Mielke Market Weekly

This column was written for the market- percent on 5,000 fewer cows and ing week ending Jan. 28. unchanged output per cow. Minnesota U.S. milk production was slightly below that of a year ago in December, according to the U.S. Department of Agriculture’s latest Milk Production report. Preliminary was up 1.7 percent on 5,000 more cows and a 10-pound gain per cow. New Mexico was down 15 percent on a drop of 45,000 cows and 40 pounds less per cow. data put output at 18.8 billion pounds, New York was down 1.7 percent on down just 0.15 percent from December 6,000 fewer cows and a 15-pound drop 2020. The top 24 producing states’ total per cow. Oregon was up 0.5 percent on a was 18 billion pounds, down 0.2 percent. 10-pound gain per cow and no change in Revisions lowered the original 50-state cow numbers. Pennsylvania was down November estimate by 11 million pounds, 2.6 percent on 8,000 fewer cows and 15 now put at 18 billion, down 0.4 per- pounds less per cow. South Dakota cent from a year ago. was up 2 percent, thanks to 29,000 December cow numbers totaled 9.375 million, down 7,000 from November. It is the seventh consecutive month they were down from the previous month, and were 67,000 head below a year ago. The November count was revised 3,000 head lower. The U.S. milking herd has dropped 132,000 head from its peak in May. more cows offsetting a 10-pound drop per cow. Texas was up 3.4 percent on 12,000 more cows and a 30-pound gain per cow. Vermont was down 1.4 percent on a 25-pound drop per cow. Cow numbers were unchanged. Washington State was down 7.3 percent on a loss of 18,000 cows and 20 pounds less per cow than a year ago.

Output per cow averaged 2,008 pounds, up 11 pounds or 0.6 percent from a year ago.

The preliminary data shows 2021 milk output totaled 226.3 billion pounds, up 1.4 percent from 2020. Cow numbers averaged 9.45 million head, up 60,000 or 0.6 percent from 2020, with output per cow up an average of 173 pounds or 0.7 percent from 2020. USDA’s latest projections show 2022 milk output will be up 0.7 percent from 2021.

December milk output in the number-one producing state, California, totaled 3.5 billion pounds. This is up 75 million or 2.2 percent from a year ago, thanks to a 45-pound gain per cow offsetting 1,000 fewer cows. Wisconsin put 2.65 billion pounds in the tank, up 46 million or 1.8 percent. Cow numbers were up 16,000 and output per cow was up 10 pounds.

Idaho was up 1.7 percent on 6,000 more cows and 15 pounds more per cow. Michigan was down 1.2

MIELKE MARKET WEEKLY

By Lee Mielke

MARKETING As an industry we weren’t putting expensive butter into inventory and that likely continued into the first half of January but there are indications that stocks are now starting to build seasonally.

— Dave Kurzawski The Jan. 24 Daily Dairy Report points out that herds in New Mexico and Washington state shrunk “as co-ops began to manage supply and cows were relocated to states with fewer restrictions and newer facilities.” No doubt, weather and local economics also contributed. StoneX viewed the report as slightly bullish; but pointed out that components were very strong, with protein up 3.32 percent vs. 3.28 percent last year, and butterfat at 4.16 percent vs. 4.11 percent a year ago.

In the week ending Jan. 15, 62,100 dairy cows were sent to slaughter. This is down 900 from the previous week, and 5,300 head or 7.9 percent below a year ago.

The amount of market share that dairy cows account for in the total cattle market has shifted slightly lower; but still accounts for just over 10 percent of the beef market, according to StoneX, and may signify the end of the dairy herd decline. n

Americans chewed through plenty of butter in December, as evidenced in the USDA’s latest Cold Storage report. The Dec. 31 butter inventory fell to 199.1 million pounds, down 11.4 million or 5.4 percent from November. This is the sixth consecutive month butter lost ground, and the lowest level since December 2019. Stocks were 74.7 million pounds or 27.3 percent below those in December 2020, the third month in a row to fall short of the previous year.

American-type cheese added 11.5 million pounds or 1.4 percent from November, and was 44.6 million pounds or 5.6 percent above a year ago.

The “other” cheese category grew to 576.8 million pounds, up 10 million or 1.8 percent from November, and 2.1 million pounds or 0.4 percent above a year ago.

The total cheese inventory hit 1.445 billion pounds, which is up 22.8 million pounds or 1.6 percent from November, and a plentiful 48.8 million or 3.5 percent above a year ago.

StoneX viewed the data as neutral to cheese but bullish for butter, adding “As an industry we weren’t putting expensive butter into inventory and that likely continued into the first half of January but

See MIELKE, pg. 14

18 New Holland Boomer

Very clean, front wheel assist, joy stick, 1 remote, 3 pt, PTO, 4x4 trans, 5 front weights, shuttle shift, good tires

For Sale Price $25,000 1987 Allied Tanker

45 foot all aluminum tandem axle, spring suspension with 5 compartments, tires at 70-80%, brakes at 70%, top or bottom load, was used for oil

Call for price Clark GC S25MB

Fresh tune up, new lift cylinder, new battery, clean tight machine, 5,000 lb, G138MB0504-6072FA. Used, Stock Number: 72FA For Sale Price: $3,500

MIELKE, from pg. 13

there are indications that stocks are now starting to build seasonally.”

Broker Dave Kurzawski said the market did what it was designed to do in the Jan. 31 “Dairy Radio Now” broadcast — especially on butter. Physical demand pushed it to top $2.90 per pound, he said, and then plunged; but the futures market never went up with the spot market.

