By Lee Mielke

U.S. milk production is recovering slowly, very slowly. The USDA’s latest data shows July output hit 19.14 billion pounds, up just 0.2 percent from July 2021, and the first gain since October 2021. The 24-state total came in at 18.3 billion pounds, up 0.3 percent.

Revisions lowered the 50-state June estimate by 45 million pounds to 18.93 billion, 0.1 percent below a year ago instead of the 0.5 percent increase originally reported.

July cow numbers totaled 9.416 million, up 1,000 head from June numbers which were revised down 8,000 head. The July herd was down 67,000 from July 2021.

Output per cow averaged 2,033 pounds, up 19 pounds or 0.9 percent from July 2021. June output per cow was revised down 3 pounds, to 2,011 pounds.

California cows put 3.52 billion pounds of milk in the tank, up 77 million or 2.2 percent from a year ago. Cow numbers were up 4,000 while output per cow jumped 40 pounds. Wisconsin produced 2.72 billion pounds, down 7 million or 0.3 percent. Cow numbers were down 6,000 but output per cow was up 5 pounds from a year ago.

As I pondered the July data I was reminded of the old “Got Milk” campaign which endeavored to portray what life would be like if we ever ran out of milk.

We’re not even close to that, according to Matt Gould, analyst and editor of the Dairy and Food Market Analyst newsletter in the Aug. 29 Dairy Radio Now broadcast. But he quickly added “We’re not facing a gusher or a wall of milk either.” He talked about USDA revisions in the report and the fact that July output was only up 0.2 percent. He spoke of the stress that dairy farm profit margins are under, particularly those in the west where drought has ravaged feed production and lifted hay prices. “We’re not short of milk right now,” he said, “But the outlook isn’t exactly like we’re going to have a surplus any time soon.”

Commenting on July Cold Storage data, Gould said butter stocks came in below expectations at the same time we have U.S. butter prices near record highs. Retail butter prices keep climbing, he said, and shows that we’re tight on butter. Tight supplies mean expensive prices at the store and he expects that to continue through the end of the year. “That may not be good news for consumers as they think about Thanksgiving and Christmas cookies, but it is positive news for the dairy farmer,” he concluded.

Meanwhile, dairy farmers are keeping cows in the milking string. Culling under federal inspection totaled 230,100 head in July, according to the USDA’s latest Livestock Slaughter report. That’s down 2,900 head from June and 17,800 head or 7.2 percent below July 2021. Culling in the January to July period totaled 1.751 million head, down 60,300 or 3.3 percent from a year ago.

In the week ending Aug. 13, 57,600 dairy cows were sent to slaughter, up 200 head from the previous week, but 2,700 head or 4.5 percent below a year ago.

Checking the cooler; U.S. butter stocks headed lower in July and remained well below a year ago. The latest Cold Storage report put the July 31 inventory at 314.4 million pounds, down 16.4 million or 5 percent from June’s inventory which was revised down 1 million pounds. Stocks were down 82.1 million pounds or 20.7 percent from a year ago, 10th consecutive month they fell short of the previous year.

American type cheese stocks climbed to 859.9 million pounds, up 13.1 million pounds or 1.6 percent from June, and were 42.3 million or 5.2 percent above a year ago.

The “other” cheese category hit 640.4 million pounds, up 5.5 million or 0.9 percent from June, and 31.2 million pounds or 5.1 percent above a year ago. The total cheese inventory set a record at 1.52 billion pounds, up 16.5 million pounds or 1.1 percent from June, and 73.3 million or 5.1 percent above a year ago.

CME cheese prices were lower following the Cold Storage data. The Cheddar blocks dropped a nickel the next day and closed the last Friday of August at $1.74 per pound, down 8 cents on the week and a penny below a year ago.

The barrel’s Friday finish was at $1.8825, down 1.25 cents on the week, 48 cents above a year ago, and an inverted 14.25 cents above the blocks. There were 5 sales of block on the week at the CME and 18 of barrel.

Retail cheesemakers report that sales range from steady to busy in the Midwest, according to Dairy Market News, and one factor increasing customer interest is “the topsy-turvy market tone” of recent weeks. Buyers are potentially getting ahead as case markets reenter another bullish cycle. Food service orders are mixed. Some restaurants, including pizzerias, have reduced hours due to staffing shortfalls. Scheduled downtime at cheese plants has regularly kept milk available at other plants and at similar prices to previous weeks. Some cheesemakers say milk offers are quiet but they are not looking for more. A growing number of producers are saying orders are starting to outpace current availability.

Cheese makers in the West are running busy schedules as milk remains available, though some continue to run below capacity due to delayed deliveries of supplies and labor shortages. Domestic cheese demand was steady to lower this week. Retail sales are down from last year as higher prices impact consumer purchasing. Stakeholders expect an increase in mozzarella sales in coming weeks “as more customers purchase pizzas to enjoy as they watch football.”

Cash butter jumped 8 cents Monday, as traders expected a bullish Cold Storage report for butter. It climbed to $3.0550 per pound Tuesday, then lost 5.50 cents Wednesday, but ended up closing Friday at $3.0825, up 14.25 cents on the week and $1.3750 above a year ago, highest CME price in seven years and third highest ever. Forty three cars traded hands on the week, five less than the previous week.

Butter producers say sales are somewhat in line with recent weeks, but year-to-date numbers are starting to lag, partly due to the $3 market prices. Some plants cleared some spot cream this week, but more from the West than within the region. Cream is still regarded as tight to nonexistent, depending on location. Expectations vary on near-term tones. Domestic prices have pushed above some global values so stronger import trading is expected to fulfill some seasonal industrial baking needs, according to DMN.

Declining milk production in the West is contributing to reduced cream output though demand remains strong from butter and ice cream makers. Cream availability is tightening and some are reportedly paying premiums for additional loads. Some churns are running below capacity, unable to obtain sufficient cream. Butter output is further hampered by limited tanker availability and labor shortages at some facilities. Bulk butter sales trended higher this week as some spot purchasers are concerned about butter availability in the coming months. Retail and food service demand was unchanged this week, according to DMN.

Grade A nonfat dry milk closed Friday at $1.56 per pound, up 4 cents on the week, highest since Aug. 4, and 26.75 cents above a year ago on nine sales.