Mielke Market Weekly

MIELKE MARKET WEEKLY

By Lee Mielke

See MIELKE, pg. 14

This column was written for the marketing week ending Dec. 24.

First, I wish you a very merry and blessed Christmas and hope you can rejoice in “the reason for the season.” I believe most of us have much to be grateful for. News and information for Minnesota and Northern Iowa dairy producers November milk production appeared to be below a year ago, according to the U.S. Department of Agriculture’s latest Milk Production report (but then, so did October’s). November output slipped to 18 billion pounds, according to preliminary data, down just 0.4 percent from November 2020. Output in the top 24 major producing states totaled 17.3 billion pounds, down 0.1 percent. Output per cow averaged 1,922 pounds, up 3 pounds or 0.2 percent from a year ago California was up 32 million pounds or 1 percent from a year ago, on a 20-pound gain per cow offsetting 1,000 fewer cows milked. Revisions resulted in a 2 percent increase in October from 2020 instead of a 1.3 percent decline as originally reported. Wisconsin cows put 55 million more pounds in the tank in November than a year ago, up 2.2 percent, thanks to 18,000 more per cow; but cow numbers were up 2,000 head. Oregon was up 0.5 percent on a 10-pound gain per cow. Cow numbers were unchanged. Pennsylvania was down 3.5 percent on 10,000 fewer cows and 25 pounds less per cow. South Dakota was up 16.7 percent, thanks to 22,000 more cows and a 15-pound gain per cow. Texas was up 2.8 percent on 17,000 more cows; but output per cow was unchanged. Vermont was down 1.4 percent on a 25-pound

Revisions however, added 110 million pounds to cows and a 15 pound per cow increase. drop per cow. Cow numbers were unchanged. the original October estimate, now put at 18.6 million, up 0.1 percent instead of the originally reported drop of 0.5 percent. Michigan was off 0.8 percent on a 10-pound drop per cow and 2,000 fewer cows. Minnesota was up 1.9 percent on 6,000 more cows and a 10-pound gain Washington State output was down 6.7 percent on a loss of 17,000 cows and 15 pounds less per cow than a year ago.

November cow numbers totaled 9.39 million head, per cow. New Mexico again had the biggest drop, n down 10,000 from October. It is the sixth consecutive month they were down from the previous month, and 47,000 head below a year ago. The October count was lowered 5,000 head. down 13.2 percent, after falling 12.2 percent in October. Cow numbers were down 39,000 head and output per cow was down 35 pounds. New York was off 0.2 percent on a 10-pound drop The Dec. 17 Dairy and Food Market Analyst says reports suggest the U.S. dairy herd is no longer declining. “Between June and October 2021, cow

MIELKE, from pg. 13

numbers had decreased by a total of 103,000 head, with a large number of herd exits in the southwest and west. Now, contacts are reporting rising replacement heifer prices. And from our survey of farm auction websites, we have seen a significant downtick in the number and size of dairy farms for sale. From our viewpoint, it looks like cow numbers are just now starting to climb again in the USA.”

But, the Analyst adds, “A major shift in global milk supplies appears to be underway. Output in New Zealand is already capped out due to a lack of land. In Australia, too little consistent rainfall has limited investment in the industry.”

“The governments of European countries are announcing plans to limit and reduce milk supplies. In October, the European Parliament adopted the Farm to Fork strategy, which, among many things, includes a mandate for a 20 percent reduction in fertilizer usage (including cow manure) and a target of 25 percent of all agricultural production becoming organic by 2030.”

The Analyst concludes, “This is the beginning of a shift of production away from Europe toward more cow-friendly countries, including the USA.”

Meanwhile, China’s dairy appetite remains intact. November whole milk powder imports totaled 142 million pounds, up 44.8 percent from November 2020. Skim milk powder totaled 68.4 million pounds, down 1.9 percent, though year-to-date are up 31 percent. Whey products totaled 107.3 million pounds, down 20.1 percent, but up 20.2 percent year-to-date.

Butter imports amounted to 10.6 million pounds, down 47.5 percent, with year-to-date up 13.6 percent. Cheese imports, at 35.4 million pounds, were up 37.2 percent and 38.1 percent year-to-date.

China’s cheese demand continues to be impressive, says HighGround Dairy, reaching 10-month highs in November and the strongest November ever. HighGround Dairy adds that imports from New Zealand jumped 42 percent followed by Australia. Gains from the United States by volume were the third largest after Oceania.

Back home, dairy cow culling fell from the previous month but bested that of a year ago in November, according to USDA’s latest Livestock Slaughter report.

