U.S. milk output was somewhat held in check in July by heat, humidity and drought, especially in the west. The USDA’s preliminary data pegs July output at 19.14 billion pounds, up 1 percent from June, and just 2 percent above July 2020 though it is the 14th consecutive month to top year ago output. The 24-state total hit 18.3 billion pounds, up 2.1 percent.

Revisions lowered June’s 50-state estimate by 1 million pounds from last month’s report to 19.95 billion pounds, up 2.9 percent from 2020. The report wasn’t expected to excite traders either way.

Interestingly, July cow numbers totaled 9.50 million head, down 3,000 from June, second month in a row they fell from the previous month, but were 128,000 above a year ago. June cow numbers were revised down 5,000 head.

July output per cow averaged 2,015 pounds, up 14 pounds or 0.7 percent from 2020. 

Dairy cow culling remained strong in July and again topped that of a year ago as margins remain tight. The latest Livestock Slaughter report shows an estimated 247,900 head were sent to slaughter under federal inspection, up 10,400 from June and 14,200 or 6.1 percent above July 2020. Culling in the first seven month of 2021 totaled 1.81 million, down 14,900 or 0.8 percent from the same period a year ago.

In the week ending Aug. 7, 59,500 dairy cows were sent to slaughter, up 1,000 from the previous week, and 6,600 or 12.5 percent above that week a year ago.

The USDA announced details of the Pandemic Market Volatility Assistance Program (PMVA) to help dairy producers. USDA will provide $350 million in payments to farmers who received a lower value for their products due to market abnormalities caused by the pandemic. The assistance is part of a larger package including improvements to the Dairy Margin Coverage safety net which will update the feed cost formula to better reflect actual costs for high quality alfalfa. The change will be retroactive to January 2020 and is expected to provide additional retroactive payments of about $100 million for 2020 and 2021.

PMVA payments will reimburse qualified farmers for 80 percent of the revenue difference per month based on an annual production of up to 5 million pounds of milk marketed and on sales from July through December 2020. The payment rate will vary by region based on the actual losses on pooled milk related to price volatility and be made through independent handlers and cooperatives.

Speaking in the Aug. 23 “Dairy Radio Now” program, HighGround Dairy’s (HGD) Lucas Fuess said while details have not been finalized, the program was clearly designed to focus on smaller dairies. He said he doesn’t see it significantly impacting markets but will likely boost milk output the rest of 2021 and into 2022.

The Biden Administration also announced a re-evaluation of the Thrifty Food Plan used to calculate Supplemental Nutrition Assistance Program (SNAP) benefits. The average SNAP benefit, excluding additional funds provided as part of pandemic relief, will increase 25 percent for Fiscal Year 2022 beginning Oct. 1.

The Aug. 17 Daily Dairy Report said the increase in benefits could mean an additional $2 billion in dairy products purchased with SNAP funds. The increase provides each of the 42 million recipients an additional $1.19 per day.

Dairy producers can surely use the help. Dairy margins were unchanged in the first half of August as increases in both milk prices and feed costs were largely offsetting since the end of July, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC. Strength in cash cheese prices were supportive of CME Class III futures which bounced about $1.50 per cwt. from recent lows, the MW stated.

The MW cautioned however that “The overall tone of the market remains bearish with spot futures still down around $2.50 from their May highs. Milk production remains strong for this time of the year. Demand uncertainty lingers from the advancing Delta variant of COVID-19 and indications from Open Table that U.S. restaurants are no longer showing growth in demand, with some significant slowing evident in states more heavily impacted by the current COVID-19 surge. Mobility data similarly suggests a modest slowdown in travel,” the MW stated.

Checking demand; June cheese disappearance was up 3.8 percent from May, unchanged from June 2020, and up 5.1 percent year to date, according to the USDA’s latest data. Total disappearance was driven by stronger American-style cheese demand, HGD said, but negatively impacted by weaker non-American usage.

Butter was also up 3.8 percent from May but down 3.5 percent from a year ago, and the third consecutive month disappearance was below a year ago. HGD says robust demand in first quarter kept year to date disappearance (up 2 percent) higher in the first half of 2021.

Nonfat dry milk domestic disappearance was up 6.4 percent from May but down 20.7 percent from a year ago, and up 0.3 percent YTD. HGD said it was the weakest June domestic disappearance on record.

Looking globally; the Aug. 17 Global Dairy Trade auction ended eight consecutive declines but not by much. The weighted average inched up 0.3 percent, following the 1 percent drop Aug. 3, 2.9 percent drop on July 20, and 3.6 percent on July 6.

Butter led the gains, up 4 percent, following a 3.8 percent rise in the last event. Anhydrous milkfat was up 1.5 percent, following a 1.3 percent gain. Cheddar was up 2.8 percent, after inching 0.7 percent higher, and skim milk powder was up 1.1 percent, after it rose 1.5 percent last time. Whole milk powder was down 1.5 percent, after dropping 3.8 percent last time.

StoneX Dairy Group says the GDT 80 percent butterfat butter price equates to $2.1111 per pound U.S., up 8 cents, after advancing 7.5 cents last time, and compares to CME butter which closed Friday at a huge bargain $1.6625.

StoneX’s Dustin Winston said, “North Asia (which includes China) purchases were in line with their market share last event but below year ago levels. The smaller purchasing regions; Africa, South/Central America, and North America were the only regions to increase their market share from both last event and year ago levels.” China is buying lots of product outside of the GDT as well.

Looking ahead, HighGround Dairy pointed out that “Despite a solid milk production season in 2020/21 and a flat outlook for this year, Fonterra’s 12-month offer volumes are now the lowest in a little more than three years (May 2018).”