Milk Output Totals 217.5 Billion Pounds in 2018, Up Nearly 1%
Published: Friday, March 1, 2019
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Increased output in milk per cow kept December production above December 2017, the 61st consecutive month that output topped the year before, according to the USDA's latest report, delayed a month by the government shutdown. Preliminary USDA data in the top 23 producing states shows output at 17.1 billion pounds, up .9 percent from 2017, with the 50-state total, at 18.16 billion pounds, up .5 percent.
Preliminary data also shows 2018 milk output totaled 217.5 billion pounds, up 2 billion pounds, or .9 percent, from 2017, on 7,000 fewer cows. Average per cow output increased by 232 pounds, or 1 percent, from 2017, to 23,173 pounds.
December cow numbers in the 50 states totaled 9.35 million head, down 3,000 from November and 49,000 less than a year ago, the sixth time that cow numbers were below a year ago since May 2016. Output per cow averaged 1,942 pounds, up 21 pounds from the year before and the 38th consecutive month of gain.
The report is viewed as neutral to the market, but harsh weather in key dairy regions will surely affect January and February output and perhaps send it below year-ago levels.
FC Stone warns that elevated dairy cow culling the past year will translate into tighter milk supplies. The Feb. 19 Early Morning Update says this is currently transpiring more on the East Coast and Upper Midwest where more and more smaller dairies exit the business. It adds, "Western cow numbers have been pretty steady as bigger dairies absorb the smaller dairies going out of business." It adds, "Nearly every dairy in the U.S. has too many heifers due to advanced breeding technologies, but the cull rates are bullish at first blush."
"More and more heifers have been going to into feedlots and are ultimately being culled," said Stone. "These heifer cull numbers are not included in the statistics, so it's hard to grasp how many young animals are being taken out of the pipeline. Several of the most recent herd dispersal auctions have seen heifer prices go for beef equivalent values, with little buying interest from other dairymen."
Another scare last week concerned a farmer in New Mexico euthanizing 4,000 head of cattle due to high levels of per- and polyfluoroalkyl substances in the ground water. FC Stone says there are a lot of rumors floating around the industry, with questions ranging from how many additional cows are affected to what happens to demand if consumers become worried by the news.
The rapid rise of the previous five Global Dairy Trade auctions (GDT) slowed Feb. 19 as the weighted average of products offered inched up .9 percent, following jumps of 6.7 percent on Feb. 6, 4.2 percent on Jan. 15 and 2.8 percent on Jan. 2 but is the sixth consecutive session of gain. Sellers brought 55.8 million pounds of product to the market, up from 51.4 million on Feb. 6.
All products offered saw gains except lactose, which was down 2.9 percent. The gains were led by Cheddar cheese, up 2.9 percent, following a 1.4 percent boost in the last event. Skim milk powder was close behind, up 2.8 percent after jumping 3.9 percent last time, and rennet casein was up 2.7 percent. Butter was up 1.2 percent, following a 4.2 percent advance, and anhydrous milkfat was up .7 percent, following a 5.8 percent move higher last time. Whole milk powder inched .3 percent higher, after jumping 8.4 percent last time.
FC Stone equates the GDT 80 percent butterfat butter price to $1.9892 per pound U.S., up 2.2 cents from the last session. CME butter closed last Friday at $2.26. GDT Cheddar cheese equated to $1.6634 per pound, up 4.6 cents from the last event and compares to last Friday's CME block Cheddar at $1.5950. GDT skim milk powder averaged $1.1702 per pound, up from $1.1494 last time. Whole milk powder averaged $1.3706 and compares to $1.3731 last time. CME Grade A nonfat dry milk closed last Friday at 99¾ cents per pound.
Overseas milk output continues to struggle, according to the Daily Dairy Report's Sarina Sharp. She reports in the Feb. 15 Milk Producers Council newsletter that December Australian milk collection was down 6.9 percent from a year ago. That put season-to-date output down 5.1 percent. Sharp says that "June through December milk output Down Under hasn't been this low in at least 15 years, and there is no end in sight to the crippling drought."
"Europe's preliminary data suggests that December milk collections fell .9 percent short of the prior year, following a .8 percent deficit in November. The December shortfall was large enough to offset nearly all of the substantial growth reported in New Zealand in December," the DDR stated.
Back on the home front, the March Federal Order Class I base milk price is $15.98 per hundredweight, up 68 cents from February, $2.62 above March 2018, and the highest Class I price since October 2018. It equates to about $1.37 per gallon, up from $1.15 a year ago. The three-month Class I average is at $15.47, up from $14.35 at this time a year ago and compares to $17.03 in 2017.
