Bearish gain reported in June U.S. milk production

posted July 30, 2018 9:48 a.m. (CDT)
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by / Lee Mielke

June U.S. milk output showed a bearish 1.3 percent increase, the 54th consecutive month of gain vs. the year before and the highest year-to-year gain in four months. The Agriculture Department’s preliminary data shows output at 17.2 billion pounds in the top 23 states, up 1.3 percent from June 2017. The 50-state total, at 18.3 billion pounds, was up 1.2 percent. Revisions raised the May estimate by 40 million pounds to 18 billion, up 1.1 percent from 2017.

May cow numbers totaled 8.75 million head in the 23 states, unchanged from May but 12,000 more than a year ago. The 50-state total, at 9.4 million head, was unchanged from May and a year ago. Output per cow averaged 1,964 pounds in the 23 states, up 23 pounds from a year ago.

Second-quarter output totaled 55.8 billion pounds, up 0.8 percent from a year ago and cow numbers, at 9.4 million head, were down 3,000 from first quarter 2018 but 4,000 head more than second quarter 2017.

California’s June output was up 0.5 percent despite a drop of 14,000 cows from a year ago, but output per cow was up 25 pounds. Wisconsin was up 1.2 percent on a 30-pound gain per cow, but 4,000 fewer cows were milked. Minnesota was down 0.6 percent, on 5,000 fewer cow offsetting a 10-pound gain per cow. Michigan was up 1.3 percent, thanks to a nice 50-pound gain per cow, but cow numbers were down 4,000 head.

June butter stocks were down from May but well above June 2017, according to the Agriculture Department’s latest Cold Storage data. The June 30 inventory was at a bearish 336.4 million pounds, down 2.1 million pounds, or 0.6 percent, from May but 26.2 million pounds, or 8.5 percent, above June 2017.

American-type cheese, which includes Cheddar, slipped to 803.3 million pounds, down 1.3 million pounds, or 0.2 percent, from May, and 6.9 million, or 0.9 percent, below a year ago. The other cheese category hit 557.9 million pounds, up 8.4 million pounds, or 1.5 percent, from May and 78.9 million, or 16 percent, above a year ago.

That put the total cheese inventory at another bearish record high of 1.39 billion pounds, up 7 million pounds, or 1 percent, from May and 75.8 million, or 5.8 percent, above a year ago.

HighGround Dairy summed up the report: “With Other-than-American and Total cheese stocks at record levels as well as butter still close to multi-decade highs, HighGround sees this report as having bearish undertones but mostly in line with June’s stronger-than-expected U.S. milk production data and largely factored into the market.”

Cash dairy prices strengthened the week of July 23 as temperatures rose, particularly in the West. CME block Cheddar closed July 27 at $1.52 per pound, unchanged on the week but 23.5 cents below a year ago. Cheddar barrels, after closing the previous week at $1.27, also finished at $1.52, up 25 cents on the week but 3.5 cents below a year ago. Twelve cars of block exchanged hands on the week at the CME and 62 of barrel.

FCStone reports that “replacements seem to be plentiful out there to keep our cow numbers up at the moment. The semi-annual cattle report showed milk replacement heifers at 4.2 million head, slightly above estimates but in line with year-ago levels.”

Some Midwestern cheese producers suggest that slowing sales are an indication of rattled markets, according to Dairy Market News. Buyers are taking the bare minimum, waiting out fluctuant markets. Milk supplies for Class III vary widely. Some cheese producers report ample supplies locally while others are seeing thinning supplies, and a number say they are not interested in spot milk regardless of the offer.

Western cheese trading is mixed depending on suppliers. Some manufacturers report that sales are back up, while others are not receiving as many requests as they were a few weeks ago. According to them, both domestic and international sales have slowed somewhat. The alteration of some U.S. trade agreements remains a concern for many players, especially now that other countries are forging solid trade agreements with some of the U.S. main competitors. Cheese production is active despite a drop in milk volumes. Inventories are plentiful and outpace demand, but as pizza season approaches and educational institutions begin to reopen, processors hope domestic sales will reboot.

Cooperatives Working Together export assistance enabled members to sell 489,426 pounds of Cheddar, Colby and Monterey Jack cheese and 275,578 pounds of butter last week to customers in Asia and Oceania. The product was contracted for delivery from August through December. These sales are the equivalent of 829.76 million pounds of milk on a milkfat basis.

An amendment to legislation in the House has got a thumbs up that would improve the H-2A Program for dairy producers, according to National Milk. Authored by Rep. Dan Newhouse, R-Wash., the amendment to the Homeland Security Appropriations bill would allow farm employers to use the H-2A visa program to hire foreign workers, regardless of whether those employees are engaged in temporary or seasonal work.

A National Milk Producers Federation news release stated that members of its Immigration Task Force worked with Newhouse on the proposal “so that dairy farmers can more readily use the H-2A visa program to fill their need for year-round workers.”

“Dairy farmers have largely have not been able to utilize the H-2A visa program because the current version restricts the visas only to the temporary and seasonal labor needs of agricultural employers,” NMPF explained. “The H-2A program simply isn’t an option for a commodity that harvests its product multiple times a day, every day.”

The House GOP Leadership promised the agriculture community that it would bring forth an Ag Guest Worker Bill before the House goes on its August recess. That is not going to happen, says Bob Gray, editor of the Northeast Dairy Farmers Cooperatives newsletter, as the House adjourned for recess July 26 and will not return until Sept. 4.

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