Lee Mielke’s Market Report May 25

Lee Mielke

Lee Mielke is a veteran dairy journalist and broadcaster, currently carried in a dozen Ag newspapers nationally. This column is prepared especially for the readers of DairyBusiness. Based in Lynden, Wash., he can be reached by email at [email protected] or by phone 360.201.4033.

We had a summit planned with North Korea and then we didn’t. We had a Farm Bill and then we didn’t. Such were some of the political highlights for the week before Memoruial Day.

The House of Representatives gave a 198 to 213 thumbs down to its Farm Bill proposal. Bob Gray wrote in his May 18 Northeast Dairy Farmers Cooperatives newsletter that 30 Republicans and all of the Democrats voted against the bill.

 

“The House Republican Freedom Caucus, the conservative wing of the Republican party, wanted assurances that Congressman Goodlatte’s immigration bill would be brought before the House for a vote as a condition for supporting the Farm Bill,” Gray stated. “Apparently the negotiations between the House leadership and the Freedom Caucus broke down and the Caucus felt they would lose their leverage unless they put the brakes on the Farm Bill.”

Meanwhile; in the real world, the slowdown in U.S. milk output was a little more obvious in April, though it still bested previous year output for the 52nd month. USDA’s preliminary data shows output at a bullish 17.3 billion pounds in the top 23 states, up 0.7 percent from April 2017. The 50-state total, at 18.4 billion pounds, was up 0.6 percent. Revisions lowered the March estimate 9 million pounds to 17.8 billion, up 1.4 percent.

April cow numbers in the 50 states totaled 9.4 million, down 2,000 from March but 8,000 above a year ago. Output per cow averaged 1,961 pounds, up 9 pounds from a year ago.

California topped its year ago output for the fourth consecutive month but not by much, up just 0.4 percent on a drop of 19,000 cows from a year ago. Output per cow was up 30 pounds. Wisconsin inched 0.7 percent lower on a 5 pound loss per cow and 5,000 fewer cows. That’s only the second time in four years that its output was below the previous year, according to the Wisconsin Ag Connection.

 

A 55 pound drop per cow took New York milk down 2.4 percent, though cow numbers were up 2,000. Idaho was up 3.5 percent, thanks to a 40 pound increase per cow and 9,000 more cows. Pennsylvania was down 1.7 percent on a 30 pound loss per cow. Cow numbers were unchanged. Minnesota was down 2.2 percent, on 5,000 fewer cows and 20 pounds less per cow.

Michigan was down 1.4 percent on a 15 pound loss per cow and 3,000 fewer cows. New Mexico was up 2.6 percent on 6,000 more cows and 15 pounds more per cow. Texas producers saw a 100 pound gain per cow propel their overall output 7 percent higher and the extra 10,000 cows helped as well. Vermont was down 3 percent on a 30 pound loss per cow and 2,000 fewer cows. Washington State was up 3.1 percent on a 45 pound gain per cow and 2,000 more cows.

U.S. dairy cow culling dropped in April from March but remained above a year ago. The USDA’s latest Livestock Slaughter report shows an estimated 248,900 head were slaughtered under federal inspection, down 38,000 head from March but 20,800 above a year ago or 9.1 percent. A total 1.09 million head were culled in the first four months of 2018, up 64,700 head or 6.3 percent from 2017.

 Dairy product inventories continued to grow in April and also remain above a year ago, according to the Agriculture Department’s latest Cold Storage report.

April butter stocks hit a bearish 307.3 million pounds, up 33.4 million pounds or 12.2 percent from March and 15.1 million or 5.2 percent above April 2017.

American type cheese hit 781.5 million pounds, up 14.9 million pounds or 1.9 percent from March, but 23.2 million or 2.9 percent below a year ago.

The other cheese category grew to 536.1 million pounds, up 7.1 million pounds or 1.4 percent from March and 64.4 million or 13.7 percent above a year ago.

The total cheese inventory stood at 1.35 billion pounds, up 22.1 million pounds or 1.7 percent from March and 43.5 million or 3.3 percent above a year ago.

Dairy prices strengthened early in the week of May 21, then backed off, as traders reacted to the bullish April Milk Production report, Chinese officials announcing over the weekend that China seeks to avert a trade war with the U.S. and will “substantially reduce the trade deficit” and agree to “meaningful increases in US agriculture and energy exports.” The markets also anticipated the upcoming Memorial Day holiday.

