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U.S. Dairy Farms Add 19,000 More Cows in October


by Lee Mielke

Published: Friday, November 29, 2024

The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."

U.S. milk output remains slightly above a year ago. The Agriculture Department's latest preliminary data showed October production at 18.7 billion pounds, up .2% from October 2023, third month in a row to top that of a year ago. September output was revised to 18.2 billion pounds, up 52 million pounds from last month's estimate, and up .4% from September 2023, instead of the .1% originally reported. October's 24-state total, hit 17.96 billion pounds, up .4%, with September output up .5%, instead of the .2% reported.

October cow numbers increased for the first time since May 2023, jumping to 9.365 million head, up 19,000 from the September count, which was revised up 18,000 from last month's count, and was up 10,000 head or .1% from October 2023. The 24-state count, at 8.921 million, was up 16,000 from September, which was revised up 18,000 head, and was up 21,000 or .2% from a year ago. The October U.S. dairy herd is the largest since September 2023.

As expected, California production took a hit as avian influenza spread rapidly in the nation's biggest milk producer. Output fell to 3.2 billion pounds, down a whopping 127 million pounds, or 3.8%, from a year ago. Cow numbers were down 4,000 head and output per cow dropped 70 pounds.

HighGround Dairy points out that, on a 30-day adjusted basis, this was the smallest monthly volume for California since September 2017, and is quite a contrast to growth seen in the Plains and Mountain-West states, according to HighGround dairy economist Betty Berning in the Nov. 25 Dairy Radio Now broadcast.

Wisconsin output was down 2 million pounds,or .1% from a year ago, on 4,000 fewer cows, while output per cow was up 5 pounds.

Idaho, which has also battled bird flu, was up 2.8% on 9,000 more cows and a 30 pound gain per cow. Michigan was up .5% on a 15-pound increase per cow which offset 1,000 fewer cows. Minnesota was down .5% on 9,000 fewer cows, though output per cow was up 30 pounds. New York was up 1.2% on a 25 pound increase per cow. Cow numbers were unchanged.

StoneX Nov. 19 Early Morning Update stated, "There were a lot of anecdotal comments about strong components in October, especially fat. Milk pooled on Federal Milk Marketing Orders during October had a weighted average fat content of 4.22%. That was up 1.2% from last year, which is weaker growth than the plus 1.9% we saw in September and 2.6% in August."

"Protein content was 3.33%, up .8% from last year, and slower than the plus .9% we saw in September and 1.5% in August. Like fat, protein content was down from last year in California and the Pacific Northwest orders," says StoneX.

The latest Livestock Slaughter report showed an estimated 235,600 head of dairy cows were slaughtered under federal inspection in October, up 25,200 from September, but 7,300 head, or 3%, below October 2023. Year to date, 2,355,200 head have been, culled, down 355,600, or 13.1%, from a year ago.

Cash dairy prices were mostly lower the week before Thanksgiving, but cheese and butter prices are at a discount to global levels, so exports could be strong and, if domestic demand increases, things could get interesting.

CME block Cheddar climbed to $1.7250 per pound last Wednesday but closed last Friday at $1.6450, down 4.75 cents on the week, the fifth consecutive week of decline and the lowest CME price since April 18, but was still 5.50 cents above a year ago, as traders anticipated Monday's October Cold Storage report.

The barrels made it to $1.73 last Wednesday but saw their last Friday finish at $1.65, 3.50 cents lower on the week, also the lowest since April 18, but 21 cents above a year ago. Sales totaled 15 cars of block on the week and 10 of barrel.

Midwest cheesemakers tell Dairy Market News that demand is slightly slow to very busy. Holiday orders have been fulfilled and some plants are running slower schedules. Mozzarella and other Italian-style cheeses are moving quickly from warehouses to end users. Milk availability varies widely and spot prices in the Midwest and Upper Midwest were still reported to be above Class III.

Cheese output is steady in the West. Spot milk is tighter in the southwestern part of the region. Contractual demand is steady and some companies recently finishing fiscal years convey that full-year sales are in line with expectations.

Domestic demand is lighter while export demand is steady. Domestic prices continue to be competitive which helps counter less robust domestic demand.

Butter fell to $2.54 per pound last Friday, down 9 cents on the week, lowest since Jan. 8, but still 4 cents above a year ago. There were 23 CME sales on the week.

HighGround Dairy says there are limitations and capacity issues with making butter for export. Exported product is 82% fat and unsalted and those issues may temper sales, "but the increased demand could be price-supportive."

DMN says retail butter demand is seasonally active but lower to steady compared to a year ago. Some say demand has picked up for the end-of-year holiday weeks. Butter availability is somewhat steady and in line with previous weeks. Salted butter volumes are available, while unsalted varieties are lighter. Cream is ample and Midwestern butter makers were turning offers away. Some plants are expected to be down four to five days for maintenane, so there may be some cream looking for a home, according to DMN.

Retail butter production is steady in the west, while bulk output is lighter. Cream is readily available. Domestic demand is mostly lighter near-term. Buyers are generally set for end-of-month holiday needs but first quarter booking is stronger.

Grade A nonfat dry milk closed last Friday at $1.3675 per pound, down 3.25 cents on the week, but 18.25 cents above a year ago, with 13 sales put on the board.

StoneX points out that the powder market is "finding solace in not deviating from the current price level as comments around immediate demand remain subdued. Between milk production concerns in California, which are on-going presently, and the fact that California plants produced 50% of our nonfat/skim milk powder in 2023, NFDM has likely priced in much of the supply side of the equation or tried to. The other side of the story is any increase in demand as trading partners work through the last of their less expensive inventory," StoneX concludes.

