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USDA reports smaller than expected milk output 
 
By Lee Mielke
 
Milk is flowing in the United States but perhaps not as much as might have been thought. The USDA’s preliminary data reports U.S. output in the first month of 2021 totaled 19.2 billion pounds, up a somewhat bullish 1.6 percent from January 2020. Output in the top 24 states, at 18.3 billion pounds, was up 1.8 percent.
Revisions reduced the December 50-state total by 90 million pounds to 18.85 billion pounds, up 2.6 percent from December 2019, instead of the 3.1 percent increase originally reported.
January cow numbers increased for the seventh consecutive month, totaling 9.45 million head in the 50 states, up 8,000 from December’s count, which was revised down 1,000 head. The January herd was up 85,000 from January 2020.
Output per cow averaged 2,029 pounds, up 13 pounds or 0.6 percent from a year ago. The report showed 2020 total milk output at 223 billion pounds, up 2.2 percent from 2019, with cow numbers at 9.39 million head, up 0.5 percent from 2019.
California’s January output was reportedly down 0.7 percent from a year ago on a 10 pound loss per cow and 4,000 fewer cows. The number one milk producer’s December total was revised 77 million pounds lower, resulting in a 0.5 percent drop from December 2019, instead of the originally reported 3.2 percent increase.
Regionally, Michigan was up 4.3 percent, on a 30 pound gain per cow and 13,000 more cows. Indiana took honors for the biggest gain, up 10.1 percent.
StoneX Dairy’s Feb. 24 Early Morning Update stated: “If farmers can keep the production restrained, commercial demand stays decent, and the government purchases ramp up in February, March, and April, the fundamentals start to look a lot more supportive than they did on Feb. 22.”
Some of the Milk Production report’s data is suspect however, according to Lucas Fuess, director of dairy market intelligence for HighGround Dairy (HGD).
Speaking in the March 1 Dairy Radio Now broadcast, Fuess said most analysts were expecting something like a 3 percent gain in milk output, comparable to what was seen in November and December, so the smaller gain was bullish. However, the downward revisions in the California data are questionable, he said, and not consistent with what farmers and processors in the region have been saying.
California aside, Fuess pointed to the growth in the upper Midwest, particularly Wisconsin, Minnesota and Michigan especially, which saw an all-time record high in January milk output. Fuess said he still expects a strong spring flush ahead and expects upward revisions of the January data in the February report.
The Cold Storage report was welcomed by the cheese market, according to Fuess, because natural American stocks declined slightly in January versus December, when the growth was 10 times the norm. He said, “It was a relief that stocks did not surge into the new year” and the decline indicates demand was strong into January, especially considering American production was likely high.
Dairy cow culling was up in January from December but lagged a year ago, according to the latest Livestock Slaughter report. The USDA reported an estimated 277,300 head were sent to slaughter under federal inspection, up 3,800 head from December but 21,200 or 7.1 percent below January 2020.
In the week ending Feb.13, 66,500 dairy cows were sent to slaughter, down 1,100 from the previous week but 2,800 or 4.2 percent more than that week a year ago.
There’s plenty of dairy product in the cooler. The January Cold Storage report shows U.S. butter stocks grew to 328.4 million pounds, up a whopping 54.6 million pounds or 19.9 percent from December and 81 million pounds or 32.7 percent above January 2020, 19th consecutive month they topped the year ago level.
American type cheese slipped to 800.8 million pounds, down 90,000 pounds or 0.1 percent from December but 21.1 million pounds or 2.7 percent above a year ago.
The “other” cheese category climbed to 576.3 million pounds, up 1.6 million pounds or 0.3 percent from December and 25.3 million or 4.6 percent above a year ago.
The total cheese inventory amounted to 1.398 billion pounds, up 2.3 million pounds from December and 44.9 million pounds or 3.3 percent above a year ago.
Dairy traders had a lot to absorb from the above reports and appeared to respond positively but then reversed. The Cheddar blocks climbed to $1.66 per pound by Thursday but closed Friday at $1.6175, still up 8 cents on the week but 10.50 cents below a year ago and 3.50 cents above where they were on Feb. 1.
The barrels dipped to $1.3825 Tuesday, lowest since Aug. 24, 2020, then gained 6.50 cents Thursday, but closed Friday at $1.42, up 0.75 cents on the week, 17 cents below a year ago, 19.75 cents below the blocks, and 3 cents above their Feb. 1 perch.
There were 17 cars of block traded on the week at the CME and 59 in the month of February, down from 62 in January. Barrel sales numbered 6 for the week and 75 for the month, down from 98 in January.
StoneX’s Feb. 25 Early Morning Update stated: “Food boxes are expected to pick up delivery and provide opportunity for more sales. Recent government purchases have been in-line with solicitations. These sales numbers along with recent USDA fundamentals lead us to believe that we could see a short term bounce in the market.”
Midwestern cheese makers report varying production schedules, some with four day workweeks one week and six days the next. Others have robust production across the board. Retail and some restaurant customer bases are somewhat active. Spot milk availability has tightened. Discounts were reported near last week’s mid-point but prices of $2 under Class III were among them. Contacts suggest this could be due to more milk loads being spread out to refill depleted pipelines in the southern portion of the country, following the havoc winter systems the previous week.
Cheese market tones are “somewhat muted,” DMN said. “There are a number of questions as to which direction markets will follow, including the potential of further government awards, retail/food service replenishment after most areas of the country begin to warm up, and continuously increasing milk availability moving into spring.”
Western cheese makers said food service demand has yet to return, even as COVID restrictions relax. Retail sales are above previous year levels but “a bit lackluster.” Export demand is present but the challenges within the ports and transport channels due to container shortages make shipping difficult.
Cheese makers therefore have heavy inventories and are making a lot of spot offers. Manufacturers also have ample amounts of milk. Contacts suggest processing facilities are getting back to “normal” operations following the strong winter storms, “however, normal over the last few months has meant production that is variable,” DMN said. Some are running full schedules, others are trying to hold back and or schedule routine maintenance ahead of the spring flush.
Butter, after two weeks of gain, lost ground the last week of February, closing Friday and the month at $1.47 per pound, down 8 cents on the week, 25.50 cents below a year ago, but 26 cents above where it was on Feb. 1. Sixteen cars were sold on the week and 59 for the month, down from 63 in January.
3/2/2021