CME block Cheddar ended the week at $1.61 per pound, up 2 3/4-cents, reversing two weeks of decline, but is 12 1/4-cents below a year ago. The Cheddar barrels closed at $1.5450, up 1 1/4-cents on the week and 6 1/2-cents above a year ago, with 12 cars of block selling on the week and 41 of barrel.

Midwest mozzarella and pizza cheese sales are still meeting or above expectations, particularly for this time of year, reports Dairy Market News. “Contacts suggest buyers decided the stable markets were more unbending than originally thought, thus buying has been less hand to mouth than in previous months,” but “traditional cheesemakers are reporting a bit of an expected slowdown in overall sales. Cheese production is steady to lower. That said, with holiday weekend milk availabilities, some plant managers are adding days to the schedule. Milk is readily available, spot loads ranged $2 to $5 under Class III.”

Western cheese output is strong. Manufacturers say there is plenty of milk available and, with higher components, cheese yields are up. Industry contacts say demand is stable, but in a few cases, manufacturers report buyers have pulled back a bit on orders. Some contacts suggest that retail buyers are content with the cheese they currently have on hand and are hesitant to take on more.

Uncle Sam will shell out up to $177.4 million in purchases for nutrition assistance programs using a new streamlined process. Up to $20 million of that is for Cheddar cheese purchases. FC Stone cautions; “From what we’ve seen so far, it’s not crystal clear whether these are new funds or if they’ve simply dedicated $20 million of existing money towards this new purchase process (one that seems like it will try to ‘time the market’ to make the most of taxpayer dollars). Our assumption is the latter.”

Cash butter climbed to $2.45 per pound Tuesday, highest price since September 21, 2017, but closed Friday at $2.4150, up 3 cents on the week and 5 1/2-cents above a year ago, with 41 cars exchanging hands on the week at the CME.

By the way, the last time butter was below $2 per pound was November 15, 2016 when it was at $1.98. Those days are likely over. The record high was September 19, 2014 when it hit $3.06 per pound.

DMN says butter demand has yet to slow down this spring and both 80 and 82 percent varieties are moving out of storage. Some butter producers suggest that domestic sales are the lion’s share of their output, but export interest remains strong for others. “The NASS Cold Storage stock increases have some questioning how the markets will react, but butter has been unbending in the face of bearish news in recent months.”

Western butter market remains strong however, some reports suggest that churning schedules have slowed a little. Cream demand for Class II products is increasing due to current warmer weather and preholiday production runs for cream cheese and whipped cream. Butter inventories are relatively steady compared to the previous week. Butter demand is good in both the national and international markets. Competitive U.S butter prices coupled with a decrease in international butter supplies are boosting export sales, according to DMN.

CME Grade A nonfat dry milk closed the week a penny lower, at 84 1/4-cents per pound, 8 1/2-cents below a year ago, with 19 sales reported for the week.

Cash dry whey closed Friday at a new high of 37 1/4-cents per pound, up a quarter-cent on the week, with 4 sales reported. A 1 cent movement in the dry whey price equals about 5.9 cents on the Class III milk price.

The Daily Dairy Report’s Sarina Sharp wrote in the May 18 Milk Producers Council newsletter that “Better milk prices on the board in Chicago have yet to translate to meaningfully higher milk checks, and many dairy producers remain dejected. Higher feed and labor costs are not helping matters. Auction and slaughter houses remain busy. Springer values creep ever lower. At the monthly dairy sale in Pipestone, Minnesota, May 17, the top 25 springers averaged $1,332, the lowest average value since November 2011. For the week ending May 5, dairy cow slaughter averaged 57,457 head, up 4.7 percent from a year ago. That puts year-to-date slaughter 5.4 percent ahead of the 2017 pace.”

Dairy industry woes remain in fluid milk consumption, as consumers reduce their purchases and or choose plant-based alternatives. Fluid sales were down for the 10th consecutive month, according to the USDA’s latest data. March packaged sales totaled 4.1 billion pounds, down 3.0 percent from March 2017.

