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Cheese demand, production up thanks to football season

By Lee Mielke
You’ll recall USDA’s preliminary data showed August milk production totaled 18.8 billion pounds, up just 1.1 percent from Aug. 2020. While school milk pipelines got filled, drawing milk away from manufacturing, limiting butter and powder output, the football season helped grow cheese demand and thus cheese production.
August cheese output totaled 1.14 billion pounds, down 0.3 percent from July but 4.4 percent above August 2020. Year to date (YTD) cheese output hit 9.05 billion pounds, up 3.4 percent from the same period in 2020.
Wisconsin produced 294 million pounds of that cheese, up 0.8 percent from July and 5.1 percent above a year ago. California output, at 201.7 million pounds, was down 0.6 percent from July but 5.4 percent above a year ago. Idaho produced a tad under 78 million pounds, down 9.5 percent from July and 4.2 percent below a year ago.
Italian style cheese totaled 484.8 million pounds, up 0.3 percent from July and 8.8 percent above a year ago. American type cheese, at 451.9 million pounds, was down 3.1 percent from July but 1.5 percent above a year ago. Mozzarella totaled 379.4 million pounds, up 6.7 percent from a year ago.
Cheddar, the cheese traded daily at the CME, totaled 318.4 million pounds, down 5.8 million pounds or 1.8 percent from July, and 4.8 million pounds or 1.5 percent below a year ago. YTD Cheddar was at 2.6 billion pounds, up 4 percent from 2020.
Churns produced 148.4 million pounds of butter, down 2.2 million pounds or 1.5 percent from July, and 2.5 million pounds or 1.7 percent below a year ago. YTD butter output was at 1.4 billion pounds, down 2 percent from 2020.
Yogurt totaled 401.1 million pounds, up 4.9 percent from a year ago.
Traders were looking for strength in Tuesday’s Global Dairy Trade auction but the weighted average was unchanged, following the 1 percent increase on Sept. 21 and 4 percent jump on Sept. 7. Traders brought 63.2 million pounds of product to market, up from 54 million on Sept. 7, and the highest since Feb. 2.
Buttermilk powder led the gains, up 9.7 percent. GDT Cheddar was up 0.7 percent, following a 1.2 percent drop on Sept. 21, and skim milk powder inched up 0.5 percent, after gaining 0.9 percent last time. Lactose was up 0.4 percent, as were both butter and anhydrous milkfat, following butter’s 1.9 percent decline last time and anhydrous milkfat being unchanged. Whole milk powder was down 0.4 percent, following a 2.2 percent rise.
StoneX Dairy Group said the GDT 80 percent butterfat butter price equates to $2.1587 per pound U.S., up almost a penny from the last event and compares to CME butter which closed Friday at $1.72. GDT Cheddar, at $1.9493, up from $1.9387, and compares to Friday’s CME block Cheddar at $1.81. GDT skim milk powder averaged $1.5038 per pound, up from $1.4979. Whole milk powder averaged $1.7005 per pound, down from $1.7131. CME Grade A nonfat dry milk closed Friday at $1.46 per pound.
GDT prices were stable, according to broker Dave Kurzawski in the Oct. 11 ‘Dairy Radio Now’ broadcast, but “stable at higher prices” and “the stability of the GDT is not bearish.” He said the GDT may “chop around for a few sessions, but we’ll see where the tides take us in fourth quarter. If buyers need to get more done, you’ll start to see that GDT price go up.”
As the Asian countries come out of the COVID lockdowns, Kurzawski believes there will continue to be strong demand for dairy. When asked about the port congestion and the lack of help and shipping supplies, he said he doesn’t know how that will play out. It needs to be addressed, he said, but, “Watch the money. If there’s money behind this, the darkest days may be behind us.” He said he remains optimistic, concluding, “We have brighter days ahead.”
Meanwhile, U.S. dairy industry exports continue to excel. August cheese exports totaled 80.6 million pounds, up 18.1 percent from August 2020 and was a record high for the month, following a record-breaking July, according to HighGround Dairy, which listed Mexico, Japan and Chile as the top destinations.
HGD reports that trade with Mexico improved and marked the seventh consecutive month of year-over-year gains, adding that “While 2020 figures are skewed to the downside, shipments to Mexico were higher versus 2019 levels as well during June, July, and August.”
The biggest jump was in nonfat dry milk. The U.S. shipped almost 73 million pounds to Mexico. Total nonfat and skim milk powder exports amounted to 174 million pounds, up 15.4 percent from a year ago, with year to date (YTD) up 15.4 percent.
Butter totaled 7 million pounds, up 90.5 percent from a year ago, with YTD up 130.1 percent. Canada was the biggest destination, followed by South Korea, and Bahrain. Interestingly, butter imports amounted to 10.9 million pounds, up 29.9 percent from a year ago, with YTD imports up 8.1 percent. Cheese imports totaled 35.5 million pounds, up 8.8 percent from a year ago, with YTD up 16.6 percent.
Butter plant managers continue to report production being hampered by staffing shortages. Many say hiring has increased but new employees are undergoing the training process which takes time. Cream is available from the West, but locally sourced cream is priced too high for some. Butter market tones softened a bit but with the limited output during the busier demand season, “some foresee more bulls than bears for the short term.”
StoneX Oct. 7 Early Morning Update summed things up well: “There are more and more questions about the impact of labor issues. The impact depends on where the lack of labor is most acute: Farm level, bulk commodity on plant, packaging plant, retailer, restaurant, port or at any of the transportation links in between. We could have too much milk and not enough bulk product, too much bulk product and not enough finished product, or too much finished product in warehouses and empty refrigerators at home. It could have very different price impacts depending on where the biggest disruption is seen.”
The costs of producing milk aren’t going down. The Daily Dairy Report’s Sarina Sharp pointed out in the Oct. 1 Milk Producers Council newsletter that, according to the Dairy Margin Coverage program income over feed calculation, the average dairy producer spent $12.45 on feed to produce 100 pounds of milk in August.
Sharp said, “That’s the highest national average feed cost since 2013, on the heels of the devastating 2012 drought. Even at eight-year highs, the index likely understates feed costs because it fails to account for this year’s stiff markups due to regional scarcity and expensive freight. Other costs are higher too. Wages and fuel are taking an especially big bite out of dairy producer incomes.”
She added, “Rising expenses are pushing dairy producers to take a hard look at their less productive cows, and high beef prices make culling more attractive. Today, the beef check from a heavy cull cow will generally cover the cost of a springer to fill her stall.”