Bird Flu Takes a Big Bite Out of Calif. Milk Production
Published: Friday, December 27, 2024
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
U.S. milk output is hesitating due to bird flu. The Agriculture Department's latest preliminary data shows November output at 17.9 billion pounds, down 1% from November 2023, after inching up .4% in October. Output in the top 24 states totaled 17.2 billion, down .8%, after rising .6% in October. October data was revised up 35 million pounds from last month and up 32 million in the top 24 states.
November cow numbers were down 5,000 head from October, though the October count was raised 5,000. The herd is up 20,000 from a year ago and 42,000 more than the January count. The 24-state count, at 8.9 million head, was down 2,000 from October, but 32,000 more than a year ago.
California production, which represents about 20% of U.S. milk output, again took a big hit from avian influenza and saw the largest year over year decline ever, according to StoneX, with data back to 1950. Output plunged to 2.96 billion pounds, down a whopping 301 million, or 9.2%, from a year ago. Cow numbers were down 1,000 head and output per cow was down 175 pounds. October production was revised up 12 million pounds however, and resulted in output being down 3.5% from a year ago, instead of the 3.8% originally reported.
The Dec. 19 "Daily Dairy Report" stated, "As of Dec. 17, avian influenza had infected 645 of California's 1,070 dairy herds. Of these, 56 have emerged from quarantine after 30 days without a positive test. The number of infected California dairy herds last month more than doubled from 203 on Nov. 1 to 461 by Nov. 27." California Gov. Gavin Newsom declared a state of emergency due to the rapid spread of bird flu there.
Wisconsin's November output, at 2.58 billion pounds, was down 8 million pounds, or .3%, from a year ago, on 4,000 fewer cows, and output per cow unchanged.
Idaho was up 2.1%, thanks to 11,000 more cows and a 10-pound gain per cow. Kansas was up 2.6% on 5,000 more cows but output per cow was down 5 pounds. Michigan was up .5% on a 10-pound increase per cow. Cow numbers were unchanged.
Texas scored the biggest gain this month, up 7.3%, thanks to 40,000 more cows and a 20-pound increase per cow. Vermont was down 1% on 3,000 fewer cows, although output per cow was up 25 pounds. Washington State was down 1% on a 25-pound drop per cow. Cow numbers were up 1,000 head.
The impact of bird flu is significant and StoneX Dec. 19 Early Morning Update stated that farm milk expansions will be needed to fill new or expanded cheese plants. "In the three months from July through October, U.S. farmers added 46,000 dairy cows to the milking herd. That is a .5% increase in just three months. They did this despite record tight heifers, record high replacement cow prices, the cost of building new barns, high interest rates, etc. How many more of these big expansions have been planned over the next year? In rough numbers it would take an additional 350,000 cows to fill the new processing capacity, when the capacity is running at 100%. So, there could be another 50,000 or 100,000 or 150,000 more cows that could come into this herd in the next year," said StoneX. "If the herd grew another 20,000 head in November that would help to cushion the weakness in California."
HighGround Dairy's Betty Berning stated in the Dec. 23 "Dairy Radio Now" broadcast that she believes U.S. dairy producers will meet the demand of expanded cheese plants. Most of it is in the Plain states, Kansas and Texas, and producers in those states have been expanding in response to the new capacity.
She looks for growth in the Mountain and Plains states in 2025, leading to the question if demand will absorb the extra cheese. That remains to be seen, she said, however demand for protein is growing, as popular weight loss drug use drives consumers to eat more high protein foods of which dairy is a great source.
Whey protein isolate production is setting records, according to Berning, as are other high protein dairy products. They are all being consumed, but there will also be more cheese available and that consumption remains to be seen.
The Agriculture Department's latest Livestock, Dairy and Poultry Outlook reported that, as of Dec. 12, avian influenza was confirmed in 16 states and 832 dairy herds. However, since the beginning of December, out of the 832 herds, the flu had been detected in 142 herds in California and one in Nevada. Affected cows and herds are quarantined until they recover and once recovered, most cows return to producing milk, according to the outlook.
As I reported last week, USDA began its National Milk Testing Strategy, mandating raw milk samples be collected and tested from U.S. farms. The second round of states coming on board was announced and included Indiana, Maryland, Montana, New York, Ohio, Vermont and Washington.
USDA's latest Livestock Slaughter report showed an estimated 210,300 head of dairy cows were slaughtered under federal inspection in November, down 25,300 from October, and 19,400, or 8.4%, below November 2023. As of the week ending Dec. 7, 2,558,700 cows had been culled, down 362,100, or 12.3%, from a year ago.
The first federal order Class I base milk price of 2025 was announced last week at $20.38 per hundredweight, down $1.05 from December, and the lowest Class I since June, but is $1.90 above January 2024. It equates to $1.75 per gallon, up from $1.59 a year ago.
Fluid milk sales recovered in October after slipping in September, and have topped year ago levels in six out of 2024's first nine months. USDA's latest data shows October packaged sales at 3.8 billion pounds, up 1.3% from October 2023.
Conventional product sales totaled 3.5 billion pounds, up 1% from a year ago. Organic products, at 256 million pounds, were up 5.9%, and represented 6.8% of total sales for the month, down from 7.1% in September.
