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.
Preliminary Agriculture Department data pegs April milk output in the top 23 producing states at 17.2 billion pounds, up 2.0 percent from April 2016. The 50-state total is 18.3 billion pounds, also up 2.0 percent.
The most bearish part of the report is cow numbers, up for the seventh consecutive month, totaling 9.39 million head in the 50 states and 8.72 million in the 23 states, 8,000 more than March and 81,000 more than a year ago. Output per cow was above the prior year for the 18th consecutive month, averaging 1,967 pounds, up 20 pounds from a year ago.
California output was below a year ago for the fourth month in a row, off 1.1 percent, on a 10 pound loss per cow and 11,000 fewer cows. Wisconsin was only up 0.6 percent. Output per cow was only up 10 pounds and cow numbers were only up 1,000 head.
Texas again showed the biggest gain, up 12.8 percent, thanks to 45,000 more cows than a year ago and 55 pounds more per cow. New Mexico was second, up 7.5 percent, on a 40 pound gain per cow and 17,000 more cows.
Gains in milk per cow were not as great as some expected but still evidence that U.S. producers know how to get more blood out of a turnip.
Arizona saw a 40 pound gain per cow and 4,000 more cows pushed the State’s output 3.8 percent higher than a year ago. Michigan cows produced 50 pounds more each and there were 8,000 more of them to move the State’s output up 4.2 percent. Minnesota saw a 40 pound gain per cow and, while cow numbers were down 1,000, overall output was up 2 percent. New York was up 3.6 percent, on a 65 pound gain per cow and 3,000 more cows. Pennsylvania was up 2.5 percent, thanks to a 60 pound gain per cow outweighing a loss of 5,000 cows.
Idaho found itself in the negative column, output per cow was off 30 pounds and even though cow numbers were up 5,000, the State’s overall output was down 0.7 percent. Washington State was there too. Output per cow was off 30 pounds, cow numbers were down 3,000, and the State’s output was down 2.5 percent.
FC Stone’s Dave Kurzawski makes the point in his May 25 Early Morning Update: “The herd is now up 55,000 head since October. In the next 12 months these cows will produce roughly 1.2 billion pounds of milk. But the markets seem well-supported and look poised for more strength.”
USDA’s latest Livestock Slaughter report reported April dairy cow culling dropped sharply from March but was up slightly from April 2016. An estimated 228,100 head were slaughtered under Federal inspection in April, down 43,000 head from March but 1,100 head above April 2016. Culling in the first four months of 2017 totaled 1.02 million head, up 10,400 from a year ago or 1.0 percent.
U.S. cheese stocks are climbing and attracting attention. USDA’s April Cold Storage report shows American stocks at 835.1 million pounds, up 32.7 million pounds or 4 percent from March and 101 million pounds or 14 percent above a year ago. The total cheese inventory hit 1.33 billion pounds, up 42 million or 3 percent from March and 125.3 million or 10 percent above a year ago
The butter inventory stood at 292.3 million pounds, up 19.8 million pounds or 7 percent from March but 3.5 million or 1 percent below April 2016, first time inventory fell below a year ago in 25 months.
Dairy prices started the fourth week of May with little change, as traders anticipated the Memorial Day holiday, but cheese shot higher on Thursday. FC Stone’s Kurzawski wrote in his Friday Update; “Rumors swirled around the cause of the jump, which looked to be sparked by early short-covering. Spot loads of cheese in Europe trading in the high-$1.70s seemed to be the answer.”
The Cheddar blocks closed Friday at $1.7325 per pound, up 6 1/4-cents on the week and the fourth week in a row of gain, 35 1/4-cents above a year ago, and the highest price since February 3, 2017. The barrels, after hitting $1.52 Thursday, retreated Friday, closing at $1.48, up a penny on the week and 4 cents above a year ago but at an unsustainable 25 1/4-cents below the blocks. Twenty two cars of block traded hands on the week at the CME and 50 cars of barrel.
Cheese production remains active in the Midwest, according to Dairy Market News (DMN). Milk is available, and milk suppliers report that orders from cheese producers have “ramped up,” but most spot milk price reports are similar to previous weeks, ranging $3.00 to $5.00 under Class.
Cheese demand is also up. Process manufacturers are seeing an uptick in retail demand, as grilling season has begun. Pizza and traditional cheese manufacturers also report that sales are better than expected. But, even with increased demand, there are concerns regarding long barrel inventories. Blocks range from balanced to long. The market undertone has improved but contacts suggest the large CME price gap in favor of blocks is “not beneficial for a healthy cheese market.”
Cheese output in the West is also active as some areas are still experiencing increasing milk production. Contacts suggest that sales into the international market are picking up slightly and the U.S. cheese price is competitive. Some processors have increased their export opportunity to Mexico, Asia, and Australia while domestic demand varies depending on the type of cheese.
At the moment, contacts report that the age of the cheese determines the level of demand for both blocks and barrels. Overall, inventories for all types of cheese are long and readily available in the spot market, according to DMN.
The cheese will no longer “stand alone” as the song says at the CME. Starting Monday, June 26, block and barrel cheese trading will leave behind the traditional call market and transition to the CME Direct Auction Platform.
Spot butter marched to $2.38 per pound Wednesday but closed Friday at $2.36, down 1 1/2-cents on the week and 29 1/2-cents above a year ago. Eleven cars traded hands on the week at the CME.
Cream remains available for butter makers in the Central U.S., says DMN. Even with frozen yogurt and ice cream manufacturers starting to increase intakes, supplies of cream at recent multiples persist. Memorial Day weekend had some butter makers expecting flat market multiples by week’s end. Butter churns are continuing at active levels and retail butter orders are stronger than expected.
