By Lee Mielke

U.S. milk production continued to lag that of a year ago in April, the sixth month in a row to do so, as cow numbers and output per cow paused. The USDA’s latest preliminary data shows April output at 19.15 billion pounds, down 1.0 percent from April. 2021, and follows a revised 0.4 percent drop in March. April output in the top 24 producing states totaled 18.3 billion pounds, down 0.9 percent. Only five of the top 24 producing states showed an increase in milk output.

Revisions raised the original 50-state March estimate by 23 million pounds to 19.7 billion, 0.4 percent below a year ago, instead of the 0.5 percent originally reported.

Farmers added 13,000 cows to the milking string in February, and 22,000 in March, following a 7,000 head revision, hitting 9.4 million head. The April count was unchanged from March, but was 98,000 below a year ago.

April output per cow averaged 2,037 pounds, unchanged from April 2021.

High milk prices are incentivizing dairy farmers to keep cows in the milking string. Dairy culling dropped in April, according to the USDA’s latest Livestock Slaughter report. An estimated 237,800 head were sent to slaughter under federal inspection, down 59,400 or 20 percent from March, and 19,700 head or 7.7 percent below April 2021. Culling in the first four months of 2022 totaled 1.06 million head, down 39,900 or 3.6 percent from the same period a year ago.

In the week ending May 7, 56,400 dairy cows were sent to slaughter, up 4,800 head from the previous week, but 400 or 0.7 percent below a year ago.

Tuesday’s Global Dairy Trade auction saw its fifth consecutive decline. The weighted average was down 2.9 percent, following the 8.5 percent drop on May 3. Traders brought 53.5 million pounds to the market, down from 55.5 million on May 3, and the average metric ton price was at $4,432 U.S., up from $4,419.

Event 308 was led by whole milk powder dropping 4.9 percent, following the 6.5 percent decline on May 3. Skim milk powder was down just 0.6 percent, after dropping 6.5 percent. GDT butter was down 1 percent, after leading the losses last time with a 12.5 percent plunge. Anhydrous milkfat inched up 0.6 percent after a 12.1 percent plunge last time. Cheddar rounded out the losses, down 0.1 percent, after dropping 8.6 percent last time.

StoneX says the GDT 80 percent fat butter price equates to $2.5446 per pound U.S., down 2.5 cents after dropping 36.9 cents in the last event, and compares to CME butter, which closed Friday at $2.85. GDT Cheddar, at $2.5559, was down 0.8 cents, after losing 24.2 cents last time, and compares to Friday’s CME block Cheddar at $2.38.

StoneX’s Dustin Winston says volume purchased by the North Asia region, which includes China, was again lower from the last event and last year. Every other region experienced an increase from last year’s volume with only Africa and North America declining from the last event.

HighGround Dairy points out that buyers were taking advantage of China’s pullback while they can as China focuses on its Zero-COVID policy. To no one’s surprise, China’s April imports were down on just about every product except three, one of them ironically being infant formula. I’ll report details next week.

In other trade news; the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC) called on the U.S. government this week to levy retaliatory tariffs on Canada after Ottawa made clear that it refuses to meet its signed treaty obligations under the U.S.-Mexico-Canada Agreement (USMCA) concerning dairy market access.

A USMCA dispute resolution panel initiated by the U.S. in January found that Canada’s dairy tariff-rate quotas (TRQs) system violated terms of USMCA. Canada issued a new proposal in March which included “inconsequential changes,” says NMPF, and “This week’s announcement shows no indication that Canada intends to comply with its USMCA commitments on dairy TRQs.”

Michael Dykes, president of the International Dairy Foods Association, stated; “Canada’s publication clearly shows they are ignoring their trade commitments agreed to in the USMCA and refusing to administer their dairy TRQs in a manner compliant with the agreement.”

Back home, the June Federal order Class I base milk price set another record high at $25.87 per hundredweight, up 42 cents from May, $7.58 above a year ago, and equates to $2.22 per gallon, up from $1.57 a year ago. The six-month Class I average is at $23.32, up from $16.13 a year ago and $15.84 in 2020.

In other milk price news, dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Mo., warns that, after plugging the latest WASDE data into the DMC formula, “2023 will be a tighter margin year for dairy producers. The first look at 2023 shows the margin over feed costs at $9.33 versus $12.58 for 2022. The 2022 $12.58 from this month’s report is down from April’s $12.85 due to lower milk prices and higher feed costs,” says Brooks.

CME block Cheddar closed Friday at $2.38 per pound, up 7.25 cents on the week, and 81 cents above a year ago when they dropped 15.50 cents to $1.57.

The barrels climbed to $2.45 per pound Tuesday, highest since Nov. 5, 2020, but closed Friday at $2.3475, down 4.75 cents on the week, 74 cents above a year ago. There were 6 sales of block on the week at the CME and 21 of barrel.

Storms slammed the Northern Plains with high winds and heavy rain the week of May 9 and the Daily Dairy Report’s Sarina Sharp wrote in the Milk Producers Council newsletter that three cheese plants in South Dakota and Iowa were shuttered by power outages. She said the plants can process more than 12 million pounds of milk per day. Some producers dumped milk and the plants will have to discard the cheese they were in the process of making before the shut down so “There may be a little less cheese for sale in Chicago over the next 30 days, which could briefly lift the spot Cheddar market,” according to Sharp.

Meanwhile, cheese demand is mixed, according to Midwestern cheesemakers who told Dairy Market News that “The previous weeks’ block market dips may have affected customers’ approaches. This week’s markets buoyed, so some buyers may look to get ahead of potentially bullish markets in the next weeks.” Cheddar makers are finding milk at levels similar to previous weeks and production is active. Mid-week prices ranged from $2.50 under to 75 cents over Class III, according to DMN, but “May has been a very active month in regard to spot milk making its way into cheese vats.” Cheese availability is balanced to tight, says DMN, “But as notable amounts of milk clear to the vats, with Class I demand ebbing, inventories could continue to increase.”