Pasteurization Essential in Milk
Published: Friday, April 5, 2024
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The U.S. butter inventory grew in February and topped that of a year ago. The Agriculture Department's latest Cold Storage data shows Feb. 29 butter at 295.8 million pounds, up 48.2 million, or 19.5%, from January's holdings, which were revised down 1.5 million pounds, and up 1.8 million, or .6%, from February 2023.
American-type cheese stocks fell to 832.8 million pounds, still record large for the month, according to the Daily Dairy Report. However, they were down 7 million pounds, or .8%, from the January count, which was revised up 3.4 million pounds. American stocks were up 23.6 million pounds, or 2.9%, from a year ago.
The "other" cheese holdings climbed to 608.2 million pounds, up 13.2 million, or 2.2%, from the January inventory which was revised 1.3 million pounds lower, and were up 3.2 million pounds, or .5%, from a year ago.
The Feb. 29 total cheese inventory hit 1.463 billion pounds, up 6.8 million pounds, or .5%, from January, highest since September 2023, and was 25.1 million pounds, or 1.7%, above a year ago.
The last week of March was captured by at least two big stories. One was the collapse of the Francis Scott Key Bridge at the Port of Baltimore, which put shipping logistics in limbo and will take a long time and lots of money to repair.
Second was the diagnosis of those sick dairy cows in Texas, Kansas and New Mexico. The Animal and Plant Health Inspection Service reported, "Unpasteurized clinical samples of milk from sick cattle collected from two dairy farms in Kansas and one in Texas, as well as an oropharyngeal swab from another dairy in Texas, tested positive for highly pathogenic avian influenza."
Farms also reported finding deceased wild birds on their properties, according to APHIS, and the detections appear to have been introduced by wild birds. Initial testing did not find changes to the virus that would make it more transmissible to humans, which would indicate that the current risk to the public remains low.
APHIS said, "There is no concern about the safety of the commercial milk supply or that this circumstance poses a risk to consumer health. Dairies are required to send only milk from healthy animals into processing for human consumption; milk from impacted animals is being diverted or destroyed so that it does not enter the food supply. Pasteurization has continually proven to inactivate bacteria and viruses like influenza in milk and is required for any milk in interstate commerce."
A joint press release from the National Milk Producers Federation, International Dairy Foods Assn., Dairy Management Inc. and U.S. Dairy Export Council echoed APHIS assurances, adding, "Routine testing and well-established protocols for U.S. dairy continue to ensure only safe milk enters the food supply."
Speaking in the April 1 "Dairy Radio Now" broadcast, Rabo Bank's Lucas Fuess admitted that the February Milk Production report showing output down 1.3% adjusted for the Leap Day has not resulted in a recovery in the markets. April and May futures are showing prices that are "brutal" for dairy farmers, he said.
He cited the additional cheese making capacity coming on line and lackluster demand but says there may be some recovery by the second half of the year. Exports will help, he said, but "There's plenty of competition from other key exporting regions around the world."
As to the sick dairy cows, he said we need to know whether it's being transmitted between cows or only by birds. He also emphasized the safeguards already in place that keep tainted milk out of the food supply. He said the impact of the bridge collapse will be significant and long lasting, but hopefully other ports along the East Coast will be able to absorb the impact.
A higher All Milk Price and lower feed costs spurred a rise in the February milk feed price ratio, ending two months of decline. The latest Ag Prices report shows the ratio at 2.13, up from 1.98 in January, and compares to 1.59 in February 2023.
The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. One pound of milk would purchase 2.13 pounds of dairy feed of that blend.
The All Milk Price averaged $20.60 per hundredweight, with a 4.30% butterfat test. That's up 50 cents from January, but $1 below February 2023, which had a 4.21% test.
Alfalfa hay slipped to $200 per ton, down $2 per ton from January and $64 below a year ago.
Looking at the cow side of the ledger, the February average cull price for beef and dairy combined jumped to $109 per hundredweight, up $6 from January, $19.50 above February 2023 and $37.40 above the 2011 base average.