Some believe that, if the spot market is well above the futures market, the futures market is right and the price has to come down, Kurzawski said, and in this case that was kind of true. “There was physical tightness and the spot market should be the highest price on the board to dis-incentivize anybody who makes the product from putting it in storage. Bring it to the market now, we need it. We can debate why the price is up where we had it, but bring the butter, bring the cheese to the market.”

The Milk Production and Cold Storage reports likely fed the bulls more than the bears. However, Kurzawski suspects they were “already baked into the market.” He explained that cheese and butter had moved higher through the middle of January, and the news was bullish for butter, but the cheese side saw stocks build from November to December, which is typically when we draw stocks down by about 14-15 million pounds. Cheese was neutral to slightly bearish, he said.

Add to that, “Milk production has not fully recovered here; so, yes the bulls were fed a little, but the markets had already adjusted to the upside. Now we had to take some of that premium out,” he concluded.

n

Dairy prices and milk futures end January weaker, but still above a year ago. After losing 11.25 cents the week before, the cheddar blocks fell to $1.73 per pound on Jan. 26. The brakes got applied the next day and they actually regained 6 cents on Jan. 28 on a sale to close at $1.79. This is down 1.75 cents on the week, but 21.5 cents above a year ago.

The barrels, after dropping 14.75 cents the previous week, fell to $1.6625 per pound on Jan. 26 (the lowest since Dec. 28, 2021) but were bid higher over the next two days to close Jan. 28 at $1.7425. This is 7 cents lower, 35.25 cents above a year ago, and 4.75 cents below the blocks. There were five sales of each on the week at the Chicago Mercantile Exchange.

“Bearish cheese prices snuggled up to demand tones this week,” according to Dairy Market News, but contacts relayed that customers were waiting on further price drops before committing to anything outside their contractual needs. That said, a number of plant managers admitted while sales have slackened, they were down only a small percentage and production was still busy. Spot milk remained under flat market and was keeping some plants busy.

Western cheese demand was holding steady at retail while food service demand was lower this week. Rising Covid cases in parts of the West are contributing to declines in food service sales. Sales of mozzarella are strong thanks to football playoffs. International demand remains steady with continuing notable interest from Asian markets. Port congestion, a shortage of truck drivers, and labor shortages continue causing delays. Cheese output is steady to higher, as plants are running busy schedules to work through available milk supplies.

n

The U.S. dollar has been strong this week and breaking out above the high water mark established in November and December 2021. The strength is a function of Fed comments about raising interest rates, but the point is a stronger dollar may be a limiting factor, not necessarily a death knell, for a basket of commodity prices. This is the point of course as the Fed gears up for battle with inflation

— StoneX

After jumping 21 cents the previous week, the butter appeared to be on its way to $3 per pound plus. But it started the week dropping almost 9 cents, then kept falling. It regained a nickel Jan. 28 to finish at $2.54, down 39.5 cents on the week but $1.295 above a year ago. Twenty-four cars sold on the week, 19 on Jan. 28.

StoneX reported that the USDA put out a solicitation to buy 82,080 pounds of salted print butter for April to June delivery, but no one offered any. “Not a market moving quantity either way,” says StoneX, “but interesting to note.”

There are likely several reasons for the price fall, according to StoneX. “The main dynamic is a slump in demand due to Omicron and seasonality coupled with supply chain issues. If shipping were easy, perhaps exports would be stronger. If people were not out with Omicron, perhaps cheese converters would be pulling more cheese through their facilities instead of pushing back some onto manufacturers. The dynamic today isn’t necessarily long-term and eventually we’ll get to a price where buyers really want to own cheese.”

Add to that, “The U.S. dollar has been strong this week and breaking out above the high water mark established in November and December 2021. The strength is a function of Fed comments about raising interest rates, but the point is a stronger dollar may be a limiting factor, not necessarily a death knell, for a basket of commodity prices. This is the point of course as the Fed gears up for battle with inflation,” StoneX concluded.

Cream availability remains similarly priced for butter producers from week to week, according to Dairy Market News, although offers were beginning to quiet. Butter plant managers say Midwestern loads are not as abundant as they have been since the holiday weeks. Bulk butter is tight, but there are loads available for end users willing to pay relatively hefty premiums. Some bulk loads changing hands are recently produced, which speaks to the general shortness of availability. As spring holiday preparations are underway, churning remains active.

Cream inventories are available in the West amid steady demand as well as continued interest from Midwest purchasers. Transportation issues have caused some contracted cream loads, intended for other regions, to become available for spot purchase. Demand for butter is strong in both domestic and international markets. Inventories are tight and butter output is steady, but below capacity. Plants continue to cite labor shortages and delays to deliveries of production supplies as the reason.

Grade A nonfat dry milk fell to $1.775 Jan. 27, but closed the next day at $1.805. This is down a penny on the week, but 63.25 cents above a year ago, on 17 sales.

Dry whey set another new record, closing Jan. 28 at 84 cents per pound. This is up 4 cents on the week and 30.5 cents above a year ago, with four sales reported.

n

Dairy producers no doubt watched the disheartening fall in Class III futures prices. The break-even milk price today is around $19.30 per hundredweight, according to estimates by the Dairy and Food Market Analyst.

That’s up from $18.77 a year ago, says the Analyst, and $3.33 higher compared to before the pandemic. Last year, with feed costs elevated, many farms lost money. But now, with some Class IV futures above $24.00 per cwt, the outlook for farmlevel margins in the USA is plainly positive.

The Analyst warned, “The expected farm-level profitability also means we will see a milk supply response begin to build. Anecdotally, we have heard our first indications: milk becoming modestly more available in the West. As it always does, it will take time to ramp up. We estimate by midyear the country’s dairy herd may finally exceed 2021 levels.”

Much of the dairy industry was in California this week for the International Dairy Foods Association’s

See MIELKE, pg. 18