As the debate continues regarding plant-based beverages calling themselves "milk," U.S. cow milk sales took another dip in the final month of 2018. The Agriculture Department's latest data puts December sales at 4 billion pounds, down 2.1 percent from December 2017, following a .1 percent slip in November.
Conventional product sales totaled 3.8 billion pounds, down 2.4 percent from a year ago. Organic products, at 219 million pounds, were up 2 percent and represented about 5.4 percent of total sales for the month.
Whole milk sales totaled 1.3 billion pounds, up .8 percent from a year ago, up 1.6 percent year-to-date, and made up 32.5 percent of total fluid sales in the month and 31.8 percent for the year so far. Skim milk sales, at 303 million pounds, were down 10.5 percent from December 2017, down 9.8 percent year-to-date, and made up just 7.9 percent of total milk sales for the year so far.
Total packaged fluid milk sales for the year fell to 47.1 billion pounds, down 2 percent from 2017. Conventional products year to date totaled 44.5 billion pounds, down 2.2 percent. Organic products, at 2.6 billion pounds, were up .6 percent and represented about 5.5 percent of total fluid milk sales for 2018.
Recent legislation may impact those declining sales. The "Whole Milk for Healthy Kids Act" could result in more of the nation's 30.4 million kids in the National School Lunch program to choose milk as consumer demand for full fat dairy products has returned, according to the Feb. 7 Daily Dairy Report.
The DDR says, "Since 2010, total U.S. annual fluid milk sales declined by more than 7 percent, from 54.5 billion pounds to 50.6 billion pounds, according to USDA's Agricultural Marketing Service. Over the same period, whole milk sales increased from 15.1 billion pounds to 16.4, or 8.7 percent. Estimated sales of whole milk, including organic and flavored, accounted for nearly 34 percent of total estimated fluid milk sales in 2017."
The new legislation would "continue the process of reversing the 2010 Healthy, Hunger-Free Kids Act, which directed USDA to rewrite the school lunch nutrition standards," according to the DDR, and the dairy processors MilkPEP program says kids 2 to 17 years of age account for 40 percent of total U.S. milk consumption. Increasing consumption among this group would go a long way toward mitigating the long-term decline in fluid milk consumption, says MilkPEP.
Cheese Prices Slip
Dairy prices were mostly lower in the shortened President's Day holiday week. Cheddar block cheese closed last Friday at $1.5950 per pound, up 1½ cents on the week and 10 cents above a year ago. The barrels saw a Friday close at $1.4050, 3 cents lower on the week, 5½ cents below a year ago, and 19 cents below the blocks. Three cars of block traded hands on the week at the CME and 23 of barrel.
Dairy Market News says pizza cheesemakers report sales were a little ahead of expectations, while curd and barrel cheese producers are hopeful for some summer demand increases before production increases will be scheduled. Milk remains plentiful and nearly all Class III spot loads were reported at flat to $2 under class. Cheesemakers in rural areas remain concerned about smaller farms staying in business, stating that closures are not a matter of if, but when, for a growing number of sub-100 cow herds.
Cash butter closed last Friday at $2.26 per pound, up a penny on the week and 8¾ cents above a year ago, with 26 cars sold on the week.
Butter analysts continue to point out the range-bound nature of the market since, and throughout much of, 2018. Demand is steady, while production continues actively to pack away inventories. Cream supplies are plentiful, reports DMN.
Grade A nonfat dry milk closed last Friday at 99¾ cents per pound, up a penny on the week and 32½ cents above a year ago with only four cars sold on the week.
Spot dry whey closed a half-cent lower at 34¾ cents per pound, on 38 cars sold.
Key Index Turns Down
A drop in the U.S. All-Milk price average and higher feed prices pulled the December milk feed price ratio down again, adding pressure to already hurting dairy farm bottom lines. The latest Ag Prices report shows the December ratio at 2.04, down from 2.18 in November and down from 2.38 in December 2017.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. In other words, one pound of milk today purchases 2.04 pounds of dairy feed containing that blend.
The U.S. All-Milk price averaged $16.40 per hundredweight, down 60 cents from November and 80 cents below November 2017, with New Mexico again showing the low at $14.70, followed by Kansas at $15.30. California, at $16.05, was down 39 cents from November; and Wisconsin was at $16, down 90 cents from November.
The national average corn price averaged $3.54 per bushel, up 13 cents from November and 31 cents above December 2017. Soybeans averaged $8.57 per bushel, up 20 cents from November but 73 cents below a year ago. Alfalfa hay averaged $180 per ton, up $5 from November and $31 per ton above a year ago.
Looking at the cow side, the December cull price for beef and dairy combined averaged $51.80 per hundredweight, down 90 cents from November, $10.20 below December 2017 and $19.80 below the 2011 base average of $71.60 per hundredweight.
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