The handwriting is on the milk house wall. U.S. milk output is slowing due to falling cow numbers and output per cow, driven by tightening margins and dairies exiting the business.
The Agriculture Department’s latest preliminary data shows September output at 18.1 billion pounds, down 664 million pounds or 3.5% from August, but just 44 million pounds or 0.2% above Sept. 2020.
The 24-State total, at 17.3 billion pounds, was up 0.4% from a year ago. Revisions lowered the August 50-State estimate by 101 million pounds from last month’s report, to 18.7 billion, up 0.6% from 2020, instead of the 1.1% reported.
September cow numbers totaled 9.42 million head, down 25,000 from August, after dropping 19,000 from July (27,000 from New Mexico alone), fourth month in a row cow numbers fell from the previous month.
The milking herd is still 27,000 head above a year ago. August numbers were revised down 33,000 head. The big story is the herd dropping 85,000 head from its peak four months ago.
September output per cow averaged 1,918 pounds, down 1 pound from 2020, a repeat of last month. It is unusual for output per cow not to increase.
California milk output was only up 0.2%, on a 5-pound gain per cow, while cow numbers were unchanged. Wisconsin was up 83 million pounds or 3.3%, on a 30-pound gain per cow and 22,000 more cows. Idaho was down 0.2%, on a 25-pound drop per cow, though cow numbers were up 6,000.
Michigan was up 1.8% on 12,000 more cows offsetting a 20-pound drop per cow. Minnesota was up 2.4% on 11,000 more cows but output per cow was unchanged. New Mexico had the biggest drop, down 12.5%, due to 27,000 fewer cows milked and a 95-pound drop per cow.
New York was up 1.8%, thanks to 2,000 more cows and a 30-pound gain per cow.
Oregon was down 0.9% on 1,000 fewer cows and a 5-pound drop per cow. Pennsylvania was down 2.1% on 7,000 fewer cows and 10 pounds less per cow.
South Dakota again showed the biggest increase, up 14.6%, thanks to 20,000 more cows and a 10-pound gain per cow. Texas was up 2.5%, with 27,000 more cows hitting the parlor and offsetting a 40-pound drop per cow.
Washington state again had the second biggest decline, down 7.9%, following a 6.6% drop in August. Cow numbers were down 15,000 head and output per cow was down 55 pounds.
Dairy cow culling may be slowing some but remained above a year ago for the fourth consecutive month, according to USDA’s latest Livestock Slaughter report.
The data shows an estimated 264,600 head were sent to slaughter under federal inspection in September, up 3,200 from August and 14,200 or 5.7% above September 2020.
Culling in the nine-month period totaled 2.34 million head, up 35,500 or 1.5% from the same period a year ago.
China still buying
The elephant stayed at the feeding trough, considering China's September dairy imports.
Whole milk powder hit a record 79.2 million pounds, up 56.3% from September 2020, with year to date imports up 42.5%.
Skim milk powder totaled 67.3 million pounds, down 13.8%, though YTD imports are up 34.3%.
HighGround Dairy’s Lucas Fuess reported on the Oct. 25 "Dairy Radio Now" broadcast that the reason those imports were down was mostly due to a shortage of product from New Zealand. However, competitive prices enabled the U.S. to be the No. 1 supplier in the month.
Cheese imports amounted to 21.4 million pounds, up 9.8% from a year ago and up 42% YTD. 1.2 million pounds came from U.S. vats in September.
China imported 9.4 million pounds of butter, up 10.8% from a year ago, with YTD up 21.9%.
Fuess says China is aware of a potential protein shortage and is buying product wherever it can, despite plenteous stocks on hand.
Butter stocks dropping
U.S. butter stocks kept heading lower after falling below those a year ago in August for the first time since June 2019.
The Agriculture Department’s latest Cold Storage report shows the Sept. 30 inventory at 330.1 million pounds, down 32.6 million pounds or 9% from the August level, which was revised 4.2 million pounds lower than what was reported a month ago. Stocks were 13.8 million pounds or 4.0% below September 2020.
American type cheese stocks, however, jumped to 844.1 million pounds, up 17 million pounds or 2.1% from August, and a hefty 71.5 million pounds or 9.3% above those a year ago. The August level was revised up 3.5 million pounds.
The “other” cheese category climbed to 592.2 million pounds, up 8.6 million pounds or 1.5% from August, and 31.5 million or 5.6% above a year ago.
The resulting total cheese inventory stood at 1.46 billion pounds, up 25.5 million pounds or 1.8% from August, and a bearish 104.6 million or 7.7% above a year ago.
CME dairy prices moved higher last week as traders weighed Tuesday’s GDT, the September Milk Production and Slaughter reports, and awaited Friday afternoon’s September Cold Storage data.
The Cheddar blocks closed Friday at $1.81 per pound, up 3 cents on the week but 96.25 cents below a year ago.
The barrels finished at $1.8625, up 7.25 cents on the week, highest since Nov. 12, 2020, but were 59.25 cents below a year ago when they jumped 25 cents, and were an inverted 5.25 cents above the blocks. Only 1 car of block was sold last week at the CME plus 19 cars of barrel.
The blocks were up a penny Monday but were offered down 4.75 cents Tuesday to $1.7725.
The barrels were offered 0.25 cents lower Monday and lost 3 cents Tuesday, slipping to $1.83, but 5.75 cents above the blocks.
Cheesemakers tell Dairy Market News that spot milk is not tight but not as open as previous weeks. Cheese demand notes from both process and other cheesemakers, are in a seasonal push. Plant employee shortages have contacts concerned about schedules and overworking veteran employees, wage increases, and other logistical concerns.
Western retail and foodservice cheese demand is steady to higher. Holiday demand is picking up and export interests are steady. Some cheesemakers are operating at maximum capacity, but others report limitations due to persistent staffing issues. Congestion at ports and trucking issues continue.
Butter climbed to $1.8450 per pound last Thursday but closed Friday at $1.8350, up 6 cents on the week and 40 cents above a year ago on 30 sales.
Monday’s butter was up 3 cents and then added 6.50 cents Tuesday, hitting $1.93 per pound on 8 trades, highest since June 10, 2020.
Employee numbers at butter operations are growing, says DMN, but training new employees is a slow process. Hauling and logistical issues still remain. Cream contract negotiations are underway for 2022. Butter market tones are range bound in the near term, according to participants, but expectations are more bullish than bearish and less reactionary than other dairy commodities.
Cream is being dispersed in the Pacific Northwest and northern mountain states following last week’s fire at an Idaho butter plant. Cream supplies are, reportedly, near normal seasonal volumes but butter production is steady. Labor issues are causing some to run truncated schedules.
Butter demand is strong with contacts reporting some early purchasing from buyers in anticipation of heavy holiday sales. Butter is abundant but the butter plant fire has caused some uncertainties around immediate fresh butter availability, says DMN.
Grade A nonfat dry milk hit $1.54 per pound last Monday but closed Friday at $1.5375, up a half-cent on the week and 44 cents above a year ago, with 15 carloads finding new homes on the week.
CME powder was unchanged Monday but crept up 0.75 cents Tuesday to $1.5450, highest since Aug. 7, 2014.
Spot dry whey closed last week at 61.75 cents per pound, 1.50 cents higher and 23.25 cents above a year ago, with only 2 sales reported.
The whey gained 0.75 cents Monday, hitting 62.50 cents per pound, highest since June 11, but slid back 0.50 cents Tuesday to 62 cents per pound.