"Milk production margins moved above $10 per hundredweight the fourth time in the past five months and were $1 per hundredweight above January," according to dairy economist Bill Brooks of Stoneheart Consulting in Dearborn, Mo.
"Income over feed costs in February were above the $8 per hundredweight level needed for steady to higher milk production for the sixth month in a row. Input prices were lower, but all three commodities remained in the top eight for February all time. Feed costs were the fifth highest ever for the month of February and the 76th highest of all time. The All-Milk price moved back inside of the top 60 all-time at the 52nd highest recorded," said Brooks, and the ratio was above the 5-year average for the first time since November 2020.
"Milk income over feed costs for 2023 came in at $8.14 per hundredweight," said Brooks. Milk income over feed costs were near the level needed to maintain or grow milk production. Profitability was down $3.77 per hundredweight from 2022's level and $1.58 lower than the 2018-22 average."
"Milk income over feed costs for 2024 (using March 28 CME settling futures prices for milk, corn and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $12.73 per hundredweight, a gain of $4.59 versus 2023. Income over feed in 2024 is 52 cents per hundredweight lower than last month and would be above the level needed to maintain or grow milk production," Brooks concludes.
CME block Cheddar cheese ended March at $1.4175 per pound, up 2.50 cents on the Good Friday holiday shortened week, 13.25 cents below where it was on March 1, and 43.25 cents below a year ago when it plunged 25 cents to $1.85.
The Cheddar barrels finished the week and the month at $1.4275, a quarter-cent higher on the week, 22.25 cents lower on the month, 38 cents below a year ago, and a penny above the blocks.
There were 25 sales of block on the week at the market of last resort, and 83 for the month of March, up from 62 in February. Barrel sales totaled 22 for the week and 62 for March, up from 45 in February.
StoneX says there is plenty of fresh cheese available to weigh on the spot market. Cheese demand is lackluster, but concern over the cattle flu is "creating perceived risk on milk production loss."
Midwestern cheesemakers tell Dairy Market News that demand has been somewhat more active in recent weeks. Demand from Eastern pizza makers has noticeably increased since the Ides of March. Cheese supplies are available. Milk availability is growing and was expected to increase with holiday plant downtime and seasonal farm milk output bumps. Spot load prices mid-week were exclusively below-Class III, but not as low as last year, according to DMN.
Western cheesemakers say production continues at a steady clip. Market prices are enticing customer interest, but uncertain market tones have some waiting for further price declines. Milk availability is at early-flush levels but nowhere near last year's abundance. Cheese export demand remains steady to slower.
Butter climbed to $2.8625 per pound Monday, highest since Nov. 7, 2023, but closed last Friday at $2.8425, up 3.50 cents on the week, 8.50 cents above its March 1 perch, and 44.50 cents above a year ago. There were 16 loads sold on the week and 53 for March, down from 80 in February.
Midwest butter makers continued to report steady demand ahead of the spring holiday though some said it was lighter than last year. They believe they will have "a clearer gauge of market tones after the holiday dust has settled in the next few weeks." Cream has been and is readily available. Multiples had been reported below 1, and butter makers say they have cream booked at similar multiples throughout April, according to DMN.
Butter makers in the West say production remains somewhat steady. Spring holiday orders have wrapped up, but some say this run was notably strong. Spring flush levels of cream are noted by a growing number of contacts in the West and multiples were holding around or above the 1.05 mark in most areas.
Grade A nonfat dry milk saw its Friday finish at $1.12 per pound, up 1.25 cents on the week, 7.75 cents lower on the month, and 4 cents below a year ago. There were 12 sales on the week, 50 for the month, down from 61 in February.
HighGround Dairy warns, "When (powder) demand does pick up, many expect the market will rocket higher on the low inventories. Furthermore, with milk production in the U.S. down, resulting in fewer skim-solids available for driers, this could also cause prices to ratchet up quickly."
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