An estimated 245,300 head were sent to slaughter under federal inspection in November, down 10,900 from October but 15,900 head or 6.9 percent above November 2020. Culling in the 11 month period totaled 2.84 million head, up 48,600 or 1.7 percent from a year ago.

In the week ending Dec. 11, 62,300 dairy cows were sent to slaughter, down 1,500 from the previous week, but 200 head or 0.3 percent above a year ago.

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Checking supplies on hand, U.S. butter stocks plunged seasonally in November, falling from the previous month for the fifth consecutive time.

The USDA’s latest Cold Storage data shows the Nov. 30 inventory at 211.8 million pounds, down 67 million pounds or 24 percent from the October level, which was revised 2.7 million pounds lower than last month’s report. Stocks were 40 million pounds or 15.9 percent below those a year ago, second month in a row they were below a year ago, and were the lowest since December 2019.

The governments of European countries are announcing plans to limit and reduce milk supplies. In October, the European Parliament adopted the Farm to Fork strategy, which, among many things, includes a mandate for a 20 percent reduction in fertilizer usage (including cow manure) and a target of 25 percent of all agricultural production becoming organic by 2030.

— Dairy and Food Market Analyst

Weaker butter production is the likely reason for the lower stocks, says StoneX Dairy’s analysis, “driven by larger demand for fat in other forms, namely cream, and weaker overall milk production;” but warns, “That will likely change as we head into next year with higher butter prices pulling more milk into the churn.”

American-type cheese stocks fell to 835.2 million pounds, down 8.1 million pounds or 1 percent from October, but 73.2 million or 9.6 percent above those a year ago.

The “other” cheese category dropped to 565.7 million pounds, down 18.2 million pounds or 3.1 percent from October, and virtually unchanged from a year ago.

The total cheese inventory slipped to 1.42 billion pounds, down 27 million pounds or 1.9 percent from October, but an abundant 73.5 million pounds or 5.5 percent above a year ago. There were no big surprises in this report.

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Christmas week saw Chicago Mercantile Exchange block cheddar close Dec. 23 at $1.8725 per pound. This is down 1.5 cents on the shortened week, but 27.5 cents above a year ago.

The barrels fell to $1.6250 per pound on Dec. 20, but finished Dec. 23 at $1.65. This is up 2 cents on the week, 18.5 cents above a year ago, but 22.25 cents below the blocks. There were five cars of block sold on the week at the CME and 12 of barrel.

Midwestern cheesemakers reported spot milk prices at expected discounts, below $1 under Class III Christmas Week; but, compared to last year, milk was notably less available and prices were as low as $8.50 under according to the Dairy Market News report from that week. Cheese demand has been very steady in recent weeks and months and availability is balanced to tight in the region.

CME butter marched to a $2.25 per pound close on Dec. 23, the highest since Aug. 22, 2019. It is up 15.75 cents on the week and 72.5 cents above a year ago. There were 28 carloads that exchanged hands in the four days.

International interest in 82 percent butterfat unsalted loads remain strong, says Dairy Market News, while domestic demand for 80 percent salted loads has held steady. Contacts suggest cream availability may not remain long much after the onset of 2022, as some processors are behind on orders. Meanwhile, domestic butter demand remains steady in the west at retail, food service, and internationally.

Grade A nonfat dry milk fell to $1.6625 per pound on Dec. 21, but closed Dec. 23 at $1.67. This is three-quarter cents lower on the week but 52.25 cents above a year ago, on 13 sales.

Dry whey lost a half-cent on Dec. 21 (the first loss since Dec. 1), but rallied and closed Dec. 23 at a new record-high 75 cents per pound. This is 28.25 cents above a year ago on two sales for the week at the CME.

The USDA announced the first milk price of 2022. The January Federal order Class I base is $19.71 per hundredweight, up 54 cents from December, $4.57 above January 2021, and the highest Class I since Dec. 2020.

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Dairy margins strengthened noticeably over the first half of December, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC. The Margin Watch credited a surge in milk prices more than offsetting steady to slightly higher projected feed costs.

“Class III and Class IV Milk prices advanced with slowing domestic and global milk production providing support amidst a backdrop of strong demand,” the Margin Watch stated. “Whey price strength has been a big contributor to Class III prices. Dry whey prices are up 53.2 percent since the beginning of the year, besting any dairy product price performance as well as that for many other agricultural commodities.”

“Strength in the export market with robust demand from global buyers has been a key feature

See MIELKE, pg. 18