Most Americans are collecting information to fill out federal and state tax forms and they’ll be comparing their 2011 income to the year before. Dairy Profit Weekly’s Dave Natzke discussed how much income the nation’s 9 million dairy cows made last year in Friday’s DairyLine and said “Every year about this time I calculate what the average dairy cow earned the year before, based on the simple average annual milk price and milk production per cow. Based on gross income, at least, our dairy cows had more earning power in 2011.”

According to preliminary estimates from USDA, annual gross income per cow improved for a second straight year, according to Natzke. Milk production per cow was up about 186 pounds from the year before, to about 21,335 pounds. More importantly, the 2011 U.S. milk price was up about $3.88 per hundred pounds from the year before, averaging $20.14 per cwt.

Multiplying the increased milk production and price, each cow brought home nearly $4,300 in milk sales in 2011, up $859 per cow from the year before. Even more startling, gross income per cow was up more than $1,650 from 2009, the year of devastatingly low milk prices, Natzke said.

“The 2011 estimate gross income per cow is the highest on record, and when you add the increase for all 9 million cows, U.S. dairy farmers saw their gross income increase by about $7.7 billion from 2010,” Natzke reported.

“Of course, that’s gross income, and the nation’s dairy cows will be declaring a few deductions,” Natzke cautioned. USDA updates its cost estimates to produce milk next week, but through November, feed and operating costs were running about $1.75 per cwt. more than 2010, and even with the previous high-cost year of 2008. Adding in those higher costs will reduce the earning power of each cow by about 43 percent, he concluded. “The bottom line, our cows made more, but they cost more, too.”

The National Milk Producers Federation (NMPF) praised USDA’s updated school meal standards that it says “continue to stress the nutritional benefits of low-fat and fat-free milk and dairy products.” 

A final version of those standards was released Jan. 25 following more than a year of public comment and review. The International Dairy Foods Assoc. also praised the action, but expressed concern that restrictions on flavored milk could reduce overall milk consumption in schools in favor of less healthy alternatives.

U.S. dairy cows keep producing thanks to a mild winter and expanding numbers. The USDA’s preliminary December data put output in the top 23 producing states at 15.425 billion pounds, up a surprising 2.7 percent from December 2010. The 50-state total, at 16.559 billion, was up 2.5 percent. 2011 output in the 50 states was estimated at 196.216 billion pounds, up 1.8 percent. 

December cow numbers in the 23 states totaled 8.49 million head, up 12,000 from November and 99,000 more than a year ago. Output per cow averaged 1,818 pounds, up 27 pounds from a year ago.

California was up 3.8 percent from a year ago thanks to 30,000 more cows and a 40-pound gain per cow. Wisconsin was up 2.6 percent on a 45-pound gain per cow. Cow numbers were unchanged. New York was up just 0.2 percent on a 5 pound gain per cow though cow numbers were down 1,000.

Idaho was up 3.4 percent on a 40-pound gain per cow and 7,000 more cows.

Pennsylvania was off 0.2 percent on a 10-pound loss per cow and 4,000 fewer cows. Minnesota was up 0.8 percent despite 5,000 fewer cows but output per cow was up 30 pounds. 

Checking other key players, Michigan was up 4.2 percent on a 30-pound gain per cow and 9,000 more cows. Missouri recorded the biggest loss, down 1.7 percent despite a 10-pound gain per cow. Cow numbers were down 2,000 head. New Mexico was up 2 percent, thanks to 13,000 more cows, but output per cow was down 40 pounds. Texas was up 4.1 percent, thanks to 15,000 more cows, but output per cow was off 10 pounds. Washington State saw a healthy 4.7 percent gain in milk production on 11,000 more cows and 5 pounds more per cow.

Meanwhile, the cash dairy markets had little reaction. Block cheese closed the last Friday of January on an up note at $1.51 per pound, up a half-cent on the week, but 22.5 cents below that week a year ago when they jumped 21 cents to $1.7350. The barrels closed Friday at $1.4950, down three quarters on the week and 21 cents below a year ago when they gained 19.5 and were trading at $1.7050. Eight cars of block found new homes on the week and 25 of barrel, with 20 coming on Friday morning. The NASS-surveyed U.S. average block price hit $1.5899, up 1.8 cents, while the barrels averaged $1.6053, down 0.3 cent.

Butter saw more weakness, closing Friday at $1.55, down 2 cents on the week and 55 cents below a year ago. Only one car was sold all week. NASS butter averaged $1.5923, up a penny. NASS powder averaged $1.3654, down a nickel, and dry whey averaged 71.13 cents, up yet another 0.9 cent.

FC Stone’s Jan. 27 Insider Opening Bell reports that signs of erosion are starting to surface in the whey market, according to USDA.

Dairy economist Bill Brooks warned that, “If the whey market sees a sharp price decline, it could knock Class III prices down unless an offsetting increase in cheese prices occurs, which is unlikely.” 

Dec. 31 butter stocks stood at 105.2 million pounds, according to USDA’s Jan. 20 Cold Storage report, up 12 percent from November and 29 percent above December 2010. Market analysts viewed the overall data as bearish for both butter and cheese.

FC Stone dairy economist Bill Brooks stated in the Jan. 23 Insider Opening Bell that “December can be a swing month on butter stocks.” 

He reported that stocks were down in six of the last 10 Decembers when compared with November levels but butter stocks built more than expected and are stronger than a year ago on a percentage basis.

“They are not burdensome,” he said, but warned; “With more product coming out of the Southern Hemisphere, U.S. exports of butterfat have slowed and more butter has moved into storage.” 

American cheese stocks totaled 600.7 million pounds, up 3 percent from November but 5 percent below a year ago. The total cheese inventory, at 981.3 million, was up just 1 percent from November and 6 percent below a year ago.

Stewart Peterson’s Matt Mattke blamed rising cheese inventories for the price weakness in Tuesday’s DairyLine. He said stocks are up abnormally on a weekly basis and up 7.5 percent from a year ago, but down on the month. The weekly buildup however leads him to believe that stocks will be up on the month as well. The big question, he asks; is the buildup due to supply as milk output climbs or have exports taken a hit due to the rallying U.S. dollar to a recent 15 month high.

Cheese production remains steady for this time of year and inventories are expanding for most varieties, according to USDA. Orders for aged sharp Cheddar remain good ahead of the Super Bowl. Demand for mozzarella has improved as colleges and universities start spring semesters.