The Agriculture Department’s preliminary data reports February milk output hit 17.63 billion pounds, down 1.5% from February 2020, however February 2020 had an extra “Leap Day,” 29 days of production instead of the 28 this year, so adjusting for that, February output was really up 2.0% from 2020. Output in the top 24 states was up 2.3%, when adjusted. 

Revisions in January output were a big factor of interest in this report as January’s preliminary estimate was raised by 155 million pounds to 19.3 billion, up 2.4%, instead of the originally reported 1.6% increase.

February cow numbers were up for the eighth consecutive month, totaling 9.46 million head in the 50 states, up 3,000 from January’s count, which was revised up 5,000 head. The February herd was up 81,000 from February 2020. 

February output per cow averaged 1,864 pounds, up 22 pounds or 1.2% from a year ago.

Michigan was up 3.8%, on a 14 pound gain per cow and 13,000 more cows. Indiana again showed the biggest gain, up 10.4%, thanks to 17,000 more cows milked and a 14 pound per cow gain. 

The data may seem bearish however demand dynamics, including rising food service sales, retail sales, and exports will help swallow some of that extra milk.

In the week ending March 6, 70,400 dairy cows were sent to slaughter, down 1,200 from the previous week but 5,400 or 8.3% more than that week a year ago. The four-week rolling average hit 66,325 head, up 1,200 or 1.8% from a year ago.

The Agriculture Department’s monthly Livestock, Dairy, and Poultry Outlook, issued March 15, mirrored milk price and production projections in the March 9 World Agricultural Supply and Demand Estimates report.

The Outlook’s forecast for the size of the 2021 dairy herd was raised to 9.445 million head, 10,000 higher than last month’s forecast, based on the reported average number of milk cows in January and recent slaughter rates close to those of last year. Based on yield per cow in January and lower expected cull rates, the forecast yield per cow was lowered to 24,065 pounds per head, down 35 pounds from last month’s estimate.

This week’s Global Dairy Trade auction reversed gears as Event 280’s weighted average fell 3.8%, following the March 2 leap of 15%. The dip ended eight consecutive sessions of gain and was the first slippage since Nov. 3, 2020. 

Traders brought 59.2 million pounds of product to market, up from 56.3 million in the last event, as some added volume of powder pulled on the market. The average winning price was $4,089, down from $4,231 on March 2.

 The dive was led by whole milk powder, down 6.2%, after it led the gains last time with a 21% jump. Butter was down 2.8%, after posting a 13.7% rise, but anhydrous milkfat was up 3.7%, following a 7.4% advance last time. 

Gains were led by lactose, up 8.6%, which followed a 4.9% rise. Skim milk powder was up 0.7%, after a 3.5% gain. There was no volume traded on cheese.

Western United Dairies’ (WUD) weekly newsletter reports that export containers remain in extreme short supply at California’s ports, according to a report from Noble Wolf, Blimling and Associates. 

“Although many products are being directly impacted with a tight domestic export market, major challenges have affected dairy products and their downstream supply chains. There aren’t enough containers in the right place at the right time. Today, too many containers are sitting on idled ships just waiting to be unloaded at U.S. ports. And, once docked, the unloading process is taking longer than usual because of reduced workforces due to COVID flare ups at the ports.”

CME dairy prices were weaker with the exception of dry whey which set a new record high. The Cheddar blocks closed Friday at $1.79 per pound, unchanged on the week but 4.75 cents below a year ago. They have advanced 25.25 cents in four weeks. 

 The barrels rolled downhill to a close of $1.4525, down a dime on the week, still 2.25 cents above a year ago, but a whopping 33.75 cents below the blocks. There were 6 sales of block and 13 of barrel on the week at the CME.

Cheese demand reports are mixed, according to Dairy Market News, but Midwestern cheesemakers are reporting busier tones, with some having trouble keeping up with demand. Cheese inventories vary but some are balanced to tight. Export interests, renewed school lunch programs, and spring holidays have all helped to keep market tones somewhat bullish, says DMN.

Central cream is tightening, according to butter producers, but churning is ongoing. Cream is nearing the peak of affordability for churners, says DMN, but butter availability remains bountiful with some bulk loads nearing one year in age. Butter market tones have retained solidity, thanks to consecutive weeks of positive food service demand which is described as “reminiscent of pre-COVID buying,” according to DMN, plus interest continues from export customers. 

Spring flush is early in the west, says DMN, and cream is plentiful. Ice cream makers are pulling more heavily on cream but butter makers have ample cream supplies. And, there is a lot of butter in the cooler. Export interest is strong, food service demand is showing growth as restrictions relax, and retail accounts are building inventory to prepare for the upcoming spring holiday advertised sales.

Dairy margins continued to improve in the first half of March as milk prices continued higher while feed costs held generally steady, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.

The MW reported that “Strong export demand is providing support to the market along with ongoing domestic demand from the Farmers to Families Food Box Program. Export shipments have been particularly strong to the Philippines, Vietnam, and China since the beginning of the year.” 

StoneX Dairy warned in its March 15 ‘Early Morning Update’ that “Dairy farmers can no longer expect to have $3.50 corn and $3 bean meal. This increase in feed price has brought dairy margins below the 25% historical price index, presenting a challenge for dairy farmers if there were to be any further shocks to the market.” 

The March 15 Daily Dairy Report states “Demand from bottlers is steady to strong in most parts of the country. Stay at home orders have driven strong fluid milk consumption over the past year but as students return to classrooms to varying degrees, fluid milk demand from educational institutions is likely to grow. Class I utilization among the federal milk marketing orders in January was 33.9%, the highest it has been for that month since 2012.”