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.
The climb continued in the latest Global Dairy Trade (GDT) auction but it slowed. The weighted average for all products offered June 6 inched up 0.6 percent, sixth consecutive event of gain, following a 3.2 percent rise on May 16.
GDT Cheddar led the gains, up an impressive 14.5 percent, after it inched 0.6 percent higher May 16. Skim milk powder was up 7.9 percent, following a 1 percent rise. Butter was up 3.3 percent, after leading the gains last time with an 11.2 percent jump.
Whole milk powder was down 2.9 percent, after inching 1.3 percent higher May 16, and anhydrous milkfat was down 1.2 percent following an 8.2 percent climb.
FC Stone equated the average 80 percent butterfat GDT butter price to $2.4921 per pound U.S. CME butter closed Friday at $2.4750 per pound. GDT Cheddar cheese equated to $1.9436 per pound U.S. and compares to Friday's CME block Cheddar at $1.63. GDT skim milk powder hit 97.79 cents per pound and whole milk powder averaged $1.4258 U.S. CME Grade A nonfat dry milk closed Friday at 90 3/4-cents per pound.
Preliminary data reported April's 50-State milk production at 18.3 billion pounds, up 2.0 percent from April 2016. USDA's latest Dairy Products report shows that processors made more cheese and less butter with it.
April cheese output totaled 1.04 billion pounds, down 2.1 percent from March but 3.7 percent above April 2016. Year to date (YTD) cheese output stands at 4.1 billion pounds, up 2.1 percent from this time a year ago.
California produced 210.4 million pounds of that cheese, down 2.8 percent from March but 4.4 percent above a year ago. Wisconsin, at 275.9 million pounds, was down 4.1 percent from March and 1.3 percent above a year ago. Idaho output was up 10.1 percent from a year ago. Minnesota was up 0.8 percent.
Italian cheese totaled 448.3 million pounds, down 4.4 percent from March but 2.2 percent above a year ago, with YTD output at 1.78 billion pounds, up 0.7 percent.
Mozzarella, at 348.1 million pounds, was up 2.3 percent, with YTD at 1.4 billion pounds, down 0.7 percent.
Total American type cheese hit 419.3 million pounds, up 0.8 percent from March and 5.3 percent above a year ago. YTD totaled 1.6 billion pounds, up 3.7 percent
Cheddar output amounted to 314.2million pounds, highest monthly total since record keeping began, according to the Daily Dairy Report, up 4.8 percent from a year ago, with YTD at 1.2 billion pounds, up 6.2 percent from a year ago.
U.S. churns produced 164.1 million pounds of butter, down 11.96 million pounds or 6.8 percent from March and 7.1 million pounds or 4.1 percent below a year ago. YTD butter totaled 679 million pounds, down 0.9 percent.
California butter totaled 48 million pounds, down 5.2 percent from March and 6.9 percent below a year ago. New York output was down 16.8 percent from March and 13.8 percent below a year ago.
Yogurt output amounted to 369.5 million pounds, down 0.9 percent from a year ago, with YTD at 1.5 billion pounds, down 1.5 percent.
Dry whey totaled 84.3 million pounds, up 3.0 percent, with YTD hitting 331.3 million pounds, up 2.6 percent.
Nonfat dry milk output hit 170.9 million pounds, up 7 percent from March but down slightly from a year ago, with YTD at 625.4 million pounds, up 0.3 percent. Skim milk powder totaled 50.2 million pounds, down 4.7 percent from March but 16.2 percent above a year ago. YTD output is at 198.2 million, up 13.1 percent.
Nonfat dry milk stocks stood at 266.3 million pounds, up 7.6 percent from March and 5.6 percent above a year ago. The report is viewed as mostly bearish, except for butter.
Dairy prices slumped the first full week of June Dairy Month, even on butter, as plenty of product made its way to Chicago. Traders awaited Friday morning's World Agricultural Supply and Demand Estimates report where USDA again lowered its 2017 and 2018 milk production estimates "as lower expected growth in milk per cow more than offsets expected gains in cow numbers."
Cheddar block cheese closed at $1.63 per pound, down 7 cents on the week but still 15 1/2-cents above a year ago. The barrels finished at $1.4150, down 7 1/2-cents, 9 1/2-cents below a year ago, and still at a too-high 21 1/2-cents below the blocks. Twelve cars of block traded hands on the week and 49 of barrel.
HighGround Dairy's Monday Morning Huddle pointed out that, since the week ending May 5th, 203 barrels had traded hands at the CME, an equivalent to about 8.7 million pounds and 115 more than the same time frame the prior year.
Milk availability for Central cheesemakers was mixed on the week, according to Dairy Market News (DMN). Some reported continuance of abundant milk supplies, others reported noticeably fewer offers, with milk spots reported from $2.50 to $6.00 under Class. After weeks of generally strong cheese sales, Midwest producers reported that demand slackened a bit after Memorial Day weekend. Inventory reports vary. Some pizza cheese producers report light inventories in recent weeks, as strong demand has dipped into stored cheese but the cheese market tone is "uncertain."
Western cheese output is active and many facilities are running at or near full capacity due to readily available milk. Domestic retail demand remains good and some manufacturers are getting more inquiries from export buyers, but this business has yet to fully develop. Cheese makers welcome any additional business as inventories are generally heavy, especially for barrel cheese. Stocks of mozzarella are growing seasonally with schools out for the summer and demand for pizza entering the low point for the year. Contacts suggest that the current spread between block and barrel prices at the CME is "putting a lot of price pressure on barrel cheese producers."