Retail demand reports in previous weeks have varied from plant to plant but are now generally bullish, says DMN. Butter makers suggest demand may have been stimulated by the possibility of increasing prices but the market tone is considered “healthy.”
Western butter demand has eased slightly as prices continue to rise. Some buyers are taking a wait and see approach to purchases, hoping prices will settle at lower levels. Butter production is active due to plenty of cream available but a few processors would like to slow production to better manage stocks. Inventories are heavy and growing, but at a slower rate, according to DMN.
The May 19 Dairy and Food Market Analyst (DFMA) stated that “It appears that higher domestic demand expectations have strengthened this market (butter), not a material uptick in exports.”
The DFMA also reported that “Restaurant sales continue to grow, but at a more modest pace compared to 2016. During April, total USA foodservice revenue was up 5.4 percent year over Year (YoY), according to Census Bureau data. This was the strongest monthly performance since November, but still below last year’s average gain of 5.7 percent. Limited food service sales (the cheese-friendly side of the business) were up 4.1 percent in March, according to the latest available data. This was below all of 2016 when fast-food revenue grew by an average of 6.0 percent YoY.”
Cash Grade A nonfat dry milk closed Friday at 92 3/4-cents per pound, up 1 1/4-cents on the week and 13 1/4-cents above a year ago. Twenty six carloads exchanged hands on the week.
The latest Crop Progress report shows 84 percent of the U.S. corn crop is planted, as of the week of May 21, up from 71 percent the previous week, dead even with a year ago, and 1 percent behind of the five year average. Fifty four percent of the corn is emerged, up from 31 percent the previous week, 4 percent behind a year ago, and 1 percent behind the five year average.
Fifty three percent of soybeans are in the ground, up from 32 percent the previous week, even with a year ago and 1 percent ahead of the five year average.
Fifty two percent of the cotton is planted, up from 33 percent the week before, 7 percent ahead of a year ago and 2 percent ahead of the average.
FC Stone says “Exports are still on pace to beat USDA estimates by 11.5 mmt for corn and 3.4 mmt for beans. However, for beans especially, South American product remains at a competitive advantage to the US.”
“The political unrest continues in Brazil as the military has been called in to deal with protesters calling for the removal of the president. The Real has been able to hold relatively firm during the turbulence, and traders are looking more towards the gains made in the USD the past 2 days when comparing competitiveness.”
Cooperatives Working Together (CWT) accepted 14 requests for export assistance the week of May 22 from Dairy Farmers of America, Foremost Farms USA, Northwest Dairy Association (Darigold) and Tillamook County Creamery Association, which have contracts to sell 2.57 million pounds of Cheddar and Monterey Jack cheeses, and 220,462 pounds of butter to customers in Asia, the Middle East, North Africa and Oceania.
The product has been contracted for delivery through August and puts 2017 sales at 34.17 million pounds of American-type cheeses and 2.31 million pounds of butter (82 percent milkfat) to 16 countries on four continents.
Things are looking up down under, according to the May 24 Daily Dairy Report (DDR), as Fonterra announced a higher cash payout forecast for the 2016-17 season, “welcome and long-awaited news for New Zealand dairy producers.”
“Fonterra announced its projected 2016-17 farmgate milk price at NZ$6.15 per kilogram of milk solids (kgms), up 15 cents from its prior forecast. Coupled with a dividend forecast of 40 cents, the 2016-17 estimated cash payout is now $6.55/kgms, a far better finish to the season than the original estimate of $4.60,” the DDR said.
Fonterra also announced its forecast for the 2017-18 season at NZ$6.50/kgms, “a 5.7 percent improvement over the current season and the highest price since the 2013-14 record setting price of $8.40,” according to the DDR.
The National Conference on Interstate Milk Shipments (NCIMS), held the week of May 15, took steps to align the Grade “A” Pasteurized Milk Ordinance (PMO) with the regulatory requirements in the preventive controls rule for human food under the Food Safety Modernization Act (FSMA).
The PMO is a set of standards and requirements that regulates all dairy plants producing Grade “A” products, including fluid milk, cream products, yogurt, cottage cheese, eggnog, buttermilk and many dried dairy products.
NCIMS, which meets every two years, includes regulators from all 50 states and Puerto Rico and recommends changes and modifications to the PMO for final approval by the Food and Drug Administration (FDA).
“The big news from the 2017 NCIMS meeting,” according to the International Dairy Foods Association (IDFA), “is that we successfully harmonized the PMO with FDA’s ‘Current Good Manufacturing Practice, Hazard Analysis and Risk-Based Preventive Controls for Human Food’ rule, which covers most FDA-regulated foods,” said John Allan, IDFA vice president of regulatory affairs and international standards.
“Working together, state regulators, industry stakeholders, FDA officials and experts from academia demonstrated the strength of the NCIMS process to work through difficult issues and come out with a positive solution that advances food safety yet does not overly burden the dairy industry or cash-strapped states.”
IDFA has advocated working through the NCIMS process to leverage the success of the PMO in assuring the safety of Grade “A” products while avoiding duplicative or contradictory regulations on the dairy industry. Prior to this meeting, IDFA met with representatives from the National Milk Producers Federation as well as FDA officials to build consensus on a pair of proposals developed to achieve this alignment.
As we gear up for another “June Dairy Month” celebration, the U.S. will also join the rest of the world in celebrating “World Milk Day.” The dairy industry contributes much to countless millions of people around the globe and June 1 will be a day of world recognition for what may be the most healthful, nutritious, and natural foods available to man.