Increased cow numbers and increased output per cow drove December milk production well above December 2019. Preliminary data in USDA’s latest Milk Production report has output at 18.94 billion pounds, up a bearish 3.1 percent from a year ago. December output in the top 24 states hit 18.1 billion, up 3.2 percent.

Revisions raised the November 50-state total by 73 million pounds, to 18.1 billion, up 3.4 percent from November 2019, instead of the originally reported 3.0 percent.

December cow numbers increased for the sixth consecutive month, totaling 9.44 million head in the 50 states, up 12,000 from November’s count, which was revised up 24,000. The December herd was at a whopping 100,000 head above December 2019 and the largest dairy herd in over 20 years.

December output per cow averaged 2,006 pounds, up 40 pounds or 2 percent from a year ago.

Fourth Quarter milk output in the 50 states totaled 55.6 billion pounds, up 3 percent from a year ago, with cow numbers at 9.43 million head, up 59,000 from Third Quarter and 81,000 more than a year ago.

The preliminary data would peg 2020 total milk output at 223.06 billion pounds, up 2.1 percent from 2019, with cow numbers at 9.38 million head, up 46,000 or 0.5 percent.

In the week ending Jan. 16, 2021, 67,400 dairy cows were sent to slaughter, down 100 from the previous week but 200 head or 0.3 percent above a year ago.

Give no thought of any shortage of milk, butter, or cheese anytime soon in this country. December’s Cold Storage report put that to rest and no doubt sent shivers throughout the dairy industry, as dairy stocks grew markedly due to restaurant and food service shortfalls and slowing government buying opposite rising milk output.

Dec. 31 butter stocks swelled to 273.8 million pounds, up 22 million pounds or 8.7 percent from November, and a scale breaking 84.1 million pounds or 44.4 percent above December 2019, 18th consecutive month they topped the year ago level.

American type cheese hit 801.2 million pounds, up 39.2 million pounds or 5.1 percent from November and 51.3 million pounds or 6.8 percent above a year ago.

The “other” cheese category climbed to 576.9 million pounds, up 12.2 million pounds or 2.2 percent from November and 28.8 million or 5.3 percent above a year ago.

The total cheese inventory amounted to 1.398 billion pounds, up 51.1 million pounds or 3.8 percent from November, biggest inventory since June 2020, and 75.9 million pounds or 5.7 percent% above that of a year ago.

HighGround Dairy said butter stocks typically build in December as production climbs and holiday buying ends but the build exceeded the five-year average. As to the cheese build, HGD says it is a concern “as strong milk production is expected to result in heavy cheese output in the coming months to drive stocks even higher.” The build was nearly 10 times the five-year average.

Speaking in the Feb. 1 Dairy Radio Now broadcast, HGD’s Lucas Fuess said December was the second consecutive month that milk output topped 3 percent above the previous year, and pointed to the “tremendous growth rate in cow numbers,” as well as growth in milk per cow as well as milk components.

He said there was strong growth in almost all regions of the country and mentioned a new cheese plant in Michigan which is quickly heading toward full capacity. He looks for significant milk volumes continuing into the spring flush.

The Cold Storage data is indicative of slightly lower demand in December, he said, and stocks will only grow as milk output increases in the spring, however the silver lining may be the lower U.S. prices being more competitive globally.

He doesn’t think the cheese price has hit bottom yet but concluded, “It all depends if demand can keep up with the really strong production we’re expecting through spring.”

Cash dairy prices indeed came under pressure the last week of January as traders weighed the Milk Production and Cold Storage data. The Cheddar blocks finished the last Friday of the month at $1.5750 per pound, down 3.50 cents on the week, third week in a row of decline and lowest since May 12, 2020, 4.25 cents below where they were on January 4, and 34.50 cents below a year ago.

The barrels rolled to a $1.39 per pound finish, down a quarter-cent on the week, 9.25 cents below their January 4 perch, 11 cents below a year ago, and 18.50 cents below the blocks.

There was no block sold on the week at the CME, and 62 cars for the month of January, down from 109 in December. 21 cars of barrel exchanged hands in the last week of January, 98 cars for the month, up from 90 in December.

Midwest cheese sales vary by type, according to Dairy Market News. Contacts reported stronger Cheddar sales to retail outlets, while some mozzarella producers reported softer interest. East coast based customers are definitely “hit and miss,” with restricted access to restaurants and other food service entities.

Cheese production remains busy and a few plants reported that demand is hearty enough to outdo production capacity, while concerns elsewhere are for growing inventories which are expected to grow even more, “while customers wait out some sentiment of market stability.” There is plenty of milk in the Midwest and spot milk prices remain discounted to previous weeks, DMN said, but cheesemakers did receive fewer offers of milk week to week.

Western cheese manufacturers are working hard to process the ample supply of milk and to find markets in which to move the cheese. Cheese inventories are also heavy. Market price volatility is “creating significant challenges to forecasting cheese needs,” DMN said, “and market participants do not want to get on the wrong end of a swing.”

Contacts suggest that demand is “all over the place.” Retail demand is holding but losing a little steam from the pre-winter holiday season. Mozzarella demand is starting to slow as the football playoffs draw to a close. Cheese demand from some fast-food chains is strong but food service sales are still way down. Cheese sellers are holding out hope that shuttered restaurants in parts of the United States may be able to re-open, or open more fully soon, DMN said.

Cash butter, after jumping 11.25 cents the previous week, fell to its lowest level since  May 5, 2020 on Friday, $1.2450 per pound, 15.75 cents lower on the week, 65.50 cents below a year ago, and 15 cents below its January 1 position. 18 cars sold on the week and 63 on the month, down from 129 in December.

Cream remains plentiful in the Midwest, DMN said, with cream offers aplenty from both local and Western sources though some “trucking hiccups” had occurred in getting cream from the West. Retail butter sales are strong, better than expected, according to some this week, but “the elephant in the room remains to be food service sales, or a lack thereof,” DMN said.

Western butter output is at seasonal levels but milk supplies remain heavy so the resulting cream is keeping plants running at full capacity. Retail butter sales are flat, following a brisk two day order cycle, after the recent Food Box announcement. Butter manufacturers anticipate that once the new crop deadline passes, the market should see some renewed interest, though the Cold Storage data won’t likely help matters any.