November milk production appeared to be below a year ago
First, I wish you a very merry and blessed Christmas and hope you can rejoice in “the reason for the season.” I believe most of us have much to be grateful for.
November milk production appeared to be below a year ago, according to the USDA’s latest Milk Production report, but then so did October’s.
November output slipped to 18.0 billion pounds, according to preliminary data, down just 0.4% from November 2020. Output in the top 24 major producing states totaled 17.3 billion pounds, down 0.1%.
Revisions however, added 110 million pounds to the original October estimate, now put at 18.6 million, up 0.1%, instead of the originally reported drop of 0.5%.
November cow numbers totaled 9.39 million head, down 10,000 from October, sixth consecutive month they were down from the previous month, and 47,000 head below a year ago. The October count was lowered 5,000 head.
Output per cow averaged 1,922 pounds, up 3 pounds or 0.2% from a year ago
California was up 32 million pounds or 1.0% from a year ago, on a 20 pound gain per cow offsetting 1,000 fewer cows milked. Revisions resulted in a 2.0% increase in October from 2020 instead of a 1.3% decline as originally reported. Wisconsin cows put 55 million more pounds in the tank in November than a year ago, up 2.2%, thanks to 18,000 more cows and a 15 pound per cow increase.
Michigan was off 0.8% on a 10 pound drop per cow and 2,000 fewer cows. Minnesota was up 1.9% on 6,000 more cows and a 10 pound gain per cow. New Mexico again had the biggest drop, down 13.2%, after falling 12.2% in October. Cow numbers were down 39,000 head and output per cow was down 35 pounds.
New York was off 0.2% on a 10 pound drop per cow but cow numbers were up 2,000 head. Oregon was up 0.5% on a 10 pound gain per cow. Cow numbers were unchanged. Pennsylvania was down 3.5%, on 10,000 fewer cows and 25 pounds less per cow. South Dakota was up 16.7%, thanks to 22,000 more cows and a 15 pound gain per cow. Texas was up 2.8% on 17,000 more cows but output per cow was unchanged.
Vermont was down 1.4% on a 25 pound drop per cow. Cow numbers were unchanged. Washington State output was down 6.7% on a loss of 17,000 cows and 15 pounds less per cow than a year ago.
The Dec. 17 Dairy and Food Market Analyst says reports suggest the U.S. dairy herd is no longer declining. “Between June and October 2021, cow numbers had decreased by a total of 103,000 head, with a large number of herd exits in the Southwest and West. Now, contacts are reporting rising replacement heifer prices. And from our survey of farm auction websites, we have seen a significant downtick in the number and size of dairy farms for sale. From our viewpoint, it looks like cow numbers are just now starting to climb again in the USA.”
But, the DFMA adds that “A major shift in global milk supplies appears to be underway. Output in New Zealand is already capped out due to a lack of land. In Australia, too little consistent rainfall has limited investment in the industry.”
“The governments of European countries are announcing plans to limit and reduce milk supplies. In October, the European Parliament adopted the Farm to Fork strategy, which, among many things, includes a mandate for a 20% reduction in fertilizer usage (including cow manure) and a target of 25% of all agricultural production becoming organic by 2030.” The DFMA concludes; “This is the beginning of a shift of production away from Europe toward more cow-friendly countries, including the USA.”
Meanwhile China's dairy appetite remains intact. November whole milk powder imports totaled 142 million pounds, up 44.8% from November 2020. Skim milk powder totaled 68.4 million pounds, down 1.9%, though year to date are up 31%. Whey products totaled 107.3 million pounds, down 20.1%, but up 20.2% YTD.
Butter imports amounted to 10.6 million pounds, down 47.5%, with YTD up 13.6%. Cheese imports, at 35.4 million pounds, were up 37.2% and 38.1% YTD.
China’s cheese demand continues to be impressive, says HighGround Dairy, reaching 10-month highs in November and the strongest November ever. HGD adds that imports from New Zealand jumped 42%, followed by Australia. Gains from the U.S. by volume were the third largest after Oceania.
