassing 5.6 percent, according to the USDA's latest tracking data, as plant-based beverages appear to continue to steal market share, which was previously already declining.
Conventional product sales totaled 3.6 billion pounds, down 5.9 percent from a year ago; organic products, at 206 million pounds, were even down, off 1.2 percent and represented about 5.4 percent of total sales for the month.
Whole milk sales totaled 1.2 billion pounds, down 2.9 percent from a year ago, up 1.2 percent year to date, and made up 31.3 percent of total fluid sales in the month and 31.9 percent for the year so far. Skim milk sales, at 293 million pounds, were down 13.4 percent from September 2017, down 10.1 percent year to date, and made up just 8 percent of total milk sales for the year so far.
Total packaged fluid milk sales in the nine-month period climbed to 34.8 billion pounds, down 2.5 percent from the same period a year ago.
Conventional products year to date totaled 32.9 billion pounds, down 2.6 percent; organic products, at 1.9 billion pounds, were up .3 percent. Organic represented about 5.5 percent of total fluid milk sales January through September.
The figures represent consumption of fluid milk products in Federal milk order marketing areas and California, which account for approximately 92 percent of total fluid milk sales in the U.S.
The above data factors into what is happening to Class I milk prices. The Agriculture Department announced the December base price at $15.05 per hundredweight, down 47 cents from November, $1.83 below December 2017, and the lowest December Class I since 2009 when it was at $13.99.
Checking the markets, cash cheese prices plunged in the Thanksgiving holiday shortened week. The Cheddar blocks fell to $1.34 per pound last Tuesday, lowest CME price since May 2016, but closed last Wednesday at $1.3450, down 10¾ cents on the week and a heartbreaking 26½ cents below a year ago.
The barrels rolled to $1.24 per pound last Wednesday, approaching lows seen just four weeks ago, down 12 cents on the week, 43½ cents below a year ago, and put the spread at 10½ cents. Fifteen cars of block traded hands on the week at the CME and 6 of barrel.
Many Midwestern cheese plants allotted more time off last week, according to Dairy Market News. Reported spot milk prices were all discounted, ranging $1 to $3 under class. Although discounts were reported, spot milk prices from Thanksgiving week a year ago were as low as $5 under class.
Inventories vary from plant to plant, while barrel producers have begun to see a necessary downshift in stocks the past two weeks. Some cheese producers relay that markets have slowed sales for most of the fall, while others are not as affected. There are contacts who foresee a bullish 2019 ahead and suggest that cheese inventories will begin to clear up as milk intakes have been tighter than in recent years, creating an improved supply/demand balance.
Midwestern butter makers report demand is expectedly strong, according to DMN. Cream is more available, but not as much as was expected during the holiday week. Some Central region churns were clearing cream from the West, as locally produced cream continues to make its way into Class II manufacturing within the region. Butter markets are "steadily bullish."
Global demand for powder has been quiet, says FC Stone. "The uncertainty surrounding trade wars along with a strong U.S. dollar are a few factors keeping global demand weak."
The spot dry whey price closed the shortened week at 42½ cents per pound, a half-cent lower on the week, with 11 cars finding new homes.
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