Mielke Market Weekly
By Lee Mielke
Slippage in U.S. milk production slowed some in August but was the second month in a row to be below a year ago. The Agriculture Department’s preliminary data put total output at 18.975 billion pounds, down 41 million pounds or 0.2 percent from August 2022. The top 24-state total, at 18.166 billion, was down 0.3 percent.
The July 50-state total was revised down 35 million pounds from last month’s estimate, which put output down 0.7 percent instead of the 0.5 percent originally reported. The 24-state revision was down 27 million pounds, down 0.8 percent, instead of the 0.6 percent loss originally reported.
August cow numbers totaled 9.39 million head, unchanged from the July count, which was revised down 10,000 head. The herd is 16,000 below a year ago, and the smallest since February 2022. The 24-state count was up 1,000 from July’s count, which was revised down 9,000 head, but is 15,000 below a year ago.
The cow numbers were surprising, according to the Sept. 18 Daily Dairy Report, “as data showed persistently elevated dairy slaughter numbers throughout the month. Dismal margins and soaring beef prices pushed many producers to increase slaughter rates in August with figures reaching the highest level since 1986 during the Whole Herd Buyout program.”
Output per cow averaged 2,021 pounds, down 1 pound or 0.05 percent from August 2022. The 24-state output averaged 2,038 pounds, 2 pounds below a year ago or 0.1 percent.
StoneX said, “Fat and protein in the milk are still running above last year which put component adjusted production up 0.9 percent from last year. Dairy cow slaughter did slow a bit in late August so it isn’t a huge surprise to see the herd unchanged aside from the revision to July, but we do think the herd will still decline moving forward.” They also warned: “With the weather cooling down and feed costs shifting lower, improving production per cow is expected to oﬀset the declining herd to keep headline production growth growing through the remainder of 2023.”
The latest Livestock Slaughter report showed an estimated 275,500 head were sent to slaughter under federal inspection in August, up 31,300 head from July, and 9,400 or 3.5 percent above August 2022. However, the rate has since slowed.
The week ending Sept. 9 saw 54,600 dairy cows go to slaughter, down 3,000 from the previous week and 2,700 or 4.7 percent below a year ago. Year to date 2,205,800 head have been culled, up 107,900 or 5.1 percent from a year ago.
The Livestock, Dairy, and poultry Outlook warned, “With continued erosion of dairy margins and the average milk cow inventory reported through July, projections for the milking herd in 2023 were lowered 5,000 head to 9.405 million.”
The Outlook added, “The milk supply typically responds to changes in prices with a lag of several months. The low margins experienced in 2023 are expected to contribute to further contraction of the dairy herd in the first half of 2024. However, some rebuilding of the milking herd is expected in late 2024 as milk prices improve and feed costs moderate.”
The Sept. 19 Global Dairy Trade auction weighted average headed higher for the second event in a row, up 4.6 percent, following the 2.7 percent rise on Sept. 5. Traders brought 82.4 million pounds of product to the market, down from 83.2 million on Sept. 5. The average metric ton price climbed to $2,957 U.S., up from $2,888 on Sept. 5.
Skim milk powder led the gains, up 5.4 percent, following a 1.6 percent decline on September 5. Whole milk powder was up 4.6 percent, after leading the gains last time with a 5.3 percent advance. Anhydrous milkfat was up 5.3 percent, after a 2.7 percent rise, and butter was up 3.8 percent, following a 1.1 percent gain. GDT Cheddar was the only negative, down 1.7 percent, after slipping 0.6 percent last time.
StoneX says the GDT 80 percent butterfat butter price equates to $2.0902 per pound U.S., up 6 cents from the Sept. 5 event. That compares to CME butter which closed Friday at $3. GDT Cheddar, at $1.8343, was down 2.7 cents, and compares to Friday’s CME block Cheddar at $1.78. GDT skim milk powder averaged $1.0887 per pound, up from $1.0367, and whole milk powder averaged $1.2694 per pound, up from $1.2255, (4.4 cents). CME Grade A nonfat dry milk closed Friday at $1.17 per pound.
Analyst Dustin Winston says, “North Asia, which includes China, increased purchases substantially in this event. Broker Dave Kurzawski pointed out in the Sept. 25 ‘Dairy Radio Now’ broadcast that North Asia includes South Korea and Japan and Japanese milk output has been down about 4 percent. He said Japan could have been buying though it typically buys via tenders rather than the GDT.
Assuming most of the increase was China, Kurzawski asks, why? StoneX offices in Singapore and contacts in China are not indicating that end users there think they’ve “missed something.” Milk prices in China have been heading lower quite aggressively, he said, but there’s no shortage of milk, so he suggests that physical traders may have got caught short in futures and to mitigate their exposure, bought physical. He adds that is not a good sign for long term demand, but “It’s just Chinese traders doing what they do.”
The other consideration is that most of the GDT volume was in the November and December contracts, according to Kurzawski, which will clear customs in January. After Jan. 1, there are zero tariffs on product brought into China from New Zealand so perhaps there was demand enough to get product in, he said.
HighGround Dairy says China’s total dairy imports were the lowest for July since 2017, the biggest drop coming in purchases from the U.S., especially in whey products. And, while China purchased the highest volume of whole milk powder since November 2018 in the Sept. 19 GDT, August imports were down 3 percent after rising the previous three months.
Skim milk powder imports were down 36 percent, following six consecutive months of year-on-year gains of 20 percent or more, according to HGD. Unfortunately, the biggest drop was in product purchased from the U.S., down 71 percent.
Whey product imports were down 20.9 percent from a year ago, but butter was up 19.4 percent. Cheese imports were up 25 percent and HGD stated: “Chinese cheese demand continues marching to its own beat relative to other imported commodities as August’s total set a record for the month. Product from New Zealand jumped to highs not seen since March 2021, up 40 percent.”
The USDA announced the October Federal order Class I base milk price at $19.47 per hundredweight, up 57 cents from September and the second highest October Class I since 2014, but is $3.24 below a year ago. It equates to $1.67 per gallon, down from $1.95 a year ago. The 10-month Class I average is $19.09, down from $22.73 a year ago but compares to $16.48 in 2021.
The latest data shows July packaged fluid sales at 3.2 billion pounds, down 1.3 percent from July 2022. Conventional product sales totaled 3.0 billion pounds, down 1.7 percent from a year ago.