Back home, dairy cow culling fell from the previous month but bested that of a year ago in November, according to USDA’s latest Livestock Slaughter report.
An estimated 245,300 head were sent to slaughter under federal inspection in November, down 10,900 from October but 15,900 head or 6.9% above November 2020. Culling in the 11 month period totaled 2.84 million head, up 48,600 or 1.7% from a year ago.
In the week ending Dec. 11, 62,300 dairy cows were sent to slaughter, down 1,500 from the previous week, but 200 head or 0.3% above a year ago.
Checking supplies on hand; U.S. butter stocks plunged seasonally in November, falling from the previous month for the fifth consecutive time.
The Agriculture Department’s latest Cold Storage data shows the November 30 inventory at 211.8 million pounds, down 67 million pounds or 24% from the October level, which was revised 2.7 million pounds lower than last month’s report. Stocks were 40 million pounds or 15.9% below those a year ago, second month in a row they were below a year ago, and were the lowest since December 2019.
Weaker butter production is the likely reason for the lower stocks, says StoneX Dairy’s analysis, “driven by larger demand for fat in other forms, namely cream, and weaker overall milk production,” but warns “That will likely change as we head into next year with higher butter prices pulling more milk into the churn.”
American type cheese stocks fell to 835.2 million pounds, down 8.1 million pounds or 1% from October, but 73.2 million or 9.6% above those a year ago.
The “other” cheese category dropped to 565.7 million pounds, down 18.2 million pounds or 3.1% from October, and virtually unchanged from a year ago.
The total cheese inventory slipped to 1.42 billion pounds, down 27 million pounds or 1.9% from October, but an abundant 73.5 million pounds or 5.5% above a year ago. There were no big surprises in this report.
Christmas Week saw CME block Cheddar close Thursday at $1.8725 per pound, down 1.50 cents on the shortened week, but 27.50 cents above a year ago.
The Barrels fell to $1.6250 per pound Monday but finished Thursday at $1.65, up 2 cents on the week, 18.50 cents above a year ago, but 22.25 cents below the blocks. There were 5 cars of block sold on the week at the CME and 12 of barrel.
Midwestern cheesemakers reported spot milk prices at expected discounts, below $1-under Class III Christmas Week but, compared to last year, milk was notably less available and prices were as low as $8.50 under according to the Dairy Market News report from that week. Cheese demand has been very steady in recent weeks and months and availability is balanced to tight in the region.
CME butter marched to a $2.25 per pound close Thursday, highest since Aug. 22, 2019, up 15.75 cents on the week, and 72.50 cents above a year ago. There were 28 carloads that exchanged hands in the four days.
International interest in 82% butterfat unsalted loads remain strong, says DMN, while domestic demand for 80% salted loads has held steady. Contacts suggest cream availability may not remain long much after the onset of 2022, as some processors are behind on orders. Meanwhile, domestic butter demand remains steady in the west at retail, food service, and internationally.
Grade A nonfat dry milk fell to $1.6625 per pound Tuesday but closed Thursday at $1.67, 0.75 cents lower on the week but 52.25 cents above a year ago, on 13 sales.
Dry whey lost a half-cent Tuesday, first loss since Dec. 1, but rallied and closed Thursday at a new record high 75 cents per pound, 28.25 cents above a year ago on 2 sales for the week at the CME.
The Agriculture Department announced the first milk price of 2022. The January Federal order Class I base is $19.71 per hundredweight, up 54 cents from December, $4.57 above January 2021, and the highest Class I since Dec. 2020.
Dairy margins strengthened noticeably over the first half of December, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC. The MW credited a surge in milk prices more than offsetting steady to slightly higher projected feed costs.
“Class III and Class IV Milk prices advanced with slowing domestic and global milk production providing support amidst a backdrop of strong demand,” the MW stated. “Whey price strength has been a big contributor to Class III prices. Dry whey prices are up 53.2% since the beginning of the year, besting any dairy product price performance as well as that for many other agricultural commodities.”
