The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
U.S. milk output is simmering, not cooling yet, and certainly not boiling over, but was nudged higher by stronger output per cow, especially in the Midwest. The Agriculture Department's latest preliminary data has May production at 19.875 billion pounds, up 120 million pounds, or .6%, above May 2022. The 24-state total, at 19 billion pounds, was up 146 million, or .8%, above a year ago.
The April 50-state and top 24-state totals were revised up 22 and 23 million pounds, respectively, up .4%, instead of the .3% originally reported for the 50 states, and up .6% in the top 24 states, instead of the originally reported .5%.
May cow numbers totaled 9.43 million head unchanged from the April count, which was not revised. The herd was up 23,000 head from January and up 13,000 from a year ago. The 24-state count was also unchanged from April and was 24,000 head above a year ago.
Output per cow averaged 2,108 pounds, up 10 pounds, or .5%, from May 2022 in the 50 states and up 11 pounds to 2,126 pounds, or .5%, in the top 24 states.
California was still below a year ago, at 3.64 billion pounds, down 24 million, or .7%. Output per cow was down 10 pounds and cow numbers were down 3,000. Wisconsin put 2.79 billion pounds in the tank, up 35 million pounds, or 1.3%, from a year ago, thanks to a 35-pound gain per cow offsetting the loss of 4,000 cows.
HighGround Dairy said, "The slowing of the milking herd foreshadows what is likely to come in the second half of the year: declining cow numbers on a monthly basis and potentially versus prior year, causing output to come close to parity."
Robo Bank senior dairy analyst Lucas Fuess said in the June 26 "Dairy Radio Now" broadcast that farm margins are a real concern, considering the June Class III futures is just below $15 per hundredweight while cost of production nears $20. He expects that will pull milk output lower, possibly below year-ago levels.
"Hopefully, some pullbacks in U.S. milk production by the end of the year will cause a little price recovery," he concluded. However, with drought threatening the corn crop, relief from high feed prices may be in question.
USDA released official solicitation awards for phase 2 of the American Agriculture to Feed Kids & Families program. Deliveries are to be made Oct. 1 through June 30, 2024, according to HGD. "The initial solicitation was for 47.696 million pounds of cheese, of which 80% has been awarded to six dairy companies that presented bids." HGD called it "sizable but slightly less than the solicitation and over a nine-month period, which will limit how this impacts U.S. cheese prices."
Stressed finances are keeping dairy culling rates high. The latest Livestock Slaughter report shows an estimated 249,100 head sent to slaughter under federal inspection in May, up 5,500 head from April, and 23,900, or 10.6%, above May 2022. Culling in the five-month period totaled 1.363 million head, up 75,600, or 5.9%, from the same period a year ago.
The week ending June 10 saw 57,300 dairy cows go to slaughter, up 5,500 head from the previous week and 6,900 head, or 13.7%, more than a year ago. Year-to-date, 1.447 million have been culled, up 72,000 head, or 5.2%, from a year ago. StoneX said, "Total cattle slaughter continues to be weak so dairy cows are holding a larger share of the beef market than it did a week ago."
Last Tuesday's Global Dairy Trade weighted average was unchanged, after slipping .9% on June 6 and May 16. The event saw 44.9 million pounds of product sell, down from 50.97 million on June 6. The average metric ton price crept to $3,479, up $80 from June 6.
Butter saw the biggest change, up 5.5%, after inching .5% higher on June 6. Anhydrous milkfat was up .5%, following a 1.8% advance. Cheddar was down 3.3%, after jumping 7.4% on June 6. Skim milk powder was up 2.3%, after holding steady. Whole milk powder was unchanged, following a 3% decline.
StoneX says the GDT 80% butterfat butter price equates to $2.3802 per pound, up 12.9 cents, and compares to CME butter which closed last Friday at $2.42. GDT Cheddar, at $2.0563, was down 6.1 cents, and compares to last Friday's CME block Cheddar at $1.4050. GDT skim milk powder averaged $1.2098 per pound, down from $1.2498, and whole milk powder averaged $1.4387 per pound, down from $1.4390. CME Grade A nonfat dry milk closed last Friday at $1.1325 per pound.
Analyst Dustin Winston says North Asian purchases, which include China, fell, with volume down significantly from the last event and about half of the volume purchased a year ago. SE Asia volume was slightly lower from the last event but up from last year by 43%."
