U.S. Dairy Herd Expanding, Despite Lower Milk Production in March
Published: Friday, April 29, 2022
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
U.S. milk production lagged year ago levels for the fifth consecutive month in March. However, that trend may be ending. The Agriculture Department's latest preliminary data shows March output at 19.7 billion pounds, down .5 percent from March 2021, and follows the revised .9 percent drop in February. March output in the top 24 producing states totaled 18.8 billion pounds, down .4 percent. Revisions raised the original 50-state February estimate by 18 million pounds to 17.53 billion, .9 percent below a year ago, instead of the 1 percent originally reported.
First quarter output totaled 56.3 billion pounds, down 1 percent from the same period in 2021. Cow numbers totaled 9.38 million head, unchanged from the October to December quarter, but 85,000 below a year ago.
Farmers are adding cows back into the milking string, however. March numbers totaled 9.395 million head, up 15,000 from February but were still down 87,000 from a year ago. The February count was revised up 10,000 head.
March output per cow averaged 2,096 pounds, up 8 pounds, or .4 percent, from 2021.
California production totaled 3.7 billion pounds, up 19 million pounds, or .5 percent, from a year ago, thanks to 1,000 additional cows and output per cow up 10 pounds. Wisconsin output totaled 2.7 billion pounds, up 6 million, or .2 percent. Cow numbers were up 3,000 and output per cow was unchanged from a year ago.
U.S. dairy cow culling jumped in March but fell short of a year ago, according to the USDA's latest Livestock Slaughter report. An estimated 297,200 head were sent to slaughter under federal inspection, up 30,700, or 11.5 percent, from February, but 5,000 head, or 1.7 percent, below March 2021. Culling in the first quarter totaled 824,600 head, down 20,100, or 2.4 percent, from the same period a year ago.
In the week ending April 9, 60,900 dairy cows were sent to slaughter, down 100 head from the previous week, but 400, or .7 percent, above a year ago.
USDA's 2021 Livestock Slaughter Summary shows an estimated 3.06 million head were sent to slaughter in the year, down 42,900 head, or 1.4 percent, from 2020. The biggest culling month was March, with 302,200 head heading to McDonalds, and the smallest month was May at 223,400.
The Agriculture Department's monthly Livestock, Dairy and Poultry Outlook, issued April 14, mirrored milk price and production projections in the April 11 World Agricultural Supply and Demand Estimates report.
The outlook stated, "It's not clear if dairy herd expansion will continue throughout the year. Recent input prices for feed, fuel and fertilizer have been high. The corn price forecast has been raised as has the soybean meal price forecast."
"While milk cows are forecast to average 9.37 million for the first half of the year, they are projected to decline to 9.365 million in the second half. The annual average forecast rounds to 9.37 million head, 15,000 higher than last month's forecast. The forecast for 2022 average milk per cow was unchanged from last month's forecast of 24,160 pounds per head."
U.S. dairy product commercial disappearance showed some weakness in February. The good news was cheese, with American-type up 7.2 percent from February 2021, and the other cheese category up 6.4 percent. Total cheese disappearance hit 1.1 billion pounds, up 6.8 percent. Exports were up 9.2 percent from a year ago.
HighGround Dairy (HGD) points out that February was the fifth month in a row that total cheese disappearance topped that of the previous year and was the steepest year-over-year gain since April 2021.
Unfortunately, butter took a hit, coming in at 145.5 million pounds, down 13 percent from a year ago, steepest year-over-year decline since August 2016, according to HGD. Butter exports were up 46.3 percent but only amounted to 11.2 million pounds.
Nonfat-skim milk powder totaled 172.3 million pounds, down 2.2 percent, falling short of the previous year for the fourth consecutive month. HGD points out that, while domestic disappearance was up from a year ago, exports were down 11.5 percent, driving the overall decline. Port congestion issues likely played a role there.
Dry whey disappearance totaled 68.6 million pounds, down 5.8 percent, but was an improvement over 2020's weak performance, according to HGD. Dry whey exports were down 20.1 percent from a year ago in February.
