Cow Slaughter May Have Peaked, Signaling a Rebound in Numbers
Published: Friday, December 1, 2023
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
U.S. October milk production remained below that of a year ago, the fourth month in a row. The Agriculture Department's latest preliminary data put output at 18.71 billion pounds, down 99 million pounds, or .5%, from October 2022. The top 24-state total, at 17.94 billion, was down .04%.
Cow numbers totaled 9.370 million head, down 6,000 from the September count, which was revised down 6,000 head. The herd was 42,000 below a year ago and the smallest since January 2022. The 24-state count was down 5,000 from September, which was revised up 6,000 head but 19,000 below a year ago.
Fat content is still running strong, according to StoneX, Dairy Group, but protein was only slightly above last year in October. Cow numbers have roughly flattened out since July and, given the continued weak dairy cow slaughter, there's an argument that the big drops in cow numbers are likely done. With all the new productive plant capacity slated over the next 18 months, we're likely going to need to see cow numbers start to turn around here to stave off heated competition for milk in the second half of the year. Production per cow remains weaker relative to trend and could make things interesting into next year. Feed is getting cheaper and looking at long-term trends, we will likely see better production per cow, according to StoneX.
While the decrease in milk output was bigger than expected, there's no worry that we're going to run out of milk, but we will need that extra milk, says broker Dave Kutzawski in the Nov. 27 "Dairy Radio Now" broadcast.
He cited the increased processing capacity coming on line and said, "We thought cow numbers would be up 1,000 head, but they were down 6,000. Slaughter numbers have slowed but remain above a year ago, and we have to start rebuilding the herd."
Kurzawski blamed low milk prices and high feed costs for the weaker milk output but included the increased fixed costs; labor, fuel and the cost of money itself, which is the big one right now. "All these things puts a wet blanket on the optimistic views of otherwise fairly bullish dairy farmers," he said. "The cost of doing business has become prohibitive. We needed the increased capacity and we need increased milk output especially as we export more," he concluded.
The latest Livestock Slaughter report showed an estimated 243,000 head were sent to slaughter under federal inspection in October, up 2,500 from September, but 9,800, or 3.9%, below October 2022. Culling in the 10-month period totaled 2.62 million head, up 91,700, or 3.6%, from the same period a year ago.
October cheese and butter stocks fell but were close to year ago levels, according to the Agriculture Department's latest Cold Storage report.
Butter holdings dropped to 238.3 million pounds, down 28.3 million pounds, or 10.6%, from the September inventory, which was revised down 8.8 million pounds. Stocks were only down 1.4 million pounds, or .6%, from October 2022.
American-type cheese stocks fell to 838.3 million pounds, down 12.9 million pounds, or 1.5%, from September but were up 7.1 million, or .9%, from a year ago.
The "other" cheese holdings fell to 605.2 million pounds, down 5.4 million pounds, or .9%, from the September level, which was revised up 11.2 million pounds. Holdings were up 10.3 million pounds, or 1.7%, from a year ago.
The total cheese inventory stood at 1.465 billion pounds, down 18.9 million pounds, or 1.3%, from the September total, and was 16.7 million pounds, or 1.2%, above that of a year ago.
China's dairy imports don't offer much hope. October whole milk powder, at 40.8 million pounds, was down 31.7% from October 2022, lowest figure for October since 2016, according to HighGround Dairy, with New Zealand losing market share.
Skim milk powder imports inched up to 49.5 million pounds, up .8%, and whey product imports, at 118.9 million pounds, were down 3.6%. Butter, at 12.1 million pounds, was down 11.5%.
Cheese imports hit 24.8 million pounds, up 15%, with U.S. cheese marking a huge gain in market share, according to HGD, up to 18% from 5.3% last year, on 4.5 million pounds for the month, largest volume of U.S. cheese ever imported. Price was the key differentiator, says HGD, with U.S. cheese arriving to China 23% cheaper than last year, and slightly cheaper than New Zealand cheese.
Casein and caseinate imports also saw large increases, with New Zealand holding top spot in both categories.
HGD adds, "The worrisome levels of milk powder stockpiles in China appear to be diminishing. This indicates a growing preference for domestically produced dairy over imports, a trend that could help stabilize the market in the forthcoming months. The anticipated removal of the free trade agreement may provide additional impetus as we enter the new year."
Fluid milk sales looked a little more encouraging in September but were still below those a year ago. The Agriculture Department's latest data shows packaged sales at 3.5 billion pounds, down .9% from September 2022.
Conventional product sales totaled 3.3 billion pounds, down .7% from a year ago. Organic products, at 228 million pounds, were down 4%, but still represented a pretty typical 6.4% of total sales for the month.
Whole milk sales totaled 1.2 billion pounds, up 1.8% from a year ago, up 1.3% year-to-date, and represented 35.2% of total sales in the nine-month period. Skim milk sales, at 167 million pounds, were down 8.7% from a year ago and down 7.9% year-to-date.
Packaged fluid sales January to September totaled 31.5 billion pounds, down 1.8% from 2022. Conventional product sales totaled 29.4 billion pounds, down 1.9%. Organic products, at 2.1 billion pounds, were down 1.5%, and represented 6.7% of total milk sales for the period.
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