Dry whey saw its Friday finish at 66 cents per pound, up a half-cent on the week and 26.25 cents above a year ago, with nine sales made on the week.

HighGround says "Ravenous demand for high-protein whey products is causing prices across the complex to move higher." Furthermore, the Daily Dairy Report's Sarina Sharp wrote in the Nov. 15 Milk Producer Council newsletter. "While consumers have all the cheese and butter they can stomach, they can't get enough dairy protein. Most adults are actively trying to consume more of it. Protein is especially vital for the roughly 15 million Americans taking glucagon-like peptide-1 medications like Ozempic or Wegovy. As they eat significantly fewer calories, many such users prioritize foods that pack a bigger nutritional punch. Highly concentrated whey powders, like whey protein isolates (WPIs), are becoming increasingly popular," says Sharp.

"Makers of WPIs and whey protein concentrates (WPCs) with at least 50% protein are using up as much whey as they can, leaving less for WPC-35 and whey powder," says Sharp. "While demand for less concentrated whey products is steady, lower production of those products has boosted prices significantly." She also pointed to rising powder prices, stating "Milk powder production will be limited as new cheese production capacity pulls more milk away from dryers."

Checking things globally, while China was a primary driver of sustained counter-seasonal gains in milk powders in last Tuesday's Global Dairy Trade, Chinese imports dropped 12.3% year-over-year in October.

HighGround Dairy says the sharpest decline was seen in trade from New Zealand, which fell 19.5% from a year ago and was the lowest overall import volume since 2018.

Skim milk powder (SMP) imports were down 53.1%, according to China Customs Statistics, effectively halving those of a year ago, according to HGD. Imports from New Zealand experienced a similar reduction but still accounted for 57.5% of total SMP imports.

Whole milk powder (WMP) imports slipped 15.8%. HGD says, "This is the smallest October import volume since 2016. Betty Berning said inventories are reportedly dwindling in China and may be the reason they are buying again, plus there were some adjustments to their herd size.

Whey imports rose again, up 4.6%, with volumes from the U.S. increasing 3%, according to HGD, while Dutch volumes doubled compared to the previous year.

Threatened tariffs on Chinese imports by the incoming Trump administration will likely trigger retaliation and could temper any increased purchases from the U.S.

Meanwhile, whole milk powder led the gains in this week's Global Dairy Trade auction, where the weighted average was up 1.9%, following a 4.8% jump on Nov. 5. Volume came in at 79.9 million pounds, down from 80.7 million on Nov. 5. The average metric ton price, hit $4,089 U.S., up from $3,997.

Whole milk powder was up 3.2%, which followed a 4.4% gain on Nov. 5. Skim milk powder inched .9% higher, after a 4% rise. Anhydrous milkfat was up 1.0%, after gaining 4.6%, and GDT butter was up .5%, after leading the gains on Nov. 5 with an 8.3% rise. GDT Mozzarella was down 6.6%, after inching .9% higher last time, and Cheddar was down 3.1%, after jumping 4% last time.

StoneX says the GDT 80% butterfat butter price equates to $3.0932 per pound U.S., up 8 cents, after gaining 21.9 cents last time, and compares to CME butter which closed last Friday at $2.54. GDT Cheddar equated to $2.1928, down from $2.2559, follows a 12.3 cent jump, and compares to last Friday's CME block Cheddar at $1.6450.

GDT skim milk powder averaged $1.3074 per pound, up from $1.2925. Whole milk powder averaged $1.7354 per pound, up from $1.6841. CME Grade A nonfat dry milk closed Friday at $1. 3675 per pound.

"North Asia increased their market share of WMP and overall purchases from last event and last year," reports analyst Dustin Winston. "Southeast Asia market share increased from the last event on the heels of much a much larger portion of SMP purchases compared to the last event. The Middle East stepped back its purchase volume from the last event and last year," according to Winston, "losing market share to both North Asia and SE Asia."

The December federal order Class I base milk price is $21.43 per hundredweight, down $1.10 from November, lowest since August, but is $1.67 above December 2023. It equates to about $1.84 per gallon, up from $1.70 a year ago. The 2024 Class I average is $20.35, up from $19.20 in 2023, and compares to $23.66 in 2022.

Dairy Margins

Dairy margins continued to deteriorate over the first half of November, as milk prices declined while feed costs were mixed according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.

"Global milk production is beginning to stabilize, and new cheese plants coming online will allow production to ramp up and stocks to build into next year," the MW warned. "Milk production among the world's top five exporters increased .4% in September from the prior year, indicating a change in trend following a slight gain in August after 12 consecutive months of deficits relative to the prior year. Additionally, expansion to U.S. cheese processing plants by the middle of 2025 is expected to increase cheese output by 20 million pounds per day, which assuming steady demand would be sufficient to lift cheese stocks to prior-year volumes with less than one week's output."

"Thus far in 2024, rising demand and steady cheese production have limited U.S. cheese inventories," according to the MW. "Supplies in Cold Storage at the end of September were down 7.3% from 2023, a deficit of 108 million pounds, with net year to date U.S. cheese exports up 22% from last year while domestic consumption was up just .6% from a year ago through September."

The MW concluded with a brief review of USDA's final decision on Market Order updates, which it says will "update milk composition factors to more accurately reflect current components in modern milk production, remove the Cheddar barrel price from class pricing formulas, increase make allowances, and revert to the "higher of" Class 3 and Class 4 skim milk price in the calculation of the Class I Milk price, including special provisions for extended shelf life bottlers and updates to Class I pricing differentials."

May you and yours have a happy and blessed Thanksgiving.

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