Meanwhile, China's latest dairy import numbers had key commodity imports "bouncing all over the map," according to HighGround Dairy. The largest jump over prior-year by volume was in whey, at 125.7 million pounds, up 27.9% from May 2022. The U.S. remained the primary supplier, according to HGD.
Whole milk powder and skim milk powder imports, at 115.8 million and 70.7 million pounds, respectively, were up 9% and 24.6%, respectively. HGD said, "While not quite as strong as the impressive volumes shown in 2021, SMP imports did remain positive against prior year, with New Zealand accounting for 36% market share versus just 19% last year. U.S. share was down 33%."
Butter imports were down 3.1% and cheese was down 4.6%. HGD reported that "Lactose imports remain elevated due to infant formula usage domestically," and "was anticipated as it was recently approved for use and the price is right." Lactose imported from the U.S. was up, with a 76% market share.
CME Prices Lower
CME dairy prices remained under pressure in the Juneteenth holiday-shortened week as traders awaited last Friday afternoon's May Cold Storage report.
The Cheddar blocks saw some recovery, marching to $1.41 per pound last Thursday, but closed last Friday at $1.4050, up 3 cents on the week, first gain in four weeks, but 68.50 cents below a year ago.
The barrels finished at $1.50 per pound, 2.50 cents lower on the week, 64.75 cents below a year ago, and 9.50 cents above the blocks. CME sales totaled 14 loads of block on the week and only three of barrel.
Midwest cheesemakers reported a boost in demand. Italian-style producers said slower orders in the first half of the year have begun to improve. Cheese is steadily moving though customers are less hesitant to hold some inventory at prices at or below $1.50 per pound. Milk remains available with some suppliers selling into cheese plants to avoid milk disposal, essentially looking for processors to cover freight costs. "There is a clear shift in tone regarding the recently voluminous offerings," said DMN. Some cheesemakers say that recent weeks were much busier, with calls from milk handlers and some said this was the first week of the year that there were no extra spot milk loads offered.
Western cheese demand is steady from food service although some noted downticks. Retail demand is relatively steady. Sources indicate steady demand from Mexican purchasers and moderate to flatter demand from Asian buyers.
Cash butter slid to $2.3475 per pound last Wednesday, lowest since April 14, but closed last Friday at $2.42, up 5.50 cents on the week but 49.50 cents below a year ago. There were 10 sales on the week.
Midwest butter makers report demand is steadily, seasonally, and slowly ticking higher. Cream multiples are holding generally steady and butter plants say offers have quieted noticeably but they expect more selling of cream in the near-term.
Western cream multiples moved higher this week, though some stakeholders expect slight near-term tightness in cream, while plenty is currently available. Butter manufacturing is strong to steady. Food service and retail demand are steady and export activity is "moderate," says DMN.
Grade A nonfat dry milk closed at $1.1325 per pound last Friday, lowest since April 18, and 65.75 cents below a year ago, with five sales reported on the week.
Dry whey fell to 26.50 cents per pound last Thursday, lowest since June 2, down a penny on the week and 21 cents below a year ago, with 31 sales on the board.
Dairy margins slid further the first half of June on a combination of lower milk prices and higher projected feed costs, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC. The MW stated, "The USDA's ERS reported April dairy exports totaled 482.2 million pounds, a decline of 68 million pounds, or 12.4%, from last year."
"It was the third consecutive month of year-over-year declines following a full year of growth in which dairy exports achieved all-time highs" the MW said. "Slowing demand, particularly from Asia, has weighed on the export market. Cheese exports to South Korea of 7.9 million pounds were down 53.9% from last year and the lowest April volume since 2016. Dairy exports to Mexico however, of 124.6 million pounds, were a record for April and up 15% from last year."
"Continued appreciation in the peso relative to the dollar to a seven-year high has stimulated demand," according to the MW. "Conversely, a slowdown in China's economy has weighed on demand there." The MW stated, "The slowdown in powder demand is shifting production to butter and cheese," and detailed the latest Dairy Products report, which I have previously reported.
The July federal order Class I base milk price was announced by the USDA at $17.32 per hundredweight, down 69 cents from June, $8.55 below July 2022, and the lowest Class I since October 2021. It equates to $1.55 per gallon, down from $2.22 a year ago. The Class I average stands at $19.42, down from $23.69 a year ago, and compares to $16.31 in 2021.