U.S. milk output shot sharply higher in May, hitting a record 19.85 billion pounds, according to the USDA’s preliminary data, up 4.6% from May 2020, and the biggest month to month increase since March 2006, thanks to favorable weather, increased cow numbers, and increased milk per cow. It was the 12th month in a row to top year ago output and was up a hefty 4.1% from May 2019. May output in the top 24 producing states, hit 18.9 billion pounds, up 4.9%. 

Keep in mind a year ago the nation was coping with the COVID pandemic which had plunged dairy product prices due to shuttered restaurants and foodservice demand, created havoc throughout the entire food chain, plus many dairy farmers faced milk production restrictions mandated by their cooperatives.

Revisions added 45 million pounds to the April estimate, now put at 19.34 billion pounds, up 3.5% from a year ago, instead of the originally reported 3.3%.

May cow numbers were up for the 11th consecutive month, totaling 9.5 million head in the 50 states, up 145,000 head from May 2020. May numbers were up 5,000 from the April count, which with USDA revisions, was up an astounding 26,000 head from March. 

May output per cow averaged 2,088 pounds, up 61 pounds or 3% from 2020. 

Dairy cow culling dropped below the previous month and year in May. The USDA’s latest Livestock Slaughter report shows an estimated 223,400 head were sent to slaughter under federal inspection, down 34,100 head from April and 9,900 or 4.2% below May 2020. Culling in the first five months of 2021 totaled 1.37 million head, down 39,700 or 2.9% from the same period a year ago.

In the week ending June 12, 52,600 dairy cows were sent to slaughter, up 6,100 from the previous week and 700 or 1.3% above that week a year ago.

The nation’s dairy stocks are growing. The Agriculture Department’s latest Cold Storage report showed May 31 butter totaled a whopping 401.8 million pounds, up 15.6 million pounds or 4.0% above April, and a weighty 26 million pounds or 6.9% above those on May 31, 2020. May was also the 23rd consecutive month that butter stocks topped those of a year ago but May is typically the month that stocks peak and hover there for about one or two months, according to StoneX.

American type cheese climbed to 830.7 million pounds, up 4 million or 0.5% from the April level, which was revised down 4.1 million pounds from last month’s report, and were 10.7 million pounds or 1.3% above a year ago.

The “other” cheese category jumped to 612.8 million pounds, up 11.9 million pounds or 2% from April, and 2.9 million or 0.5% above a year ago.

The total cheese inventory stood at a record high for the month of May at 1.465 billion pounds, up 16.6 million pounds or 1.1% from April, 10.8 million pounds or 0.7% above a year ago, and 79 million pounds or 6% higher than 2019.

Cheese consumption was still fairly strong in May, according to StoneX Dairy broker Dave Kurzawski. Speaking in the June 28 Dairy Radio Now broadcast, Kurzawski said, considering what happened to prices, demand likely dropped off at the end of May as the Food Box program ended and schools were closing so there were some dynamics at work there.

Butter wise, he said restaurant reopening demand in the first half of 2021 has since slowed some. The biggest users of butter and cream are the higher end, white tablecloth type restaurants, he said, and he doesn’t believe that demand has come back quite as strong as the other restaurant types.

Butter demand is not as strong as a year ago when people were quarantined at home “watching baking shows and making cookies and bread, etc.” That’s not happening now, he said, plus business travel has not resumed to prior levels.

Dairy farm margins continued to deteriorate over the first half of June as ongoing weakness in milk prices more than offset the impact of steady to weaker feed markets, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.

Demand for dairy products remains quite strong on both the domestic and export markets,” the MW stated, but increased milk production is pressuring prices. It points out that milk production in the first four months of 2002 was up 2.5% from last year adjusting for the Leap Day, and Midwest cheese manufacturers are running 6-7 days every week while cream supplies are ample in the West.

“Recent intense heat in the West and Northern Plains may begin to temper milk production moving through the summer though, with temperatures hitting 110 degrees in California’s Central Valley,” the MW warned.

“The U.S. exported 547.7 million pounds of dairy products valued at $681.3 million in April, setting a record for the month and up 26.5% from last year,” according to the MW. “Accounting for Leap Day, U.S. dairy exports are up 14.9% from 2020 through the first four months of this year. Cheese exports of 89.1 million pounds were a new record high, besting the previous high-water mark in June of last year by 4.4 million pounds. NDM exports in April of 173.1 million pounds were also a record for the month, up 15.5% from last year.” 

“The U.S. Census Department reported that combined spending on food at retail and foodservice establishments of $139.2 billion in May was up 25.7% from last year and for both April and May, food spending increased 10% over 2019’s pre-pandemic levels,” according to the MW.

“Corn and soybean meal have come under significant pressure recently as updated forecasts are for moderate temperatures and suggest more rain for the Corn Belt,” the MW concluded. Producers are encouraged to “evaluate strategic adjustments on existing positions to strengthen feed hedges while allowing for more upside flexibility on milk hedges following the recent sharp drop in prices.”

China continues to drive international dairy markets. May imports were the largest, topping a year ago from New Zealand in the form of whole milk powder (WMP) and fluid milk and cream from Germany, according to HighGround Dairy.

China’s WMP imports totaled 163.9 million pounds or 71.8% from a year ago and up 22.4% year to date. Imports from New Zealand were the highest May on record, says HGD, followed by Uruguay and from Turkey for the first time ever.

Fluid milk and cream imports continue to be off-the-chart strong, says HGD, and reached a fresh record high in May with Germany becoming the top supplier and outpacing New Zealand. Skim milk power totaled 94 million pounds, up 110%, and whey imports, at 161.8 million pounds, were up 39.9%, with YTD up 56%.

Demand for finished goods was also strong. Cheese imports totaled 36.1 million pounds, up 180.2%, with YTD up 66.4%. New Zealand’s market share jumped to 51% and cheese from the EU reached a record high, up 206%, most coming from Denmark, according to HGD.

Butter imports amounted to 22.9 million pounds, up 129.1%, with YTD up 15%.

The Agriculture Department announced the July Federal order Class I base milk price at $17.42 per hundredweight, down 87 cents from June, 86 cents above July 2020, and the highest July Class I since 2014. It equates to about $1.50 per gallon, down 7 cents from June. The seven month Class I average stands at $16.31, up from $15.94 a year ago and $16.12 in 2019.

Any expectations of lighter milk supplies in the Midwest due to the heat are yet to be met, says Dairy Market News. Cheesemakers reported even steeper discounts on spot milk this week. Cheese output is active but demand is mixed. Cheese inventories are growing as buyers “see the near-term writing on the wall, as market prices continue to struggle,” says DMN, but the restoration of the block-over-barrel price is viewed as an indicator of stability.

Cream is available in the West. Ice cream production is flat to strong but butter plants are receiving steady supplies of cream. Butter output is seasonally active. Some report that supply chain issues are driving up prices of packaging items, like boxes and bags. Butter makers are not happy absorbing the extra costs but the supply chain snags are not reported to be disrupting production. Inventories are growing and ready for fall demand. Retail sales are soft but steady and food service demand remains strong, says DMN.

Grade A Nonfat dry milk closed Friday at $1.2650 per pound, unchanged on the week but 24.50 cents above a year ago. 19 sales were reported for the week.

Dry whey saw a Friday finish at 57.75 cents per pound, down 3.25 cents on the week but 26.50 cents above a year ago, with 2 sales reported for the week.