Cash butter made to $2.5250 Tuesday, highest price since December 9, 2015, but then sputtered and closed Friday at $2.4750, down a penny on the week but 27 1/2-cents above a year ago. Thirty seven cars traded hands on the week.
DMN says retail and food service butter demand remains steady to strong and international interests have increased. Butter production is steady, as producers try to get ahead of export opportunities and fall storage. Cream, in the Central region, is still readily available but the butter market tone is "generally healthy."
Western butter output is following typical seasonal patterns. A few manufacturers are trying to slow the churns and find other markets for their cream. Others are using available cream to build inventories for the end of the year. Retail butter demand is strong but contacts are watching extended weather forecasts closely. A few suggest that if the region gets a lot of hot weather, ice cream manufacturers may increase cream demand quickly. End users, in particular, are "uneasy about this scenario," says DMN.
Grade A nonfat dry milk fell to 90 3/4-cents per pound, down 4 cents on the week but 7 3/4-cents above a year ago, with 24 cars finding new homes on the week.
The latest Crop Progress report shows 96 percent of the U.S. corn crop was planted, as of the week of June 4. Eight six percent is emerged, 61 percent is rated in good condition, and 14 percent is rated excellent.
Eighty three percent of soybeans are in the ground, up from 67 percent the previous week, and 58 percent are emerged. Eighty percent of the cotton is planted, up from 63 percent the week before.
In his last Dairy Outlook, Penn State's Dr. James Dunn reported that the CME corn price was up 3.9 percent and the soybean meal price was down 4.3 percent from the previous month. Dunn also announced his retirement after 40 years at Penn State, effective June 30.
"Overall these prices are about at their 2016 averages," according to Dunn. "Since the 2017 milk price is running about $2.40 above 2016, this means that the profitability of milk production should be higher in 2017. Penn State's measure of income over feed costs rose by 10.6 percent in May from its April value. The change in May's value is because the milk price has risen (by 4.9 percent), while feed cost has fallen. Income over feed cost reflects daily gross milk income less feed costs for an average cow producing 65 pounds of milk per day. The milk margin is the estimated amount of the Pennsylvania all milk price that remains after the feed costs per hundredweight of milk production are paid. Like income over feed cost, this measure shows that the May PA milk margin was 10.6 percent higher than in April."
The latest Drought Monitor shows very little drought in the U.S. There is slight drought in the lower Susquehanna valley of Pennsylvania and a few other places and extreme drought in Central Florida. None of the current drought will impact dairy markets significantly," Dunn concluded.
The USDA's latest National Milk Cost of Production report shows April's total milk production costs were up from March but below a year ago. Total feed costs averaged $10.47 per hundredweight (cwt.), up 23 cents from March, up 35 cents from February, 23 cents above March but 4 cents below April 2016. Purchased feed costs, at $5.63 per cwt., were down 7 cents from February, 5 cents below March but 6 cents above April 2016.
Total costs, including feed, bedding, marketing, fuel, repairs, hired labor, taxes, etc., at $21.83 per cwt., were up 11 cents from February, 10 cents above March, and 19 cents above a year ago.
Feed costs made up 47.96 percent of total costs in April, up from 47.1 percent the month before but down from 48.6 percent a year ago.
Meanwhile, the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC says "Dairy margins held steady over the second half of the month, with strength in milk offset by slightly higher feed costs. Margins remain at historically strong levels, near or above the 80th percentile of the previous 10 years through First Quarter 2018. Milk prices continue drawing support from strength in dairy product values, particularly cheese and butter."
In politics; the Progressive Agriculture Organization (Pro-Ag) announced that several farm organizations, milk cooperatives, and county commissioners have petitioned USDA for a national milk hearing that would allow U.S. dairy farmers to testify and "illustrate the severity of the problems that the majority of dairy farmers are experiencing," according to a Pro-Ag press release. The petition calls for "abolishing USDA's existing milk pricing formula and replace it with a formula that would "consider the dairy farmers' cost of producing milk."
Californians are hammering out details, if producers approve a Federal Milk Market Order for the State. Western United Dairymen's (WUD) Annie AcMoody wrote in her June 2 member newsletter; "The newly appointed Producer Review Board (PRB) was tasked by Secretary Ross to examine and develop recommendations for a stand-alone quota program, and said they faced "an ambitious agenda."
And, WUD CEO Anja Raudabaugh called out her State's legislators, writing "This past month, Sacramento proclaimed that it is 'America's Farm to Fork Capital.' Sacramento's largest tenant, the California State Legislature has proven itself to be the world's greatest 'Farm to Fork' killer by executing policies that have steadily strangled agriculture's ability to become sustainable and take steps forward to producing affordable, quality, and locally grown food."
"Californians have embraced a tremendous variety of agricultural products in their everyday lives and the agricultural community loves to grow them. There is a tremendous partnership between California's citizens and its agricultural families, and none so much as with the California Dairy industry," an industry she said, "is the largest agricultural driver in the state."
U.S. Agriculture Secretary Sonny Perdue met with his Canadian counterparts in Toronto this week in his first international trip as Secretary. Discussions centered on trade issues and reportedly included renegotiating NAFTA and American ultra-filtered milk.