Conventional product sales totaled 3.9 billion pounds, down 2.9 percent from a year ago; organic products, at 218 million pounds, were even down, 5.5 percent below a year ago and represented about 5.3 percent of total sales for the month.

Whole milk sales totaled 1.3 billion pounds, up 2.5 percent from a year ago, up 3.0 percent year to date, and made up 31.4 percent of total fluid sales in the month and 31.1 percent for the year. Skim milk sales, at 333 million pounds, were down 10.4 percent from March 2017 and down 10.1 percent year to date.

Total packaged fluid milk sales in First Quarter 2018 hit 12.05 million pounds, down 1.9 percent from the same period a year ago.

Conventional products year to date totaled 11.4 million pounds, down 1.9 percent; organic products, at 652 million pounds, were off 1.6 percent. Organic represented about 5.4 percent of total fluid milk sales in First Quarter 2018.

The figures represent consumption of fluid milk products in Federal milk order marketing areas and California, which account for approximately 92 percent of total fluid milk sales in the U.S.

Speaking of fluid milk; the June Federal order Class I base milk price was announced May 23 at $15.25 per hundredweight, up 81 cents from May, 6 cents below June 2017, but the highest Class I since January 2018. It equates to $1.31 per gallon, up from $1.24 in May and compares to $1.32 a year ago. The half-year average is at $14.47, down from $16.27 a year ago and compares to $14.01 in 2016.

USDA’s latest Crop Progress report shows that U.S. corn planting has caught up with a year ago, 81 percent, just 1 percent behind a year ago, as of the week ending May 20. That compares to 81 percent in the five year average. The week showed 50 percent emerged, down 1 percent from a year ago but 3 percent ahead of the five year average.

The report also shows 56 percent of the soybeans have been planted, up from 50 percent a year ago and compares to 44 percent in the five year average. There is 26 percent of the crop emerged, up 9 percent from a year ago and 11 percent ahead of the five year average. Cotton planting is at 52 percent, up from 49 percent a year ago and 7 percent ahead of the five year average.

Cooperatives Working Together (CWT) members accepted offers of export assistance to sell 381,400 pounds of Cheddar cheese, 104,720 pounds of butter and 6.614 million of whole milk powder, to customers in Asia, Central America, and Europe. The product has been contracted for delivery from June through October and raised CWT’s 2018 export sales to 35.16 million pounds of American-type cheeses, 10.7 million pounds of butter (82 percent milkfat) and 7.54 million pounds of whole milk powder to 25 countries on five continents. The sales are the equivalent of 620.228 million pounds of milk on a milkfat basis.

As the Farm Bill debate is well underway, June Dairy Month is around the corner and with it, an annual reminder to consumers of the trust worthy contributions that milk and dairy products supply to our health and well-being.

To address more of the public relations side of the business, the U.S. Dairy Export Council (USDEC), the International Dairy Foods Association (IDFA) and the National Milk Producers Federation (NMPF) have joined forces to create a market campaign they call “Got Jobs? Dairy Creates Jobs, Exports Create More.”

The goal is to educate consumers on dairy’s contribution to the health of the U.S. economy and the economies of every state across the country. A new storytelling campaign has been launched by the U.S. dairy industry to “shine a brighter, data-driven spotlight on the positive effects of dairy’s economic engine.”

 A joint press release states that they will “share in-depth data and compelling narratives featuring hardworking dairy farmers, innovative dairy company employees, resourceful retailers and many others throughout the food supply chain at GotDairyJobs.org.

“The U.S. dairy products industry supports nearly 3 million workers, generates more than $39 billion in direct wages and has an overall economic impact of more than $628 billion, according to IDFA’s economic impact tool, ‘Dairy Delivers.’ The tool also examines dairy’s economic ripple effect on other sectors of the national economy, showing dairy is responsible for $24.9 billion in state and local business tax revenues and another $39.5 billion in federal business tax revenues.”

“With the Trump administration’s current focus on global trade, it’s important for consumers and policymakers to understand how dairy drives the American economy,” said Michael Dykes, D.V.M., president and CEO of IDFA. “The United States needs sound trade policy that will place the U.S. dairy industry on a level playing field with global competitors. Backed by fair and proactive trade policies, the U.S. dairy industry will continue to keep and create jobs in states across the country.”