By Lee Mielke

U.S. milk production continues below that of a year ago, with May being the seventh consecutive month. Preliminary data shows output at 19.7 billion pounds, down 0.7% from May 2021, and follows a 1% drop in April. Output in the top 24 states totaled 18.8 billion pounds, down 0.6%. Revisions lowered the 50-State April estimate 3 million pounds to 19.1 billion, still 1.0% below a year ago. 

While dairy farmers have added 38,000 cows to the milking string since the first of the year, they only added 2,000 in May, putting the herd at 9.41 million head, 102,000 less than a year ago. The April tally was revised up 1,000 head.

May output per cow averaged 2,096 pounds, up 8 pounds from May 2021. 

Speaking in the June 27 Dairy Radio Now broadcast, Matt Gould, editor and analyst with the Dairy and Food Market Analyst newsletter, called the Milk Production report “a big deal.”

The industry is watching the monthly reports, wondering when dairy farmers will “turn it on or ramp it up,” he said, referring to milk output, and this report did not give any indication that is happening. He said it’s a global occurrence, citing lower output in New Zealand and Europe, calling it; “good news for American dairy farmers as that will keep support in the market for the foreseeable future.”

He doesn’t see a milk shortage, like we did on toilet paper, but says the pandemic resulted in “long effects.” Expansions, both at the farm and processor level, were delayed. “Farmers are now getting the economic signal to expand but how long will that take? Normally it takes six months of profitability to trigger a meaningful increase in cow numbers and milk output.” If that holds true, Gould said we should see that indication this summer. “The longer it takes for the supply response, the longer prices are going to stay high,” he concluded.

Meanwhile, the June 21 Daily Dairy Report says “Low slaughter rates and high milk prices suggest that dairy producers could continue to add cows. However, amid high feed costs, supply management programs, and low heifer inventories, growth in the dairy herd will likely remain incremental.”

U.S. butter stocks climbed higher in May but remained well below a year ago. The Agriculture Department’s latest Cold Storage report shows the May 31 inventory at 321.6 million pounds, up 23.3 million pounds or 7.8% from April but 92.3 million or 22.3% below a year ago, the eighth consecutive month stocks were below the previous year. The April tally was revised down 1.3 million.

American type cheese stocks hit 857.9 million pounds, up 22.2 million pounds or 2.6% from April, and up 29.9 million or 3.6% above those a year ago. The “other” cheese category crept up to 628.3 million pounds, up 7.1 million or 1.1% from April, and 19.8 million pounds or 3.3% above a year ago.

The total cheese inventory hit a bearish record high 1.512 billion pounds, up 31.1 million pounds or 2.1% from April, and 53.6 million or 3.7% above a year ago. 

The “recovery” in the Global Dairy Trade auction suffered a relapse this week as the weighted average fell 1.3%, after inching up 1.5% on June 7 ending five consecutive declines prior to that. 

Cheddar led the declines, dropping 9.0%, after falling 3.6% in the previous event. Anhydrous milkfat was down 4.7%, after gaining 2.7%, and whole milk powder was off 0.6%, following a 0.3% slip.

Butter was up 2.4%, which follows a 5.6% advance, and skim milk powder was up 1.0%, after a 3.0% rise last time.

Indications are “the elephant in the room” is still not in the room, meaning lack of China’s purchases plays a big role in the GDT. May dairy imports likely reflect that much of China’s population was in lockdown. Whole milk and skim milk powder imports totaled just 162.9 million pounds, down 36.9% from May 2021.

Whey products totaled 98.3 million pounds, down 39.3%, although HighGround Dairy points out that China increased whey and nonfat dry milk imports from the U.S., thanks to our competitive prices.

The July Federal order Class I base milk price was announced by the USDA at $25.87 per hundredweight, unchanged from the record high June price, but $8.45 above July 2021. The seven month average sits at $23.69, up from $16.31 a year ago, $15.94 in 2020, and $16.12 in 2019.

Block cheese fell for the fifth week in a row at the CME, closing the Juneteenth holiday-shortened Week at $2.09 per pound, down 5.50 cents on the week, 30.25 cents below its recent peak, but still 60 cents above a year ago.

The barrels finished at $2.1475, down a penny, sixth week of loss, 29.25 cents below its peak, but 65.75 cents above a year ago, and 5.75 cents above the blocks. There were 3 sales of block on the week at the CME and only 1 of barrel.

While cheese producers continue to face labor and supply chain shortages, milk availability is moving in the other direction, according to Dairy Market News. Spot milk prices fell as low as $5 under Class, with no expectation of change before the July 4th holiday. Plants continue to work through widely available milk while having lighter employee numbers. 

Demand for cheese is trending lower across both retail and food service markets, in the West. Restaurants are reducing operating hours due to high food costs, reduced consumer spending, and labor shortages. Export demand remains strong. Cheesemakers are running busy schedules, as Class III milk remains available, though some remain below capacity due to labor shortages and delayed deliveries of production supplies, according to DMN.

Grade A nonfat dry milk closed Friday at $1.79 per pound, down a penny on the week but 52.50 cents above a year ago, with 7 cars finding new homes.

Dry whey fell to a Friday finish at 47.50 cents per pound, 3.25 cents lower and 10.25 cents below a year ago, with 14 sales reported on the week at the CME.

The latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC. says “Dairy margins were steady to slightly weaker the first half of June as projected feed costs increased while milk prices retreated, although not before advancing to new contract highs at the beginning of the month.”

“Class III Milk futures prices have been supported by strong cheese demand, with Class IV prices receiving support from butter that recently eclipsed $3.00 per pound. Strong cheese demand drove dairy product exports higher in April.”

In politics, Pennsylvania dairy farmer Lolly Lesher testified to the importance of the farm bill safety net program and called for milk pricing improvements during a House Agriculture Committee hearing this week. Lesher, a member-owner of Dairy Farmers of America, spoke on behalf of DMN and NMPF during a congressional review of dairy provisions in the Farm Bill. 

Closing on a sweet note; the International Dairy Foods Association hosted its 38th Annual Capitol Hill Ice Cream Party on the National Mall on June 22. The event has been “an essential summertime event for members of Congress, their families, Capitol Hill staff, and many other special guests since it began in 1983,” says the IDFA, although it was not held in 2020 or 2021 due to the pandemic.