U.S. milk output grew for the 10th consecutive month and set a bearish new monthly high in March.
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A view of cattle ruminating around Frank Konyn Dairy Inc., on April 16, 2020, in Escondido, California. - The farm is operated and owned by Frank and Stacy Konyn who are lifelong farmers, however, the Konyn's income has dropped 40 percent since the Coronavirus pandemic. The farm took a financial hit since the restaurants are not open but they have not let go of any employees since the cows still need to be fed, milked and provided with medical attention. (Photo by ARIANA DREHSLER / AFP) (Photo by ARIANA DREHSLER/AFP via Getty Images)

The Agriculture Department’s preliminary data shows output hit 19.75 billion pounds, up 1.8% from March 2020. Output in the top 24 states, at 18.84 billion, was up 2.0%. Revisions added 37 million pounds to the February 50-state estimate, now put at 17.7 billion pounds, up 2.3% from a year ago, after adjusting for the Leap Day.

March cow numbers were up for the 14th consecutive month, totaling 9.468 million head in the 50 states, up 8,000 from February’s count, which was revised up 2,000 head, and up 77,000 from March 2020.

Output per cow averaged 2,086 pounds, up 20 pounds or 1% from a year ago.

California was up 1.5% from a year ago, thanks to a 35-pound gain per cow, but with 2,000 fewer cows. Wisconsin jumped a tank busting 97 million pounds or 3.7% from March 2020, thanks to a 65-pound gain per cow and 7,000 more cows.

Idaho was up 0.8% on 5,000 more cows but output per cow was unchanged. Michigan was up 3.5%, on 14,000 more cows and a 5-pound gain per cow. Minnesota was up 7.6%, on a 70-pound gain per cow and 17,000 more cows. New Mexico, still recovering from winter storm Uri, was down 1.1%, due to a 30-pound drop per cow, though cow numbers were up 1,000 head.

New York inched up 0.5%, on a 10-pound gain per cow. Cow numbers were unchanged.

Oregon was off 0.9%, on 2,000 fewer cows but output per cow was up 10 pounds. Pennsylvania was down 1.5%, on a drop of 10,000 cows, though output per cow was up 10 pounds.

South Dakota took back the title of the biggest gain, up 13.4%, thanks to 18,000 more cows outweighing a 10-pound drop per cow. Indiana wasn’t far behind, up 10%, thanks to 17,000 more cows milked and a 5-pound per cow gain.

Texas, which was also hit hard by Uri, was up 3.9%, on 27,000 more cows but output per cow was down 15 pounds. Washington state was down 1.2% on 2,000 fewer cows, and a 10-pound drop per cow.

Murky outlook

Matt Gould, analyst and editor of the Dairy and Food Market Analyst newsletter, pointed out in the April 26 “Dairy Radio Now” broadcast that the report was far from bullish though it did point out some regional items of interest.

Milk output growth slowed in the Southwest and actually fell in the Northeast, according to Gould, and both regions were impacted by processor level supply management programs. Other regions saw unhindered growth in output.

Dairy demand, of course, is the crucial factor and Gould pointed out that, prior to the COVID pandemic, we consumed more cheese and butter via restaurants than at home. We’re seeing more people traveling and eating out again, he said, so dairy demand at retail is shifting back to foodservice.

“That begs the question,” he concluded, “Can we grow dairy demand fast enough to keep up with supply. So far the answer is yes, but as we move forward it becomes a bit more murky.”

Culling jumps

March dairy cow culling topped the previous month and year. The USDA’s latest Livestock Slaughter report shows an estimated 302,200 head were sent to slaughter under federal inspection in March, up 37,000 head from February and 14,200 or 4.9% above March 2020.

Culling in first quarter 2021 totaled 844,700 head, down 7,800 or 0.9% from the same period a year ago.

Lots of butter & cheese

March butter stocks didn’t shrink but they didn’t build either, according to USDA’s latest Cold Storage report, and that was good news.

The March 31 inventory totaled 354.6 million pounds, virtually unchanged from the February level which was revised 1.9 million pounds higher, but was 45 million pounds or 14.5% above March 2020. March was the 21st consecutive month that butter stocks topped those a year ago.

StoneX Dairy’s Dustin Winston says, “The report will heighten interest in the dairy products report as we look to see if strong demand or a lack of butter production triggered the unchanged stocks.”

American type cheese climbed to 831.8 million pounds, up 14.6 million pounds or 1.8% from February, which was revised up 1.2 million pounds, and is a whopping 55.4 million pounds or 7.1% above a year ago.

