Falling cow numbers and output per cow put a small dent in July U.S. milk production as summer heat took its toll. The Agriculture Department’s preliminary data put output at 19.075 billion pounds, down 105 million or 0.5 percent from July 2022. The top 24-State total, at 18.26 billion pounds, was down 0.6 percent.

The June 50-state total was revised up 37 million pounds from last month’s estimate, which put output up 0.2 percent instead of the 0.2 percent decrease originally reported. The 24-state revision was up 37 million pounds, 0.4 percent above June 2022, instead of the 0.2 percent gain originally reported.

July cow numbers totaled 9.40 million head, down 3,000 from the June count which was revised down 5,000 head. The herd is 13,000 below a year ago, and the smallest since February 2022. The 24-state count was down 7,000 from June but dead even with a year ago.

Output per cow averaged 2,029 pounds, down 9 pounds or 0.4 percent from July 2022 in the 50 states and down 13 pounds to 2,047 pounds or 0.6 percent, in the 24 states. Productivity losses were largest in parts of the West and Southwest.

Golden State cows put 3.3 billion pounds of milk in the tank in July, down 194 million pounds or 5.5 percent from a year ago, as hot weather prevailed in July. Output per cow was down 105 pounds and cow numbers were down 7,000 head. Wisconsin output, at 2.76 billion pounds, was up 25 million or 0.9 percent, thanks to a 25-pound gain per cow offsetting the loss of 3,000 cows.

Plenty of incentive remains for culling. The latest Livestock Slaughter report shows an estimated 244,200 dairy cows were sent to slaughter under federal inspection in July, down 11,500 from June, but 14,100 or 6.1 percent above July 2022.

The week ending August 17 saw 61,900 dairy cows go to slaughter, up 1,400 head from the previous week, and 4,300 or 7.5 percent more than a year ago. Year to date 1,974,600 have been culled, up 108,700 head or 5.8 percent from a year ago.

StoneX says a substantial shift lower in beef heifer slaughter in the week ending August 12 led to dairy cows accounting for over 10 percent of the beef market share.

Americans chewed through July butter and cheese inventories. The Agriculture Department’s latest Cold Storage report shows butter holdings on July 31 at 331.6 million pounds, down a bullish 18.2 million or 5.2 percent from the June inventory, which was revised up 2.3 million pounds. But, stocks were 16.5 million pounds, or 5.2 percent, above those in July 2022.

American cheese stocks fell to 838.2 million pounds, down 15.3 million pounds or 1.8 percent from June, and 21.8 million or 2.5 percent below a year ago.

The “other” cheese category slipped to 627.8 million pounds, down 6.4 million pounds or 1.0 percent from June, and down 11.5 million or 1.8 percent below a year ago.

The total cheese inventory stood at 1.49 billion pounds, down 21.7 million or 1.4 percent from the June total, and down 33.2 million or 2.2 percent below a year ago.

StoneX broker Dave Kurzawski said the report came in under expectations in the August 28 ‘Dairy Radio Now’ program, however it justified the high butter prices. “That doesn’t underpin the market going forward but justifies what has happened,” he said, adding it’s a similar scenario on cheese and justifies the higher prices.

When asked about the USDA hearing that got underway this week on market order milk pricing, Kurzawski said “It’s a very significant process.” The industry told USDA that we need to restructure the way we price milk in this country, he explained, and said over 20 organizations will make their proposals.

The National Milk Producers Federation called the hearing “a critical moment for dairy’s future,” and “Following USDA’s initial presentations, the hearing will launch into discussions of specific issues including milk composition; surveyed commodity products; Class III and Class IV formula factors; the Base Class I skim milk price; and Class I and Class II price differentials.”

After the hearing’s conclusion, entities involved will have time to respond to the testimony, followed by a USDA draft decision, then more discussion, and ultimately a vote by farmers on a final proposal, likely in the second half of 2024.

Cash cheese prices weakened this week as the Cheddar blocks fell to $1.89 per pound Wednesday, lowest since July 27, but closed Friday at $1.9450, down 8.25 cents on the week and 20.50 cents above a year ago.

The barrels finished at $1.80, 0.75 cents lower, 8.25 cents below a year ago, and 14.50 cents below the blocks. Sales totaled 4 cars of block and 9 of barrel.

Cheesemakers tell Dairy Market News that demand is on par with previous years in mid to late August. Orders are average and inventories are balanced, but moving smoothly. Spot milk at mid-week was at Class III to 50 cents over. A number said they had not been offered any extra milk the past few weeks.

Western cheese demand is strong to steady, weighted more by the blocks. Export demand is reported as moderate to light, with Mexican purchasers showing less hesitation. Milk and cream volumes have tightened throughout the West but cheesemakers are running steady production, according to DMN. But, U.S. cheese prices remain above global levels and therefore uncompetitive.

Butter closed the week at $2.67 per pound, down 3 cents on the week and 41.25 cents below a year ago when it sat at $3.0825. There were 70 sales on the week. By the way, the highest butter price ever was $3.2675 on Oct. 6, 2022.

An important reminder is in the August issue of the Milkweed. Editor Pete Hardin states that CME prices do not set milk prices. It is the USDA surveyed prices in the National Dairy Products Sales report that are used in the pricing formulas.

Hardin addressed the disparity between CME prices and surveyed prices and the time lag between them. It’s a good reminder as to how the system works, or doesn’t, when we see milk prices that, as Hardin put it, “Are at least $10 per hundredweight below costs of production for most producers.”

Speaking of milk prices, the September Federal order Class I base price was announced at $18.90 per hundredweight, up $2.28 from August but $4.72 below September 2022. It equates to $1.63 per gallon, down from $2.03 a year ago.

Fluid milk sales returned to their old ways in June after posting a tiny 0.2 percent gain in May, first increase since August 2022. The USDA’s latest data shows packaged fluid sales totaled 3.2 billion pounds, down 1.3 percent from June 2022.

Conventional product sales totaled 3.1 billion pounds, down 1.0 percent from a year ago.

Whole milk sales totaled 1.2 billion pounds, up 2.2 percent from a year ago, up 1.1 percent year to date, and represented 34.8 percent of total sales for the first half of the year. Skim milk sales, at 164 million pounds, were down 7.5 percent from a year ago and down 7.3 percent year to date.