Powder, cheese and butter, in that order, pulled the April 19 Global Dairy Trade auction lower, the third consecutive decline. The weighted average dropped 3.6 percent, following the 1 percent slip on April 5, and .9 percent on March 15.
All products offered lost ground. Whole milk powder led the declines, down 4.4 percent, after it fell 1.5 percent on April 5. Skim milk powder followed, down 4.2 percent, after inching up 1 percent last time. GDT Cheddar was down 3.9 percent, following a 2.7 percent jump, and butter was down 3.7 percent, after it slipped .6 percent. Anhydrous milkfat was off 1.3 percent, following a 2.5 percent drop, and lactose rounded out the losses, down 2.4 percent.
StoneX Dairy says the GDT 80 percent butterfat butter price equates to $2.9383 per pound U.S., down 11.1 cents, and compares to CME butter which closed last Friday at $2.6675. GDT Cheddar, at $2.8053, was down 13 cents, and compares to last Friday's CME block Cheddar at $2.3925. GDT skim milk powder averaged $1.9995 per pound, down from $2.0859. Whole milk powder averaged $1.9083, down from $2.0558. CME Grade A nonfat dry milk closed Friday at $1.7550.
Recent declines in demand, the Russia-Ukraine conflict, Chinese lockdowns, and Fonterra adding volume of product on offer brought the downward pressure. Purchases by other regions was up but couldn't offset China's weaker buying.
China's March import data showed whole milk powder imports totaled 128.1 million pounds, down 29.8 percent from March 2021. Skim milk powder, at 50.7 million pounds, was down 27.3 percent, and whey imports, at 83.2 million, were down 50.1 percent.
Butter bucked the trend, up 7.9 percent, but only totaled 27.5 million pounds, and cheese imports amounted to 35.1 million pounds, down 21.6 percent.
HighGround Dairy's Lucas Fuess added the caveat in the April 25 Dairy Radio Now broadcast that China's 2021 purchases were at record levels for a lot of these products, and "It was a record first quarter."
The Cheddar blocks gained 2.50 cents last Monday, hitting $2.3975 per pound, highest since Nov. 5, 2020, but in a likely reaction to the GDT, reversed direction last Tuesday, fell to $2.3350 last Wednesday, then rallied last Thursday, and closed last Friday at $2.3925, up 2 cents on the week, fifth consecutive week of gain, and 60 cents above a year ago.
The barrels, after closing the previous week at $2.44 per pound, also the highest price since Nov. 5, 2020, fell to $2.3425 last Wednesday, reversed last Thursday and closed last Friday at $2.37, down 7 cents, ending seven week of gains, 56.50 cents above a year ago, and a more typical 2.25 cents below the blocks. There were 12 cars of block and 23 of barrel that exchanged hands on the week at the CME.
The April 15 Dairy and Food Market Analyst credited exports for the high CME cheese prices, which were still a bargain compared to global levels. Slowdowns in China were blamed for the slowdown in powder and high prices have affected butter sales, at least in the U.S., the analyst stated. "Generally speaking, dairy markets continue to be supported, not by tremendous dairy demand, but by a shortfall in supplies globally."
Midwestern cheesemakers continue to report strong demand, according to Dairy Market News, with some having to slim orders down to complete others. Milk is available but remained at a discount. Staffing shortages continue to plague plants but most are still running active schedules. DMN said, "Cheese market bulls met some resistance throughout the week, but as demand continues to overshadow inventories, contacts are not overly concerned about price dips."
Western cheesemakers also report strong demand from both domestic and international purchasers. Retail sales remain steady and food service increasing. Restaurateurs say warmer weather and lightened COVID restrictions are helping. International demand remains strong and Asian purchasing has increased to ship at the end of 2022 and into 2023 but port congestion remains a hindrance.
While the congestion has improved, the world's largest shipping port, located in Shanghai China, a city of 26 million, is in lockdown. Hellenic Shipping News reports that in the world stage, "One in five container vessels is waiting outside a congested port." That has likely leap-frogged congestion around the world.
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