Preliminary USDA data pegs April milk output in the top 23 producing states at 17.2 billion pounds, up 2.0 percent from April 2016. The 50-state total is 18.3 billion pounds, also up 2.0 percent.

 

The most bearish part of the report is cow numbers, up for the seventh consecutive month, totaling 9.39 million head in the 50 states and 8.72 million in the 23 states. That’s 8,000 more than March and 81,000 more than a year ago. Output per cow was above the prior year for the 18th consecutive month, averaging 1,967 pounds, up 20 pounds from a year ago.

California output was below a year ago for the fourth month in a row, off 1.1 percent, on a 10-pound loss per cow and 11,000 fewer cows. Wisconsin was only up 0.6 percent. Output per cow was only up 10 pounds and cow numbers were only up 1,000 head.

Texas again showed the biggest gain, up 12.8 percent, thanks to 45,000 more cows than a year ago and 55 pounds more per cow. New Mexico was second, up 7.5 percent, on a 40-pound gain per cow and 17,000 more cows.

Gains in milk per cow were not as great as some expected but still evidence that U.S. producers know how to get more blood out of a turnip.

Arizona saw a 40-pound gain per cow and 4,000 more cows, which pushed the state’s output 3.8 percent higher than a year ago. Michigan cows produced 50 pounds more each, and there were 8,000 more of them, to move the state’s output up 4.2 percent. Minnesota saw a 40-pound gain per cow and, while cow numbers were down 1,000, overall output was up 2 percent. New York was up 3.6 percent, on a 65-pound gain per cow and 3,000 more cows. Pennsylvania was up 2.5 percent, thanks to a 60-pound gain per cow outweighing a loss of 5,000 cows.

Idaho found itself in the negative column; output per cow was off 30 pounds and even though cow numbers were up 5,000, the state’s overall output was down 0.7 percent. Washington State was there, too. Output per cow was off 30 pounds, cow numbers were down 3,000, and the state’s output was down 2.5 percent.

FC Stone’s Dave Kurzawski makes the point in his May 25 Early Morning Update: “The herd is now up 55,000 head since October. In the next 12 months, these cows will produce roughly 1.2 billion pounds of milk. But the markets seem wellsupported and look poised for more strength.”

Culling, Cold Storage reports

USDA’s latest Livestock Slaughter report reported April dairy cow culling dropped sharply from March but was up slightly from April 2016. An estimated 228,100 head were slaughtered under Federal inspection in April, down 43,000 head from March but 1,100 head above April 2016. Culling in the first four months of 2017 totaled 1.02 million head, up 10,400 from a year ago, or 1.0 percent.

U.S. cheese stocks are climbing and attracting attention. USDA’s April Cold Storage report shows American stocks at 835.1 million pounds, up 32.7 million pounds or 4 percent from March and 101 million pounds or 14 percent above a year ago. The total cheese inventory hit 1.33 billion pounds, up 42 million or 3 percent from March, and 125.3 million or 10 percent above a year ago.

The butter inventory stood at 292.3 million pounds, up 19.8 million pounds or 7 percent from March but 3.5 million or 1 percent below April 2016, first time inventory fell below a year ago in 25 months.

Cash prices

Dairy prices started the fourth week of May with little change, as traders anticipated the Memorial Day holiday, but cheese shot higher on Thursday. FC Stone’s Kurzawski wrote in his Friday Update: “Rumors swirled around the cause of the jump, which looked to be sparked by early short-covering. Spot loads of cheese in Europe trading in the high-$1.70s seemed to be the answer.”

Cheese: The Cheddar blocks closed Friday, May 26, at $1.7325 per pound, up 6.25 cents on the week and the fourth week in a row of gain, 35.25 cents above a year ago, and the highest price since Feb. 3, 2017. The barrels, after hitting $1.52 Thursday, retreated Friday, closing at $1.48, up a penny on the week and 4 cents above a year ago but at an unsustainable 25.25 cents below the blocks. Twenty two cars of block traded hands on the week at the CME and 50 cars of barrel.

Cheese production remains active in the Midwest, according to Dairy Market News (DMN). Milk is available, and milk suppliers report that orders from cheese producers have “ramped up,” but most spot milk price reports are similar to previous weeks, ranging $3.00 to $5.00 under Class.

Cheese output in the West is also active as some areas are still experiencing increasing milk production. Contacts suggest that sales into the international market are picking up slightly and the U.S. cheese price is competitive. Some processors have increased their export opportunity to Mexico, Asia and Australia while domestic demand varies depending on the type of cheese.

The cheese will no longer “stand alone” as the song says at the CME. Starting Monday, June 26, block and barrel cheese trading will leave behind the traditional call market and transition to the CME Direct Auction Platform.

Butter: Spot butter marched to $2.38 per pound Wednesday but closed Friday, May 26, at $2.36, down 1.5 cents on the week and 29.5 cents above a year ago. Eleven cars traded hands last week at the CME.

Cream remains available for butter makers in the Central U.S., says DMN. Even with frozen yogurt and ice cream manufacturers starting to increase intakes, supplies of cream at recent multiples persist. Memorial Day weekend had some butter makers expecting flat market multiples by week’s end. Butter churns are continuing at active levels and retail butter orders are stronger than expected.

The May 19 Dairy and Food Market Analyst (DFMA) stated that “It appears that higher domestic demand expectations have strengthened this market (butter), not a material uptick in exports.”

The DFMA also reported that “Restaurant sales continue to grow, but at a more modest pace compared to 2016. During April, total USA foodservice revenue was up 5.4 percent Year over Year (YoY), according to Census Bureau data. This was the strongest monthly performance since November, but still below last year’s average gain of 5.7 percent. Limited food service sales (the cheese-friendly side of the business) were up 4.1 percent in March, according to the latest available data. This was below all of 2016 when fast-food revenue grew by an average of 6.0 percent YoY.”

Milk: Cash Grade A nonfat dry milk closed Friday at 92.75 cents per pound, up 1.25 cents on the week and 13.25 cents above a year ago. Twenty six carloads exchanged hands last week.

Looking globally

Things are looking up down under, according to the May 24 Daily Dairy Report (DDR), as Fonterra announced a higher cash payout forecast for the 2016-17 season, “welcome and long-awaited news for New Zealand dairy producers.” “Fonterra announced its projected 2016- 17 farmgate milk price at NZ$6.15 per kilogram of milk solids (kgms), up 15 cents from its prior forecast. Coupled with a dividend forecast of 40 cents, the 2016-17 estimated cash payout is now $6.55/kgms, a far better finish to the season than the original estimate of $4.60,” the DDR said.

Fonterra also announced its forecast for the 2017-18 season at NZ$6.50/kgms, “a 5.7 percent improvement over the current season and the highest price since the 2013-14 record setting price of $8.40,” according to the DDR.

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Lee Mielke may write to him in care of this publication.