Whole milk sales totaled 1.3 billion pounds, up an impressive 3.6% from a year ago, up 2.2% year to date, and represented 34.7% of total sales for the month. Skim milk sales, at 161 million pounds, were down 5.5% from a year ago, and down 10.8% year to date.
Packaged fluid sales in the 10-month period totaled 35.6 billion pounds, up .9% from 2023. Conventional product sales totaled 33.1 billion pounds, up .5% from a year ago. Organic products, at 2.5 billion pounds, were up 6.8%, and represented 7.1% of total milk sales in the 10 months.
Meanwhile, the Federal Reserve lowered its key interest rate by a quarter percent last Wednesday, the third consecutive reduction. However, the fed warned that additional cuts may be few.
"Dairy margins strengthened the first half of December as milk prices rose sharply in nearby expirations while feed costs were steady to slightly higher," according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC. "Class 3 milk in particular has been supported by strong whey prices," the MW stated. "U.S. whey powder inventories declined to 47.7 million pounds in October which was down 33.1% from a year ago, and the lowest stocks level since 2012. Manufacturers continue to direct historically high volumes of whey from strong cheese production into high protein concentrates and isolates, leaving less product available to dry into powder."
"As a result, production of dry whey powder for human consumption has declined, with only 62.7 million pounds produced in October, the lowest volume since 1984. Dry whey cash prices at the CME spot call market have climbed to 79.25 cents per pound, a new 15-year high for this time of year, and not far from the all-time high of 85.95 cents."
"While total dairy exports during October declined 1.9% from last year to 478.3 million pounds, total cheese exports of 88.8 million pounds were up 12.4% from 2023, with 38.1 million pounds shipped to Mexico during the month representing 40% of the total and 27.2% higher than last year as well as the third largest month of cheese sales ever recorded south of the border," the MW stated.
CME Cheddar block cheese climbed to $1.86 per pound last Tuesday, highest since Oct. 30, but closed last Friday at $1.8525, up 5.25 cents on the week, third consecutive week of gain, and 46.25 cents above a year ago when they were trading at $1.3925. The Cheddar barrels got to $1.7850 last Tuesday, highest since Nov. 7, but finished at $1.76, up 3.25 cents on the week, 36.75 cents above a year ago, and 9.25 cents below the blocks. Sales totaled 13 block and 11 barrel.
Midwest cheesemakers continue to report positive demand, says Dairy Market News, and cheese production is steady to lighter. Cheese is somewhat snug, according to some traders. Milk availability, although robust a week ahead of Christmas, has not been noticeably ample throughout the fall season. Spot milk prices were reported as low as $5-under Class III. Some cheesemakers expect widely available milk until the first week of 2025 due to holiday plant downtime.
This week's plant downtime differs from plant to plant, but a number of cheese processors said the workweek will end as soon as Tuesday, according to DMN. Cheese production is mostly steady in the West and some cheese makers are less active in looking for additional milk. Availability is comparatively tighter in the southwestern part of the region. Plenty of cheese is available, though some manufacturers or distributors say inventories are tighter. A few manufacturers anticipate inventories will remain tighter into first quarter. Domestic demand is mixed. Export demand is light to somewhat stronger, according to DMN.
Cash butter closed last Friday at $2.5550 per pound, up 9 cents on the week, highest since Nov. 19, and 1.50 cents above a year ago, with 19 sales on the week.
"Fat production in the U.S. has been robust in 2024," said HighGround Dairy's "Monday Morning Huddle," "up 1.7% versus 2023, which is remarkable, considering that milk production was down .55% through October relative to January to October 2023. The significant inventories built up earlier in 2024 were more than ample to fill holiday needs, and stocks through October were hefty, ranking third highest in the past 30 years, helping to explain the falling prices in fourth quarter 2024," according to HGD.
Central butter makers tell DMN that day-to-day activity is similar to previous weeks outside of holiday downtime and inventory preparation. Churning has been active and bulk butter is available, but demand is moving loads pretty regularly as market prices seemed to find a near-term bedrock near $2.50 per pound. Cream is, has been, and is expected to be widely available. Multiples one week ahead of the end-of-year holidays have been reported under 1, and that range is not expected to increase in the next few weeks. Market tones are settled for now, but contacts have more bearish than bullish viewpoints, says DMN.
Cream volumes are readily available throughout most of the West. Most butter manufacturer's retail production is in line with steady or strong production from last week. Bulk production is lighter to steady. A few manufacturers state that retail sales the second week of December will determine their butter production the next few weeks. Domestic butter demand is moderate to strong, with a few manufacturers reporting year-over-year sales for the last quarter of 2024 were up significantly. Buyers are now working to secure loads for first quarter 2025.
Grade A nonfat dry milk saw its Friday finish at $1.3925 per pound, up 1.50 cents on the week, highest since Dec. 2, and 23.25 cents above a year ago, with 15 CME sales reported.
Dry whey, after closing at a two-year high the previous week of 79.25 cents per pound, closed the Friday before Christmas at 74 cents per pound, 5.25 cents lower, but still 36 cents above a year ago, with 11 sales recorded for the week.
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