USDA Lowers Milk Production Estimates Based on Fewer Cows
Published: Friday, September 17, 2021
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Agriculture Department lowered its estimate for 2021 milk production in its latest World Agricultural Supply and Demand Estimates report, third month in a row, and lowered the 2022 estimate, citing lower dairy cow numbers and output per cow for both years.
2021 production and marketings were estimated at 227.8 and 226.7 billion pounds, respectively, down 300 million pounds on production from last month's estimates and 400 million lower on marketings. If realized, 2021 production would still be up 4.6 billion pounds, or 2.1 percent, from 2020.
2022 production and marketings were estimated at 230.6 and 229.5 billion pounds, respectively, down 600 million pounds on production and down 700 million on marketings. If realized, 2022 production would be up 2.8 billion pounds, or 1.2 percent, from 2021.
Butter, cheese, nonfat dry milk (NDM) price forecasts for both years were raised on improving demand and lower production. Whey prices were unchanged for both years. Class III and Class IV milk price forecasts were raised.
Look for the 2021 Class III price to average around $16.65 per hundredweight, up a dime from last month's projection and compares to $18.16 in 2020 and $16.96 in 2019. The 2022 average was estimated at $16.45, up 30 cents.
The 2021 Class IV average was pegged at $15.55, up 40 cents from a month ago and compares to $13.49 in 2020 and $16.30 in 2019. The 2022 average was projected to hit $16.05, up 75 cents from last month's estimate.
In the week ending Aug. 28, 62,400 dairy cows were sent to slaughter, up 3,400 from the previous week, and 8,300, or 15.3 percent, above that week a year ago.
The four-week rolling total continues to gain premium on year ago levels, says StoneX, up to 12 percent above year-ago levels. "This high slaughter level reiterates the theme that the dairy herd is continuing to contract."
USDA data showed July milk production at 19.1 billion pounds, up 2 percent from July 2020. The latest Dairy Products report shows July cheese output totaled 1.15 billion pounds, up 2.4 percent from June and 3.5 percent above July 2020. Year to date (YTD) output stood at 7.9 billion pounds, up 3.3 percent from the same period in 2020.
Wisconsin produced 292.2 million pounds of the U.S. total, up .1 percent from June and 3.5 percent above a year ago. California output, at 203 million pounds, was up 5.1 percent from June and .2 percent above a year ago. Idaho produced 86.1 million pounds, down .1 percent from June and 3.8 percent below a year ago.
Italian-style cheese totaled 484.4 million pounds, down 2.9 percent from June but 6.5 percent above a year ago. YTD Italian hit 3.3 billion pounds, up 1.6 percent.
American-type cheese, at 463.6 million pounds, was up 2.3 percent from June and 2.3 percent above a year ago. YTD American was at 3.2 billion pounds, up 5.5 percent.
Mozzarella output totaled 377.7 million pounds, up 3.5 percent from a year ago, with YTD mozzarella at 2.6 billion pounds, up .1 percent from 2020.
Cheddar, the cheese traded at the CME, totaled 321.8 million pounds, down 5.1 million pounds, or 1.6 percent, from June, and 1 million pounds, or .3 percent, below a year ago. YTD Cheddar climbed to 2.3 billion pounds, up 4.7 percent from 2020.
Churns produced 151.7 million pounds of butter, down 8.6 million pounds, or 5.4 percent, from June, and 1.2 million pounds, or .8 percent, below a year ago. YTD butter output was at 1.28 billion pounds, down 2 percent from 2020.
Yogurt output totaled 394.2 million pounds, up 7.9 percent from a year ago, with YTD at 2.8 billion pounds, up 4.4 percent.
Dry whey amounted to 80.8 million pounds, up 9.4 million pounds, or 13.2 percent, from June, but 1.8 million, or 2.3 percent, below a year ago. YTD dry whey output hit 543.5 million pounds, down 4.7 percent from a year ago. Stocks climbed to 66.8 million pounds, up 5.2 million, or 8.4 percent, from June but were 20.6 million pounds, or 23.6 percent, below those a year ago.
Nonfat dry milk production fell to 157.3 million pounds, down 29.7 million pounds, or 15.9 percent, from June and down 8.8 million, or 5.3 percent, below a year ago. Powder production YTD totaled 1.3 billion pounds, up 9.3 percent from 2020. Stocks fell to 322.3 million pounds, down 27.1 million pounds, or 7.8 percent, from June, but were up 8.5 million pounds, or 2.7 percent, above those a year ago.
Skim milk powder totaled 51.1 million pounds, up 7.6 million pounds, or 17.5 percent, from June but 10.3 million pounds, or 16.8 percent, below a year ago. YTD skim milk powder, at 284.4 million pounds, was down 22.3 percent from 2020.
Global dairy trade strengthened last week as evidenced in the Global Dairy Trade auction. The weighted average jump 4 percent, following the Aug. 17 .3 percent increase, and was the biggest gain since March 2. Traders brought 55.3 million pounds of product to market, up from 49.7 million on Aug. 17, and the most since April 20. Prices averaged $3,927, up $100 from the last event.
