Lagging Milk Output a Concern, Especially in Texas Panhandle
Published: Friday, March 29, 2024
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
U.S. milk production remained below a year ago in February, the eighth consecutive month to do so, thanks to lower cow numbers and output per cow.
The Agriculture Department's preliminary data showed output at 18.1 billion pounds, up 2.2% from February 2023, however factoring the extra Leap Day, output was 17.48 billion pounds, down 1.3% on a per day basis, and the most significant decrease since January 2022, according to HighGround Dairy. The top 24-state total, at 16.8 billion pounds, was down 1.1%, factoring in the Leap Day.
The January 50-state milk total was revised down 10 million pounds from last month's estimate, which put output down 1.2% from 2023, instead of the 1.1% originally reported. The 24-state revision was down 6 million pounds, and January output was down 1% from 2023, instead of the .9% reported.
February cow numbers totaled 9.33 million, up 10,000 from the January count which was revised 5,000 head lower from a month ago, and is down 89,000 head, or .9%, from a year ago. The 24-state count, at 8.878 million head, was up 8,000 from the January count, which was revised down 3,000 head, and is 61,000 below a year ago.
Output per cow in the 50 states averaged 1,874 pounds, down 7 pounds, or .4%, from a year ago. The 24-state average, at 1,888 pounds, was down 9 pounds, or .5%, from a year ago.
StoneX Dairy Group said, "Farmers have been focused on boosting milk solids instead of boosting water production per cow. Combined fat plus protein in the milk was up 1.4% from last year during February."
California output was down .9% from a year ago, factoring in the Leap Day. Cow numbers were down 2,000 head. The last time output topped a year ago there was August 2022. Wisconsin output was up .6% from a year ago and cow numbers were unchanged from a year ago.
Idaho was down 2.7%, on 5,000 fewer cows. Michigan was off .3%, though cow numbers were up 4,000 head. Minnesota was down 2% on 7,000 fewer cows.
New Mexico again posted the biggest loss, down 13%, on 32,000 fewer cows. New York was off .9%, with cow numbers unchanged. Oregon was off 1%, on 10,000 fewer cows. Pennsylvania was down 1.7% on 1,000 fewer cows. South Dakota again showed the biggest gain, up 10.9%, thanks to 19,000 more cows, and Texas was down .7% on 10,000 fewer cows. Vermont was down 1.5%, on 2,000 fewer cows. Washington State was down 1%. Cow numbers were unchanged.
Dairy culling remains well below a year ago. The latest Livestock Slaughter report showed an estimated 252,700 head were sent to slaughter under federal inspection in February, up 2,500 head from January, but 13,800 head, or 5.2%, below February 2023.
The week ending March 9 saw 59,400 dairy cows go to slaughter, down 400 from the previous week, and 7,900, or 11.7%, below a year ago. Year to date, 576,199 head have been culled, down 97,300, or 14.4%, from a year ago.
As reported last week, eyes are focused on an illness affecting milk output in dairy cows in the Texas panhandle. A lot of those cows may be culled as a result. HighGround Dairy points out that "Beef prices remain above average, and the immediate paycheck of a slaughtered cow is more appealing than keeping a very low-producing animal in the herd."
That spells trouble in Texas, however, as HGD warned: "New processing capacity began in 2023 in the Panhandle and more is coming online this year as well as in 2025. It is imperative that the herd grows in this area so that the new plants are filled. Cow numbers in Texas have been flat since last June, and this issue will not help increase milk flows to optimize the new assets."
Dairy margins nationally deteriorated the first half of March on a combination of a sharp drop in milk prices and slightly higher feed costs, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.
"The drop in milk prices came despite strong cheese export data for January as well as concerns over a mysterious disease circulating among dairy cows in the Texas Panhandle," the Market Watch reported. "There have been numerous theories offered including respiratory diseases, dysentery, or other potential toxins although nothing conclusive yet. The Smokehouse Creek Fire has also been raised as a potential culprit, but the blaze burned east of the affected dairies and the winds from the fire blew eastward such that larger dairies with reported cases west of the fire in the Panhandle were not impacted by either the fire or the resulting smoke."
The Market Watch reported that Trade Data Monitor shows January cheese exports at just less than 85 million pounds, up 12.6% from the prior year, the highest January on record. "U.S. cheese exports to Mexico were also record large for the month, up 39.3% from 2023 which was a previous record for January exports to Mexico." The Market Watch also warned, "With new cheese plants coming online, exports will need to continue remaining strong to help support prices." "By contrast, January milk powder exports just above 129 million pounds were down 14% from last year's record pace and the lowest volume for any month in nearly five years. Exports to Mexico dropped 21.7% from last year," the Market Watch concluded.
