By Lee Mielke

 U.S. milk production lagged year ago levels for the fifth consecutive month in March, however that trend may be ending. The USDA’s latest preliminary data shows March output at 19.7 billion pounds, down 0.5 percent from March 2021, and follows the revised 0.9 percent drop in February. March output in the top 24 producing states totaled 18.8 billion pounds, down 0.4 percent. Revisions raised the original 50-state February estimate by 18 million pounds to 17.53 billion, 0.9 percent below a year ago, instead of the 1.0 percent originally reported.

First Quarter 2022 output totaled 56.3 billion pounds, down 1.0 percent from the same period in 2021. Cow numbers totaled 9.38 million head, unchanged from the October to December quarter, but 85,000 below a year ago.

Farmers are adding cows back into the milking string, however. March numbers totaled 9.395 million head, up 15,000 from February, but were still down 87,000 from a year ago. The February count was revised up 10,000 head.

March output per cow averaged 2,096 pounds, up 8 pounds or 0.4 percent from 2021.

U.S. dairy cow culling jumped in March but fell short of a year ago, according to the USDA’s latest Livestock Slaughter report. An estimated 297,200 head were sent to slaughter under federal inspection, up 30,700 or 11.5 percent from February, but 5,000 head or 1.7 percent below March 2021. Culling in the first quarter totaled 824,600 head, down 20,100 or 2.4 percent from the same period a year ago.

In the week ending April 9, 60,900 dairy cows were sent to slaughter, down 100 head from the previous week, but 400 or 0.7 percent above a year ago.

USDA’s 2021 Livestock Slaughter Summary shows an estimated 3.06 million head were sent to slaughter in the year, down 42,900 head or 1.4 percent from 2020. The biggest culling month was March, with 302,200 head heading to McDonalds, and the smallest month was May at 223,400.

The USDA’s monthly Livestock, Dairy, and Poultry Outlook, issued April 14, mirrored milk price and production projections in the April 11 World Agricultural Supply and Demand Estimates report.

The outlook stated: “It’s not clear if dairy herd expansion will continue throughout the year. Recent input prices for feed, fuel, and fertilizer have been high. The corn price forecast has been raised as has the soybean meal price forecast.

“While milk cows are forecast to average 9.37 million for the first half of the year, they are projected to decline to 9.365 million in the second half. The annual average forecast rounds to 9.37 million head, 15,000 higher than last month’s forecast. The forecast for 2022 average milk per cow was unchanged from last month’s forecast of 24,160 pounds per head.”

U.S. dairy product commercial disappearance showed some weakness in February. The good news was cheese, with American type up 7.2 percent from February 2021, and the other cheese category up 6.4 percent. Total cheese disappearance hit 1.1 billion pounds, up 6.8 percent. Exports were up 9.2 percent from a year ago.

HighGround Dairy (HGD) pointed out that February was the fifth month in a row that total cheese disappearance topped that of the previous year and was the steepest year over year gain since April 2021.

Unfortunately, butter took a hit, coming in at 145.5 million pounds, down 13.0 percent from a year ago, steepest year over year decline since August 2016, according to HGD. Butter exports were up 46.3 percent but only amounted to 11.2 million pounds.

Nonfat-skim milk powder totaled 172.3 million pounds, down 2.2 percent, falling short of the previous year for the fourth consecutive month. HGD points out that, while domestic disappearance was up from a year ago, exports were down 11.5 percent, driving the overall decline. Port congestion issues likely played a role there.

Dry whey disappearance totaled 68.6 million pounds, down 5.8 percent, but was an improvement over 2020’s weak performance, according to HGD. Dry whey exports were down 20.1 percent from a year ago in February.

Midwestern cheesemakers continue to report strong demand, according to Dairy Market News, with some having to slim orders down to complete others. Milk is available but remained at a discount. Staffing shortages continue to plague plants but most are still running active schedules. DMN said. “Cheese market bulls met some resistance throughout the week, but as demand continues to overshadow inventories, contacts are not overly concerned about price dips.”

Spot butter closed Friday at $2.6675, down 8.75 cents on the week, lowest since Feb. 28, but 89.75 cents above a year ago, with 22 sales reported on the week.

Central butter makers are busy despite continuing staffing shortages. Cream was more widely available, as was expected during and following the holiday weekend. Demand was also reported as active in food service, retail, and export.

Cream inventories are available in the West, DMN said. Contacts report that demand slipped following the holiday weekend and interest from purchasers in other regions was waning. Regional ice cream makers are pulling on cream supplies. Food service butter demand is steady while retail is declining.

Spot Grade A nonfat dry milk closed at $1.7550 per pound, down 6.75 cents on the week, lowest since Jan. 1, but 50.25 cents above a year ago, with 18 sales.

Dry whey bobbled a bit but closed at 63.50 cents per pound, unchanged on the week but 1.50 cents above a year ago, on 7 sales for the week at the CME.

The USDA announced the May Federal order Class I base milk price at a record high, $25.45 per hundredweight, up $1.07 from April and $8.35 above May 2021. It equates to $2.19 per gallon, up from $$1.47 a year ago. The five-month Class I average stands at $22.81, up from $15.70 a year ago, and $16.72 in 2020.

Dairy margins remained relatively stable the first half of April as strength in milk prices largely offset the impact from higher projected feed costs, according to the Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.

The MW cited the latest World Agricultural Supply and Demand Estimates, which forecast a small rise in 2022 U.S. milk output and higher exports on a skim-solids basis for whey and skim milk powder, despite weak Chinese demand in recent months. It also reported on the fall in February export volume, third consecutive month, though butterfat, cheese, and lactose posted large gains.

“U.S. cheese exports set a record for the month of February at nearly 33 MMT,” the MW stated, and “This marked the 8th consecutive month of year-over-year growth. Cheese exports to Japan were particularly strong, posting a 59 percent increase from last year. Global cheese demand remains robust. U.S. cheese shipments were up 13 percent through the first two months of the year. Dairy exports to Mexico fell 10 percent on a milk solids basis, reflecting both a strong U.S. dollar and relatively high prices keeping buyers on the sidelines.”