“Strength in the export market with robust demand from global buyers has been a key feature supporting the market. Year-to-date dry whey exports are up 7.4% from 2020, with strong demand from China in particular. China’s imports of whey and dry whey products grew more than 30% in 2021, and most of these imports are coming from the U.S. that maintains a price advantage over EU suppliers.”
“Demand is expected to slow in 2022 however due to a declining birth rate in China that will limit demand for infant formulas, as well as low hog prices that will limit demand for feed-grade whey. Class IV prices are drawing support meanwhile from butter which is trading at a 2-year high above $2.00 per pound as U.S. prices are trading below international values. Butter exports have helped to draw down stocks from July through October at the fastest pace since 2013,” the MW concluded.
Whole milk powder reversed the last Global Dairy Trade auction of 2021, as the weighted average fell 1.5%, first decline since August 3, and followed a gain of 1.4% on Dec. 7, 1.9% on Nov. 16, and 4.3% on Nov. 2. Traders brought 67 million pounds of product to market, down from 68.5 million last time.
Whole milk powder was down 3.3%, after inching up 0.6% on Dec. 7. All other products posted gains, led by lactose, up 3.7%, after gaining 3.5% on Dec. 7.
Butter was up 1.0%, after leading the gains last time with a 4.6% surge. Anhydrous milkfat inched up 0.9%, following a 3.0% rise. Skim milk powder was up 0.6%, after rising 1.3% last time, and Cheddar cheese inched 0.5% higher, following a 1.0% gain last time.
StoneX Dairy Group says the GDT 80% butterfat butter price equates to $2.5891 per pound U.S., up 2.6 cents, after jumping 11.4 cents last time and 8.2 cents the time before that. CME butter closed Thursday at a bargain $2.25. GDT Cheddar, at $2.3773 per pound U.S., was up almost a penny and compares to Thursday’s CME block Cheddar at $1.8725. GDT skim milk powder averaged $1.6986 per pound, up from $1.6877. Whole milk powder averaged $1.7540 per pound, down from $1.8178. CME Grade A nonfat dry milk closed Thursday at $1.67 per pound
StoneX’s Dustin Winston says “Since whole milk powder carries the bulk of volume in the auction, the decline dragged the index down.”
The Foreign Agricultural Service’s World Markets and Trade report says “Despite the logistical challenges posed by the COVID-19 pandemic, U.S. dairy exports are set to record a stellar year led by shipments of skimmed milk powder (SMP), cheese, and butter. SMP shipments through October have already reached 689,000 tons, accounting for nearly one third of the $6.4 billion of dairy exports already shipped. For the year, SMP exports are forecast to reach a record 887,000 tons, up almost 10% over 2020,” according to the report.
“Growth is anticipated to moderate in 2022 with exports set to grow by 3% to reach 917,000 tons. Global prices of SMP have been rebounding recently as a result of lackluster milk production in Oceania and the EU. SMP prices in these regions are currently hovering around $1.60-$1.65 per pound. While U.S. prices remain competitive, import demand is expected to be tempered as food processors seek more cost-effective substitutes,” the report warned.
“One notable trend is that U.S. global market share of SMP among major exporters has been steadily climbing from around 30% in 2015 and is forecast to reach 41% in 2022. Since 2014, the EU has been the dominant supplier; however, this year U.S. exports of SMP are expected to surpass EU shipments.”
The reported added that “This trend is likely to persist into next year as U.S. milk production is expected to continue to grow. Exports of other dairy products such as cheese and butter have also posted strong gains this year. In the case of cheese, shipments this year are expected to grow by 16% to reach a record 412,000 tons. U.S. butter has also been highly sought after as it is highly competitive in a tight global market. Recent Oceania prices have been around $2.65 per pound while EU prices have been higher. Exports of U.S. butter this year are expected to more than double from last year to reach 60,000 tons. In recent months, global prices for major dairy commodities have been rising rapidly due to strong demand and faltering milk production in key producing countries.”
Lee Mielke is a graduate of Brown Institute in Minneapolis, MN. He’s formerly the voice of the radio show “DairyLine,” and his column appears in agricultural papers across the U.S. Contact him at lkmielke@juno.com.