April Milk Report Sets Stage for a Dramatic Drop in May Production
Published: Friday, May 29, 2020
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Preliminary data in the Agriculture Department's latest Milk Production report pegged April output at 18.7 billion pounds, up a somewhat bullish 1.4 percent from April 2019. Output in the top 24 producing states amounted to 17.8 billion, up 1.6 percent.
Revisions added 115 million pounds to the original March total, now put at 19.38 billion pounds, up 2.8 percent from March 2019. The April total included dumped milk and the smaller increase than in March is likely due to farmers reducing output.
April cow numbers totaled 9.38 million head in the 50 states, down 4,000 head from March but 49,000 above a year ago. Output per cow averaged 1,993 pounds, up 18 pounds from a year ago or .5 percent.
California output was up .3 percent from a year ago. Cow numbers were down 4,000, but output per cow was up 10 pounds. Revisions added 61 million pounds to the Golden State's March count. Wisconsin's April output was unchanged from a year ago on 9,000 fewer cows however output per cow was up 15 pounds. Revisions added 13 million pounds to the Badger State's March total.
Ticking down the list, Idaho was up 6.3 percent, thanks to 29,000 more cows than a year ago and 30 pounds more per cow. Michigan was up 1.6 percent, thanks to a 20-pound gain per cow and 3,000 more cows. Minnesota inched up .4 percent on a 20-pound gain per cow offsetting 3,000 fewer cows. New Mexico was down .3 percent on a 65-pound loss per cow, though cow numbers were up 9,000.
FC Stone says the story with this report is the numbers and how they relate to March. "Revisions were made to March U.S. milk production, which pushed March production higher .6 percent, or 115 million pounds, putting an already bearish March report up 2.8 percent, from the original 2.2 percent. The revision to March numbers makes the 1.4 percent growth in April even more surprising as the rate of production growth decreased by that much more. If this rate of slowed down production growth continues, and with the knowledge that many milk reduction programs began in May, then May's milk production will likely go negative." We will see.
Dairy cow culling dipped in April but was up from a year ago. The USDA's latest Livestock Slaughter report shows an estimated 279,400 head were sent to slaughter under federal inspection, down 8,600 head, or 3 percent, from March but 10,900 head, or 4.1 percent, above April 2019. A total of 1.13 million head have been culled in the four-month period, down 16,300 head, or 1.4 percent, from 2019.
Meanwhile, COVID-19 infections of animal processing plant labor forces have disrupted beef, pork, broiler and turkey production in the U.S. since early April, according to the USDA's latest Livestock, Dairy and Poultry Outlook. The outlook notes that each federally inspected meat category showed decline. Estimated pork production in April, at 2.3 billion pounds, was more than 11 percent below a year earlier, as hog processing plants in several states reduced throughput or shut down temporarily due to COVID-related labor shortages.
Estimated beef output, at about 1.8 billion pounds, was almost 21 percent lower, and COVID contagion of poultry plant employees caused year-over-year reductions in broiler and turkey production as well. Estimated April broiler production, at 3.27 billion pounds, was down 2 percent and turkey was down 8.3 percent, to 420 million pounds.
Speaking of COVID, Agriculture Secretary Sonny Perdue announced details last week of the Coronavirus Food Assistance Program, which will provide up to $16 billion in direct payments to deliver relief to America's farmers and ranchers impacted by the pandemic. In addition, USDA's Farmers to Families Food Box program is partnering with regional and local distributors, whose workforces have been significantly impacted by the closure of many restaurants, hotels, and other food service entities, to purchase $3 billion in fresh produce, dairy, and meat and deliver boxes to Americans in need.
Beginning May 26, dairy producers can sign up at their local Farm Service Agency for direct payments to offset losses due to the pandemic. They will receive $6.20 per hundredweight for all first-quarter milk, including what was dumped at 80 percent, with a follow up round of payments, if the $16 billion set aside for direct support for agriculture is sufficient to meet all of the requests.
Government assistance is helping, according to the latest Margin Watch from Commodity and Ingredient Hedging LLC. The MW stated, "Margins improved significantly over the first half of May following a strong recovery in milk prices due to optimism stemming from government intervention to aid the dairy sector." But the MW warned the Class 4 milk price is expected to remain depressed, "dragging on total milk value which may remain below the cost of production."
The dairy outlook mirrored milk price and milk production projections in the May 12 World Agricultural Supply and Demand Estimates. It also stated that the corn price estimate for the 2019-20 marketing year was $3.60 per bushel, and the 2020-21 forecast was $3.20.
The soybean meal price estimate for 2019-20 was $300 per short ton, and the 2020-21 forecast is $290. The alfalfa hay price in March was $175 per short ton, $4 higher than February but $11 lower than March 2019. The five-state weighted-average for premium alfalfa hay was $205 per short ton, $5 lower than February and $8 lower than March 2019.
Forecasts for first quarter 2020 milk cows averaged 7,000 head higher than expected last month. Due to low milk prices, recent dairy cow slaughter data, and actions by some milk handlers to discourage milk production growth, milk cow numbers are expected to decline gradually through the year, says USDA. Milk cows are expected to average 9.355 million in 2020, an increase of 5,000 from last month's forecast.
Milk per cow was higher than expected in first quarter but yield forecasts for the remaining quarters of 2020 were unchanged from last month's forecast as some dairy farmers are expected to take steps to limit yields. Milk per cow for the year was forecast at 23,770 pounds, 5 pounds higher than last month's forecast.
Return to Top of Page