The “other” cheese category hit 611.8 million pounds, up 14.4 million pounds or 2.4% from February and 36.9 million or 6.4% above a year ago.

The total cheese inventory stood at 1.47 billion pounds, up 30 million pounds or 2.1% from February and a hefty 91.8 million pounds or 6.7% above a year ago. March was the fifth month in a row that total cheese stocks grew.

The April 22 Daily Dairy Report says the increases in American and other stocks suggest that “cheese demand has been lackluster across both retail and foodservice channels,” adding that “lighter than-anticipated government purchases may also have contributed to the accumulation.”

Prices searching

CME cash block Cheddar hit $1.80 per pound last Monday but finished Friday at $1.7925, up 1.25 cents on the week and 72.25 cents above a year ago.

The barrels closed Friday at $1.8050, up 11.50 cents, highest since Nov. 12, 2020, 75.50 cents above a year ago, and an inverted 1.25 cents above the blocks, first time since July 30, 2020; 22 cars of block and 26 of barrel were sold last week.

The blocks ticked up 0.75 cents Monday and stayed there Tuesday at $1.80, with 8 cars exchanging hands both days.

The barrels were down a penny Monday but inched up a quarter-cent Tuesday, to $1.7975.

The StoneX dairy Group wrote in Monday’s Early Morning Update: “It was surprising to see the spot strength following the bearish milk production and cold storage reports but looking at how well food service sales performed in the month of March, a solid 10% above 2019 levels, it seems as though cheese makers lean on the side of optimism on their cheese sales and are no longer afraid to restrict production.”

No doubt the climbing corn price is adding to the pricing mix as well.

Midwest cheese plant managers told Dairy Market News last week that spot milk remains available with prices at or around $5 under Class III. Some plants were reselling milk on some days while other days they were trying to stay ahead of the robust supply. Schedules are full and record-setting in some cases while others have only recently upped their output to fulfill demand. Cheese demand is mostly positive but market tones are uncertain, says DMN, with barrel prices overtaking blocks, “which creates questions about near-term trends.”

Foodservice cheese demand has increased in the West as more areas loosen COVID restrictions. Some contacts report a shift in production focus from retail orders, which have remained steady, to growing restaurant/foodservice. Changes in government programs regarding the purchase of cheese and dairy products in general have caused some market instability. The block-barrel inversion also left contacts with uncertainty. Production schedules are full as there continues to be plenty of milk available, according to DMN.

Butter got back to $1.87 per pound last Monday, fell to $1.74 Thursday, and closed Friday at $1.77, 8 cents lower on the week but 62.50 cents above a year ago.

Forty-four cars were sold, highest since December 2020. Outside a few temporary blips, you’d have to go back to November 2019 to find butter consistently above $2 a pound.

Monday’s butter was unchanged but it was up 2.75 cents Tuesday, hitting $1.7975, with 11 carloads finding new homes.

DMN says, “Since roughly the ides of March, Central foodservice butter sales have incrementally shifted higher week after week,” however, contacts last week reported sales were “somewhat subdued though churning was busy.”

Western cream is abundant with “a few pockets of seemingly tightening output,” says DMN, but even in those areas, cream supply is meeting demand. Limited tanker availability continues to stymie greater movement of cream within and out of the region. Butter makers are maintaining seasonally active schedules and inventories are stable. Foodservice demand is “booming,” says DMN, some cafeterias, restaurants, and other foodservice outlets are nearing pre-pandemic levels of operation and retail sales are steady. But some contacts report that export demand is beginning to decline as U.S. prices are becoming less competitive.

Grade A nonfat dry milk climbed to a Friday close at $1.2525 per pound, up 3.75 cents on the week and 44.25 cents above a year ago. There were 8 sales reported on the week.

Traders jumped the powder 3.75 cents Monday and added 2 cents Tuesday, pushing the price to an eye catching $1.31 per pound, highest since Oct. 20, 2014.

CME dry whey set a new CME record at 70.25 cents per pound last Tuesday, but backed down to a Friday close of 62 cents, down 5.50 cents on the week and 23.50 cents above a year ago. There were 4 sales on the week at the CME.

The whey gained back 2.5 cents Monday on 3 trades, and added 1.50 cents Tuesday on unfilled bids, ascending to 66 cents per pound.

Arla Foods is examining how dairy farming can help improve soil biology, carbon capture, water quality and biodiversity via regenerative farming methods.

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