Culling Rate Inching Higher; Dairy Market Dealing with Excess Butter
Published: Friday, June 2, 2023
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Dairy cow culling remains above a year ago. The latest Livestock Slaughter report shows an estimated 243,600 head sent to slaughter under federal inspection in April, down 62,600 head from March, but 5,800, or 2.4%, above April 2022. Culling in the four-month period totaled 1.114 million, up 51,800 head, or 4.9%, from the same period a year ago.
The week ending May 13 saw 56,000 dairy cows go to slaughter, down 1,100 from the previous week but 1,700 head, or 3.1%, more than a year ago. Year-to-date, 1.226 million head have been culled, up 53,000, or 4.5%, from a year ago.
Meanwhile, butter stocks are building. The latest Cold Storage report shows the April 30 inventory at 327.7 million pounds, up 18.2 million pounds, or 5.9%, from the March level, which was revised up 16.8 million pounds, and up 29.3 million pounds, or 9.8%, from April 2022, fifth consecutive month to top a year ago.
HGD points out, "When USDA originally released March Cold Storage figures last month, it showed butter stocks falling from February to March an infrequent occurrence. However, revised numbers were issued in this month's report, and USDA revised March butter inventories up to 309 million pounds, a 5.3% rise from February, and a 9.4% jump versus March 2022."
American cheese stocks climbed to 838.2 million pounds in April, up 11.4 million pounds, or 1.4%, from the March level which was revised up 5.5 million pounds. They were also 2.5 million pounds, or .3%, above a year ago.
The "other" cheese inventory fell to 603.7 million pounds, down 8.3 million pounds, or 1.4%, from the March level which was revised up 6.3 million pounds, and was down 17.5 million pounds, or 2.8%, from a year ago.
Cheese stocks totaled 1.463 billion pounds, up 3.1 million pounds, or .2%, from March, but 17.4 million, or 1.2%, below a year ago, third month in a row to be below a year ago.
Dairy markets weren't giving much hope going into the Memorial Day weekend, especially on the whey side of the equation. The whey price fell to 25.50 cents per pound last Monday, lowest price ever since it started CME trading on March 12, 2018 at 26 cents per pound. It climbed back to 27.75 cents last Wednesday but closed last Friday at 27.50 cents per pound, up a penny on the week but 24.75 cents below a year ago. Thirty-six loads sold on the week, down from 75 the previous week.
The Daily Dairy Report's Sarina Sharp wrote in the May 19 Milk Producers Council newsletter, "Whey has not spent much time below 30 cents without extreme events to explain the depression. In 2019, African swine fever devastated China's hog herd and throttled Chinese imports of feed-grade whey. U.S. whey was further disadvantaged by the U.S.-China trade war, which levied punitive tariffs on U.S. whey products. Spot whey also dipped below 30 cents in 2020, when the pandemic closed nearly every gym in the nation and demand for protein drinks plummeted. Today, the cause is much less dramatic. Processors are simply making more whey powder than the market needs," Sharp stated.
Cheddar block cheese closed last Friday at $1.4775 per pound, down 5.75 cents on the week and 81.75 cents below a year ago.
The barrels finished at $1.49, up 2 cents, 80.50 cents below a year ago, and an inverted 1.25 cents above the blocks. There were 22 sales of block on the week at the CME and 29 of barrel.
A large solicitation by the USDA for cheese was announced this week. StoneX stated, "While price supports have been relatively non-existent for some time, we are familiar with government buying food products since the Food Box programs during COVID. Volume solicited is not at that level, but it is rather large. The solicitation asked for 47.6 million pounds of cheese," StoneX stated, but "It is unknown at this time if it will all be awarded and what the timeframe is."
Dairy Market News reports that milk remains available for Midwest cheese processors, which is typical ahead of a holiday weekend. However, for the first time this year, sentiment is changing in regards to milk availability moving into the near-term. Components have started to seasonally shift lower. Spot milk prices ranged from $11 to $4 under class.
Retail and food service cheese demand in the West is holding steady. Tight block inventories were reported from a few manufacturers with production moderately ahead of contracted retail and food service commitments. Contracted obligations are anticipated to put heavier draws on block inventories for the remainder of May. Some contacts relay good export demand from Asia, Mexico and South America, while others say demand is lighter, says DMN.
Cash butter fell to $2.4175 per pound last Thursday but finished last Friday at $2.43, down 3 cents on the week and 44.75 cents below a year ago, with three loads sold.
Butter plants reported widely available cream again, though ice cream producers are expected to increase production. Cream is not expected to remain as wide open as it has been and "this may be the final churning push ahead of the late summer-fall demand upsurge," said DMN.
Cream is plentiful in the West and multiples on the top of the range moved lower this week. Downtime for churn maintenance caused a few plants to lower cream input, making more available to spot purchasers. Butter making is strong, despite a few facilities limited from personnel shortages. Churns are busy heightened by the holiday weekend. Retail and food service demand is strong, exports steady.
Grade A nonfat dry milk closed last Friday at $1.17 per pound, up 1.75 cents on the week but 69 cents below a year ago, with 13 sales put on the board at the CME.
Last Tuesday's GDT Pulse saw 2.2 million pounds of Fonterra whole milk powder sold, same as on May 9, but at $3,150 per metric ton, down $25 from the last Pulse and down $45 from the May 16 GDT. HGD said, "WMP prices dipped again after edging upwards at the previous GDT Auction. Demand remains volatile but has yet to overcome abundant stocks to push prices higher."
The world is waiting on China whose April imports were mixed. Skim milk powder continued to trend above the previous year, although falling just short of March 2021, according to HGD. SMP totaled 78.2 million pounds, up 45.7% from April 2022, while whole milk powder, at 90.5 million pounds, was down 31.8%.
Imports increased from the top three origination countries, New Zealand, Australia and Germany, says HGD, and "Other than the United States and Argentina, Europe recorded all other losses."
Whey imports totaled 116 million pounds, up 13.5% and up 43.8% year-to-date. HGD says China whey imports marked the ninth consecutive month above prior-year levels due to greater shipments from Poland, second highest in market share. The U.S. remains the top origination country with 50% market share. The rising milk supply from school closings and resulting increased cheese output, likely means we will have even more whey to get rid of.
China's butter imports, at 15.7 million pounds, were down 27.7%, and cheese, at 28.7 million pounds, was up 18.7%. Infant formula and fluid milk and cream imports were up 30.6% and 12.7%, respectively, from a year ago.
The May 22 Daily Dairy Report said, "China's lackadaisical buying has put downward pressure on global markets, and it will be difficult for commodity prices to increase in earnest until the world's largest dairy importer returns to the table."
Robo Bank Senior Dairy Analyst Lucas Fuess echoed those comments in the May 29 "Dairy Radio Now" broadcast. Fuess said the hope is that the back half of 2023 will be supported by continued robust exports.
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