June Dairy Month butter demand appears to have been good. The Agriculture Department’s latest Cold Storage report shows the June 30 inventory at 347.5 million pounds, a drawdown of 20.4 million pounds or 5.5% from the May level, which was revised up 1.2 million pounds. But, stocks were still 16.7 million pounds or 5.0% above June 2022.

American cheese stocks slipped to 853.3 million pounds, down 3.8 million pounds or 0.4% from the May level which was revised up 4.6 million pounds. Stocks were up 6.5 million pounds or 0.8% from a year ago. 

 The “other” cheese category grew to 634.4 million pounds, up 18 million pounds or 2.9% from the May level which was revised up 2 million pounds, but was down 531,000 pounds or 0.1% from a year ago.

The total cheese inventory, at 1.51 billion pounds, was up 12.6 million pounds or 0.8% from the May total, which was revised up 7.4 million pounds. It was also up 4.1 million or 0.3% from June 2022, ending four consecutive months hovering below the previous year’s level.

StoneX Dairy Group says the cheese inventory was heavier than expected but may be the result of slower exports, weaker domestic demand, and perhaps stronger production. Butter stocks were lower than expected and possibly due to continued good domestic demand and or lower production.

The Federal Reserve approved another interest rate hike this week to a target 5.25-5.5%, highest level in over 22 years. Dairy product prices continued to rise as well as July comes to an end. 

The Cheddar blocks closed the last Friday of the month at $1.9075 per pound, up 12.50 cents on the week, gaining 57.25 cents in four weeks and hitting the highest CME price since March 30, and 2.75 cents above a year ago.

The barrels jumped 17.50 cents Monday hitting $1.83, highest since March 30, then gave back a nickel Wednesday, and finished Friday at $1.7625, 10.75 cents higher on the week but 12.50 cents below a year ago, and 14.50 cents below the blocks. There were 8 cars of each sold on the week at the market of last resort.

Milk availability is tightening and following seasonal trends in the Midwest, according to Dairy Market News. Southern reaches of the region were importing milk from the upper Midwest. Cheesemakers note that milk is tightening but plant downtime also contributed to regional availability. Spot prices ranged $5 to $3 under Class III. Outside of any downtime, cheesemakers are operating strong production, according to DMN. Demand is strong in the region and moving quickly.

Cash butter reached $2.6925 per pound Thursday, highest since Dec. 19, 2022, but closed Friday at $2.68, up 9.75 cents on the week and 31 cents shy of a year ago. 25 cars were sold on the week, down from 57 the week before.

Grade A nonfat dry milk closed Friday at $1.16 per pound, up 4 cents on the week, highest since June 20, but 48 cents below a year ago, with 14 loads finding new homes.

CME dry whey got to 26.25 cents per pound Wednesday but closed Friday at 25 cents, down a quarter-cent and 19.50 cents below a year ago, on 19 sales.

The week ending July 15 saw 59,600 dairy cows go to slaughter, up 9,000 head from the previous week, and 4,100 or 7.4% more than a year ago. Year to date 1,730,900 cows have been culled, up 93,500 head or 5.7% from a year ago.

Meanwhile, U.S. dairy heifer numbers continued to shrink over the past year, according to the July 24 Daily Dairy Report. “There were 3.65 million dairy heifers in the U.S. on July 1, according to USDA’s biannual Cattle report,” the DDR stated. “That was 100,000 fewer than the year before, a 3% decline. USDA’s estimate of dairy heifer supplies on January 1, a more precise measure, showed the dairy heifer head count has dropped for seven consecutive years.”

Dairy margins weakened the first half of July as a sharp increase in projected feed costs more than offset a slight recovery in milk prices, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.

The MW detailed the June Milk Production report, pointing out that it showed the first year over year decline since August 2022 and blamed “extremely negative spot margins for accelerating cow culling.”

“A recent trend of a weaker U.S. dollar is making dairy products more competitive on the world market,” the MW stated, “although increased milk production this spring has raised dairy product output. May nonfat dry milk production totaled 202.6 million pounds which was the second highest monthly production ever next to January 2021 and 7% higher than last year. May butter production at 194.4 million pounds was up 8.1% from last year while total cheese production was virtually unchanged from 2022, although Cheddar production was up 4.5% from 2022 while Italian varieties declined by 2.2%. Total cheese exports of 73.1 million pounds during May were down 17.9% from last year,” the MW concluded.

Tuesday’s GDT Pulse saw just under 2.1 million pounds of Fonterra whole milk powder sold at $3,000 per metric ton, unchanged from the last Pulse but down $35 from the July 18 GDT. 

HighGround Dairy warned; “Scarce global demand remains the primary challenge for dairy commodity markets. With macroeconomic uncertainties and intense heat impacting nearly every region across the Northern Hemisphere it is unlikely that demand will come back strong in the near-term.” 

 Stu Davison, consultant with SD Agri who works closely with the team at HighGround Dairy, joined my July 31 ‘Dairy Radio Now’ broadcast, after participating in the previous week’s HGD webinar. Davison lives in Rolleston, Canterbury, New Zealand (NZ), and has a Bachelor of Agriculture and a Masters in Finance from Lincoln University and is a Kellogg Rural Leadership graduate.

Davison said NZ’s new milk production season begins with a “disappointing outlook,” as he expects it to be down about 0.7% from the previous season which only grew 0.2%. He does, however, expect output to rise in the season after that.

NZ producer milk prices are not good, he said, as commodity values globally are down “created by China’s lack of interest in the dairy market currently.” He expects the NZ milk price average to fall below $7.50 per kilo of milk solids, which would be about $2 below last season’s price.

China typically buys about 40% of NZ exports, according to Davison, and he does not see a return to that in 2023, as China has enough of its own milk production and product on hand, but he does expect a recovery in 2024.

The Agricultural Marketing Service public hearing will be held August 23 in Carmel, Indiana to consider and gather evidence on proposed amendments to pricing formulas in Federal Milk Market Orders. Forty proposals have been submitted. Of those, 21 directly impact the uniform pricing formulas and will be considered at the hearing. 

 The proposals seek to amend milk composition factors, commodity product prices, Class III and Class IV formula factors, base Class I skim milk, and Class I and Class II differentials. Interested parties, including trade organizations and producers, are invited to testify and present evidence, says USDA.