By LEE MIELKE
Mielke Market Weekly 

The USDA raised its 2015 milk production forecast for the second time in nine months in its latest World Agricultural Supply and Demand Estimates report (WASDE) issued Friday morning, July 9, based on a slightly more rapid increase in cow numbers and milk per cow. However, higher expected feed prices and weaker milk prices during late 2015 and 2016 are expected to temper the rate of growth in production, and the 2016 production forecast was lowered.

2015 production and marketings were reported at 208.8 billion pounds and 207.9 billion pounds, respectively, up 100 million pounds from last month’s report. If realized, 2015 production and marketings would be up 2.8 billion pounds or 1.4 percent from 2014.

2016 production and marketings were projected at 213.6 billion pounds and 212.6 billion, both down 300 million pounds from last month’s projection. If realized, 2016 production and marketings would be up 4.8 billion pounds or 2.3 percent from 2014.

You’ll recall that May milk production totaled 17.2 billion pounds, according to USDA’s preliminary data, up 1.4 percent compared to May 2014. USDA’s May Dairy Products report shows where that milk went and didn’t.

Total cheese output hit 988.6 million pounds, up 1.8 percent from a year ago, with year to date (YTD) production at 4.8 billion pounds, up 2.2 percent. That’s a record high for May, according to the Daily Dairy Report (DDR).

Italian cheese output hit 423.2 million pounds, up 1.9 percent, with YTD at 2.1 billion pounds, up 2.1 percent. Mozzarella, at 337.9 million pounds, is up 2.1 percent and YTD totaled 1.7 billion pounds, up 1.1 percent.

American type cheese production totaled 400.6 million pounds, up 1.6 percent, with YTD at 1.9 billion, up 2.6 percent. Cheddar output amounted to 290.1 million pounds, up just 0.4 percent, with YTD at 1.4 billion, up 1.5 percent. The American category includes Cheddar, Colby, Monterey and Jack cheeses, according to the DDR, and is dominated by Cheddar, which typically accounts for about 72 percent of the category.

Churns put out 169.5 million pounds of butter in May, up 1.9 percent, but YTD, at 833.8 million pounds, is still down 2.0 percent.

Nonfat dry milk totaled 178.2 million pounds, up 9.9 percent, with YTD output hitting 855.8 billion pounds, up 11.1 percent.

Less milk went to skim milk powder, which totaled 36.7 million pounds in May, down 38.3 percent, with YTD output at 186.8 million pounds, down 25.2 percent.

The report also shows nonfat dry milk stocks at 261.0 million pounds, as of May 31, up 13 million or 5.2 percent from April and 18 percent above a year ago.

FC Stone dairy broker Dave Kurzawski sees the report as bearish on butter as May output was slightly above his expectation.

"Despite an extremely wide spread between the class III and IV markets, it appears production of class IV products remains very strong and has led to increasing inventories," he said.

He sees the report as slightly bullish on cheese because May American cheese was slightly below expectation as was other cheese. "While this is bullish versus expectations, it is also an indicator that American cheese demand is slower than expected given the strong growth in inventory on the cold storage report."

The report was bearish on nonfat dry milk, according to Kurzawski.

"Nonfat production slowed more than is typically seen from April into May, coming in well below expectation, but despite the lower production levels, stocks jumped sharply by 5.2 percent from April," he said. "Lower production with increasing stocks means lower demand, and that’s saying something given our low NFDM prices."

The report was bearish on whole milk powder, he said, and stocks continue to set record highs coming in this month at a sharp increase of 3.6 percent month over month and now a staggering 53.9 percent higher than a year ago.

The cash dairy market had a hard time making up its mind last week while traders awaited Friday’s WASDE. Cheese prices, which had shown some weakness as product, particularly barrel cheese, flowed to the CME. But, prices strengthened and the block Cheddar closed the week at $1.7250 per pound, up 10.5 cents, but still 24.5 cents below a year ago. The Cheddar barrels closed July 9 at $1.66, up 7.75 cents on the week but 32.75 cents below a year ago, and 6.5 cents below the blocks. Seven cars of block traded hands on the week and 12 of barrel. The lagging NDPSR-surveyed U.S. average block price slipped 0.6 cent, to $1.7466 per pound, and the barrels averaged $1.7058, down 2.3 cents.

Western manufacturers suggest that, although export cheese sales have dropped a little this year, strong domestic demand has helped make up the difference. Cheese production has remained strong in the region, with milk readily available.

Butter lost some ground the week of July 6, closing Friday at $1.92 per pound, down 2 cents on the week and 45.25 cents below a year ago. Only two cars traded hands on the week. NDPSR butter averaged $1.9294, up 2.6 cents.

Butter sales to retailers have started to increase for some manufacturers, reports Dairy Market News (DMN). Cream supplies tightened as processors started up after the holiday weekend. Some butter makers are buying cream from the West. Western butter output has slowed as some manufacturers are willing to sell cream and milk. The seasonal increase of ice cream production has pulled cream from butter making, while milk is being diverted to keep cheese production full, according to DMN.

Cash Grade A nonfat dry milk closed Friday, July 9, at 79.5 cents per pound, down 3.75 cents on the week, 94 cents below a year ago, likely the lowest level ever. It would be a half-cent below the government support price if the Support program was still in effect. Eleven cars traded hands last week at the CME. NDPSR powder averaged 87.70 cents per pound, down 3.4 cents. Dry whey averaged 40.90 cents per pound, down 0.4 cent. California’s latest surveyed nonfat dry milk price dropped 2.2 cents, to 88.35 cents per pound.