The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."

U.S. milk production is recovering slowly, very slowly. The Agriculture Department's latest data shows July output hit 19.14 billion pounds, up just .2 percent from July 2021, and the first gain since October 2021. The 24-state total came in at 18.3 billion pounds, up .3 percent.

Revisions lowered the 50-state June estimate by 45 million pounds to 18.93 billion, .1 percent below a year ago instead of the .5 percent increase originally reported.

July cow numbers totaled 9.416 million, up 1,000 head from June numbers which were revised down 8,000 head. The July herd was down 67,000 from July 2021.

Output per cow averaged 2,033 pounds, up 19 pounds, or .9 percent, from July 2021. June output per cow was revised down 3 pounds, to 2,011 pounds.

California cows put 3.52 billion pounds of milk in the tank, up 77 million, or 2.2 percent, from a year ago. Cow numbers were up 4,000 while output per cow jumped 40 pounds. Wisconsin produced 2.72 billion pounds, down 7 million, or .3 percent. Cow numbers were down 6,000 but output per cow was up 5 pounds from a year ago. Wisconsin produced 2.72 billion pounds, down 7 million, or .3 percent. Cow numbers were down 6,000 but output per cow was up 5 pounds from a year ago.

Michigan was down 3.8 percent on 19,000 fewer cows, while output per cow was up 10 pounds. Minnesota was down 1.1 percent on a 12,000 cow loss, while output per cow was up 30 pounds. New Mexico was down 8.1 percent on a 32,000 cow drop. Output per cow was up 40 pounds. It was second to Florida which had the biggest decline, down 11.4 percent.

As I pondered the July data, I was reminded of the old "Got Milk" campaign which endeavored to portray what life would be like if we ever ran out of milk.

We're not even close to that, according to Matt Gould, analyst and editor of the Dairy and Food Market Analyst newsletter in the Aug. 29 Dairy Radio Now broadcast. But he quickly added, "We're not facing a gusher or a wall of milk either." He talked about USDA revisions in the report and the fact that July output was only up .2 percent. He spoke of the stress that dairy farm profit margins are under, particularly those in the west where draught has ravaged feed production and lifted hay prices. "We're not short of milk right now," he said, "but the outlook isn't exactly like we're going to have a surplus any time soon."

Commenting on July Cold Storage data, Gould said butter stocks came in below expectations at the same time we have U.S. butter prices near record highs. Retail butter prices keep climbing, he said, and shows that we're tight on butter. Tight supplies mean expensive prices at the store and he expects that to continue through the end of the year.

"That may not be good news for consumers as they think about Thanksgiving and Christmas cookies, but it is positive news for the dairy farmer," he concluded.

Meanwhile, dairy farmers are keeping cows in the milking string. Culling under federal inspection totaled 230,100 head in July, according to the USDA's latest Livestock Slaughter report. That's down 2,900 head from June and 17,800 head, or 7.2 percent, below July 2021. Culling in the January to July period totaled 1.751 million head, down 60,300, or 3.3 percent, from a year ago.

In the week ending Aug. 13, 57,600 dairy cows were sent to slaughter, up 200 head from the previous week, but 2,700 head, or 4.5 percent, below a year ago.

Checking the cooler, U.S. butter stocks headed lower in July and remained well below a year ago. The latest Cold Storage report put the July 31 inventory at 314.4 million pounds, down 16.4 million, or 5 percent, from June's inventory which was revised down 1 million pounds. Stocks were down 82.1 million pounds, or 20.7 percent, from a year ago, 10th consecutive month they fell short of the previous year.

American-type cheese stocks climbed to 859.9 million pounds, up 13.1 million pounds, or 1.6 percent, from June, and were 42.3 million, or 5.2 percent, above a year ago.

The "other" cheese category hit 640.4 million pounds, up 5.5 million, or .9 percent, from June, and 31.2 million pounds, or 5.1 percent, above a year ago.

The total cheese inventory set a new record at 1.52 billion pounds, up 16.5 million pounds, or 1.1 percent, from June, and 73.3 million, or 5.1 percent, above a year ago.

CME cheese prices were lower following the Cold Storage data. The Cheddar blocks dropped a nickel the next day and closed the last Friday of August at $1.74 per pound, down 8 cents on the week and a penny below a year ago.

The barrel's last Friday finish was at $1.8825, down 1.25 cents on the week, 48 cents above a year ago, and an inverted 14.25 cents above the blocks. There were five sales of block and 18 of barrel.

Retail cheesemakers report that sales range from steady to busy in the Midwest, according to Dairy Market News, and one factor increasing customer interest is "the topsy-turvy market tone" of recent weeks. Buyers are potentially getting ahead in case markets reenter another bullish cycle. Food service orders are mixed. Some restaurants, including pizzerias, have reduced hours due to staffing shortfalls.