Fluid milk sales got a good start in 2024. The Agriculture Department's latest data shows packaged sales totaled just under 3.9 billion pounds, up 2.4% from January 2023, after dropping 2.8% in December.
Conventional product sales totaled 3.6 billion pounds, up 2.5% from a year ago. Organic products, at 259 million pounds, were up .2%, and represented 6.7% of total sales for the month.
Whole milk sales totaled just under 1.4 billion pounds, up 5.2% from a year ago and represented 35.1% of total sales for the month. Skim milk sales, at 170 million pounds, were down 12.1% from a year ago. The figures represent consumption in federal market orders, which account for about 92% of total fluid sales in the U.S.
The March 5 "Daily Dairy Report" says fluid milk sales have plunged 17% since 2013 but says one of the few bright spots is whole milk sales which have grown 12.5% from 2013's 13.3 billion pounds.
Speaking of Class I, the April federal order Class I base milk price was announced at $19.18 per hundredweight, up 38 cents from March and 33 cents above April 2023. It is the highest Class I since December 2023 and equates to $1.65 per gallon, up from $1.62 a year ago. The four-month Class I average stands at $18.61, down from $20.26 a year ago, and $22.15 in 2022.
Checking the CME, block Cheddar closed the fourth Friday of March at $1.3925 per pound, down 7.75 cents on the week, lowest since Dec. 26, 2023, and 70.75 cents below a year ago when they stood at $2.10.
The barrels closed the week at $1.4250, 1.75 cents lower, 53.75 cents below a year ago, and an inverted 3.25 cents above the blocks. Sales totaled 24 loads of block and three of barrel.
Cheese demand is trending higher as spring holidays approach, according to Dairy Market News. Plant managers report that they are nearing capacity. Milk availability is ample, and some plants declined loads at $6 under class since they were at capacity. Mid-week spot prices ranged $3-under to flat market Class III. Some processors scheduled downtime next week in concert with school closures, which will free up milk supplies. A year ago prices ranged $11- to $4-under class. Cheese inventories are "comfortable in the region," says DMN.
Cheese demand remains steady in the West. Export demand steady to slightly stronger for the end of first quarter. Cheese makers indicate steady demand from international buyers throughout second quarter while some relay current price dynamics are weakening long-term demand. Cheese manufacturers are running strong to steady production and milk volumes are ample. Plenty of cheese is available and may be outpacing demand.
Butter finished last Friday at $2.8075 per pound, down 1.5 cents on the week but 46.25 cents above a year ago, with six sales reported on the week.
Butter manufacturing is in line with recent weeks, says DMN. Churning varies as some plants report increases with micro-fixing bulk volumes. Demand is steady with interest for the spring holiday season picking up slowly. Cream is readily available but not overwhelming, according to contacts.
Butter makers note strong to steady production in the West. Some are working towards inventory goals ahead of planned summer downtime for maintenance. Churning is focused on retail production. Milk production and cream yields are seasonally strengthening. Retail demand is strong to seasonally steady. Some food service demand is weakening but the approaching spring holiday season is expected to strengthen that demand near-term, according to DMN.
Grade A nonfat dry milk dropped to the lowest CME price since Sept. 6, 2023, closing last Friday at $1.1075, 5.50 cents lower on the week and 4.25 cents below a year ago, with 13 sales put on the board for the week. Lots of fingers point to the weak GDT powder prices and weak Mexican demand.
Dry whey closed the week at 39.50 cents per pound, down a nickel on the week, lowest since Jan. 1, 2024, and a nickel below a year ago, with seven loads exchanging hands on the week.
Dairy imports into China don't hold much hope. January imports were down 5.1% from a year ago and 15% lower in February. The data was combined for the fifth year in a row because "The impact of the lunar new year is unevenly spread across those two months," said StoneX broker Dave Kurzawski in the March 25 "Dairy Radio Now" broadcast. He added that "China's milk price is falling, so either their demand is off or they're making more milk and keeping that information in-country."
Skim milk powder (SMP) and whey imports were down 37.5% and 26.2%, respectively, from 2023. HighGround Dairy said, "There have been fewer shipments of SMP from Australia, the U.S. and various EU countries. Considering the leap year adjustment, January-February imports of SMP in 2024 were the lowest in seven years, with the largest losses in whey imports from the U.S. but also from Poland, France and the Netherlands."
Whole milk powder (WMP) imports were up 2.6% compared to "the dismal figures of 2023, although the increase in 2024 was marginal," said HGD, and "stands as the second-worst January-February total since 2016."
Cheese imports were down 17.2%, although volumes were better than those in 2022, according to HGD. "Cheese imports from the U.S. have experienced significant growth, while New Zealand has reported losses," however "U.S. CME Cheddar blocks have been heavily discounted against New Zealand for the past four months."
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