Skim milk powder led the gains, up 7.3 percent, after a 1.1 percent uptick on Aug. 17. Butter was up 3.7 percent, following a 4 percent advance, and anhydrous milkfat was up 3.1 percent, after climbing 1.5 percent. Whole milk powder was up 3.3 percent, after falling 1.5 percent, and Cheddar was up 3.6 percent, following a 2.8 percent advance. Buttermilk powder was up 3 percent.
StoneX says the GDT 80 percent butterfat butter price equates to $2.1896 per pound U.S., up 7.9 cents, and compares to CME butter which closed last Friday at $1.7850. GDT Cheddar, at $1.9630, was up 6.5 cents, and compares to last Friday's CME block Cheddar at $1.79. GDT skim milk powder averaged $1.4850 per pound, up from $1.3845. Whole milk powder averaged $1.6740 per pound, up from $1.6112. CME Grade A nonfat dry milk closed last Friday at $1.3575 per pound.
Slowing milk supplies in Europe, and to some degree in the U.S., meeting good dairy demand was GDT's message, according to StoneX. Broker Dave Kurzawski, in the Sept. 13 Dairy Radio Now broadcast, said, "Milk tightness is the key underpinning for all of the markets, both here in the U.S. and globally," although it's not a "terrible tightness." The trend has been fewer cows in the U.S. and New Zealand, he said, and hotter weather, which took a toll in Europe this summer, and while milk output is still growing, it's at a "diminished rate."
I asked about the increased costs of production and Class III futures not promising much in the way of breaking even, let alone making a profit, and he agreed. He said that was felt more acutely this summer in Europe, but U.S. farmers will be feeling it in coming months. The 2022 average, which was at $17.60, would normally be considered a good price, he concluded, but not so much now. "There are things farmers can do to protect themselves as we enter a bigger demand period with schools reopening and the holidays upon us."
Back in Chicago, block Cheddar closed the Labor Day holiday shortened week at $1.79 per pound, up 5.50 cents but 37.50 cents below a year ago. The barrels climbed to $1.49 last Thursday but finished last Friday at $1.4775, still up 8.50 cents on the week, 11.75 cents below a year ago, and 31.25 cents below the blocks. Only six cars of barrel were sold on the week.
Midwest cheesemakers tell DMN that good demand remains despite continued COVID resurgences. Pizza cheese, curds and cut-and-wrap retail varieties are moving well, but "production hiccups" are regularly reported. Employee shortages have plants working with fewer employees during a strong demand season and some do not foresee a short-term remedy, says DMN. Milk availability has begun to balance out after the initial school demand rush for bottled milk.
Western cheese sales also remain steady in retail and food service, and international demand remains strong, especially to Asian markets. A shortage of truck drivers and limited shipping supplies continues to cause delays as well as port congestion. Milk availability has declined seasonally in the West, though cheese producers are able to obtain sufficient supplies.
After jumping 9 cents the previous week, butter closed at $1.7850 per pound, down 1.25 cents on the week but 30.50 cents above a year ago on 24 sales.
Cream continues to tighten. Seasonal drawdowns have begun to take place due to heat and humidity. Churns were not as active over the holiday weekend but cream was available. Post-holiday, some say cream is out of their fiscal reach. Plant managers continue to report employee shortages and truck drivers are short, so cream hauling issues continue. Market tones are awaiting direction. As the stronger demand season looms, some foresee strengthening prices ahead.
Cream in the West was slightly more available this week, but widespread driver shortages remain a hindrance. Some butter plants are operating at capacity to grow inventories ahead of the holiday season while others are running reduced schedules. Food service demand is steady and has yet to be dampened by the delta variant, says DMN, and retail orders are unchanged.
Grade A nonfat dry milk hit $1.36 per pound last Tuesday, highest price in seven years, but closed last Friday at $1.3575, 1.75 cents higher on the week and 31.75 cents above a year ago, with 12 sales reported.
Dry whey regained ground this week, closing at 53 cents per pound, up 4.50 cents on the week and 17.50 cents above a year ago, with four sales reported.
Labor Shortage
After 18 months of expanded unemployment benefits to millions of Americans who lost jobs during the pandemic, the increased payments expired as of Labor Day. The federal weekly supplement to state unemployment payments was $600 per week throughout summer 2020 and $300 since December 2020. HighGround Dairy says more than 11 million people are impacted by the reduction, yet "simultaneously, there are a record 10 million job openings across the U.S. as businesses in a wide variety of sectors search desperately for workers.
"The end of expanded unemployment benefits is not expected to quickly solve the labor shortage, though," said HGD. "In dozens of states that ended expanded benefits earlier this summer, there was not a substantial increase in job applicants in recent weeks. Many unemployed workers cite concerns about child care and the continuing pandemic in their hesitation to return to the workforce."
Agriculture Secretary Tom Vilsack announced last week that $700 million in competitive grant funding will be available through the new Farm and Food Workers Relief (FFWR) grant program to help farmworkers and meatpacking workers with pandemic-related health and safety costs.
Additionally, to recognize the essential role and costs borne by front-line grocery workers, $20 million of this amount has been set aside for at least one pilot program to support grocery workers and test options for reaching them in the future. The new program is funded by the Consolidated Appropriations Act of 2021 and will provide relief to farmworkers, meatpacking workers and front-line grocery workers for expenses incurred due to the COVID-19 pandemic.
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