Scheduled downtime at cheese plants has regularly kept milk available at other plants and at similar prices to previous weeks. Some cheesemakers say milk offers are quiet but they are not looking for more. A growing number of producers are saying orders are starting to outpace current availability.

Cheese makers in the West are running busy schedules as milk remains available, though some continue to run below capacity due to delayed deliveries of supplies and labor shortages.

Domestic cheese demand was steady to lower this week. Retail sales are down from last year as higher prices impact consumer purchasing. Stakeholders expect an increase in mozzarella sales in coming weeks "as more customers purchase pizzas to enjoy as they watch football."

Cash butter jumped 8 cents last Monday, as traders expected a bullish Cold Storage report for butter. It climbed to $3.0550 per pound last Tuesday, then lost 5.50 cents last Wednesday, but ended up closing last Friday at $3.0825, up 14.25 cents on the week and $1.3750 above a year ago, highest CME price in seven years and third highest ever. Forty-three cars traded hands on the week, five less than the previous week.

Butter producers say sales are somewhat in line with recent weeks but year-to-date numbers are starting to lag, partly due to the $3 market prices. Some plants cleared some spot cream this week, but more from the West than within the region. Cream is still regarded as tight to nonexistent, depending on location. Expectations vary on near-term tones. Domestic prices have pushed above some global values so stronger import trading is expected to fulfill some seasonal industrial baking needs, according to DMN.

Declining milk production in the West is contributing to reduced cream output though demand remains strong from butter and ice cream makers. Cream availability is tightening and some are reportedly paying premiums for additional loads. Some churns are running below capacity, unable to obtain sufficient cream.

Butter output is further hampered by limited tanker availability and labor shortages at some facilities. Bulk butter sales trended higher last week as some spot purchasers are concerned about butter availability in the coming months. Retail and food service demand was unchanged, according to DMN.

Grade A nonfat dry milk closed last Friday at $1.56 per pound, up 4 cents on the week, highest since Aug. 4, and 26.75 cents above a year ago on nine sales.

CME dry whey oscillated a little this week but finished 2 cents higher at 47 cents per pound, 3 cents below a year ago. There were four sales on the week.

The continuing declines at the Global Dairy Trade have been blamed primarily on China and its latest dairy import data would indicate the blame is justified.

Whole milk powder imports totaled 81.3 million pounds, down 49.9 percent from July 2021. Skim milk powder, at 60.4 million pounds, was down 40.6 percent, and whey products totaled 119.5 million pounds, down 16.7 percent. Cheese imports totaled 25.5 million pounds, down 26.4 percent from a year ago.

Butter imports, at 20.4 million pounds, were off .5 percent, while anhydrous milkfat, at 12.7 million pounds, was up 44.2 percent, strongest since April 2021, according to HighGround Dairy, "as China takes advantage of the discounted fat from New Zealand."

Fluid milk and cream volumes were the lowest since May 2020, according to HGD, due to steep declines from Europe. However, on a brighter note, lactose imports hit a record 34.1 million pounds, up 30.5 percent. The U.S. accounted for 82 percent market share, according to HGD.

HighGround adds that "China's diversification of feed sources for livestock has continued as unfavorable weather and the war in Ukraine tightens commodities. Additionally, over the past few years, rising trade tensions between China and the U.S. have affected bilateral soybean trade. Within a framework of food security, China has sought replacements for soybean meal and other products produced from soybeans."

The Aug. 23 Daily Dairy Report says, "China imported more U.S. whey last month than in any month since June 2018, just before the trade war pushed China to seek other suppliers. Although today the trade war is not running as hot as it once was, China still levies punitive tariffs on most U.S. dairy products, including 35 percent tariffs on milk powder and butter imports and tariffs between 35.5 percent and 39.5 percent on U.S. cheese."

"U.S. exporters can apply for relief from tariffs on an individual basis," said the DDR, "but border taxes have minimized shipments of these U.S. dairy products to China and boosted market share for product from Oceania and Europe."

"The United States accounted for 59.3 percent of China's total whey imports in July," according to the DDR, "the highest share since May 2018. In contrast, the United States accounted for just 3.7 percent of Chinese milk powder imports and 3.1 percent of its cheese imports in July."

In other trade news, StoneX reports that New Zealand exports in July were a little better than expected, up 9.4 percent from last year. However, June was revised down from a 19.7 percent drop to 25.2 percent, so combined volume for June plus July turned out about 1 percent lower than thought. Shipments to China improved, down only 4.3 percent from last year compared to the minus 17.9 percent pace over the past 12 months. It's the first sign that imports might be improving," StoneX concludes. "But the fact that WMP was down again last week would argue that demand is still not great."

Return to Top of Page

Copyright © 2004 Exchange Publishing Corporation