October 27, 2022 at 4:43 p.m.
2022 herd expansion weakest in 15 years
The U.S. Agriculture Department’s latest data shows output at 18.28 billion pounds, up 1.5% from September 2021. The 24-state total, at 17.5 billion pounds, was up 1.6%. It is the third monthly increase in 2022 and revisions raised the 50-state August total by 15 million pounds to 19.03 billion, up 1.7% from a year ago instead of the 1.6% increase originally reported.
Cow numbers were expected to rise, but the September herd totaled 9.41 million, down 2,000 head from August numbers which were revised 14,000 head lower. The September herd was up 6,000 from a year ago, the first time since September 2021 the herd size was above a year ago, but was 8,000 fewer than the peak in May.
StoneX Dairy Group called the report neutral to slightly bullish, and with only 52,000 cows added to the herd over four months, 2022 has presented the weakest herd expansion seen in the U.S. over the last 15 years.
Output per cow averaged 1,943 pounds, up 27 pounds, or 1.4%, from September 2021. August output was revised up 4 pounds to 2,022 pounds.
Third quarter milk output was up 1.2% from 2021, with cow numbers unchanged from second quarter but 29,000 less than third quarter 2021.
California output totaled 3.3 billion pounds in September, up 0.5% from a year ago. Cow numbers were up 4,000, and output per cow was up 20 pounds. Wisconsin produced 2.6 billion pounds, up 0.9%. Cow numbers were down 7,000, but output per cow was up 30 pounds from a year ago.
Idaho was up 2.4% on a 30-pound gain per cow and 6,000 more cows. Michigan was down 0.7% on a loss of 11,000 cows. Output per cow was up 40 pounds. Minnesota was up 0.6%, thanks to a 45-pound per cow gain offsetting an 8,000-cow drop. New Mexico was down 3.3% on a 16,000-cow drop. A 40-pound increase in output per cow could not offset the loss in cow numbers.
New York was up 2.2%, thanks to a 55-pound gain per cow offsetting a loss of 3,000 cows. Oregon was down 0.9% on a loss of 1,000 cows and unchanged output per cow. Pennsylvania was off 0.1%, on a drop of 5,000 cows. Output per cow was up 15 pounds. South Dakota was up 14.9%, thanks to 25,000 more cows, but output per cow was down 10 pounds. Texas was up 8.5% on 30,000 more cows and a 70-pound gain per cow.
Vermont was unchanged, thanks to a 45-pound gain per cow offsetting the loss of 3,000 cows. Washington was down 1.2% on 7,000 fewer cows, though output per cow was up 30 pounds.
USDA’s October Livestock Dairy and Poultry Outlook said based on recent milk production information, the forecast for the average number of milk cows in 2022 has been increased 5,000 head to 9.41 million as a more rapid pace of expansion is expected in late 2022. The projected average yield per cow was adjusted higher for the remainder of 2022 at 24,110 pounds.
More dairy cows are expected in the first half of 2023, and productivity is expected to be higher. Cow numbers were increased 10,000 head to 9,425 million. Milk per cow was raised 20 pounds to 24,320 pounds, according to the USDA.
Dairy cow culling fell in September. An estimated 260,500 head were sent to slaughter under federal inspection, according to the latest livestock slaughter report, down 5,600 head from August and 4,100, or 1.5%, below September 2021. Culling in the nine months totaled 2.28 million, down 59,800, or 2.6%, from 2021.
Culling in the week ending Oct. 8 totaled 60,000 dairy cows, down 1,100 from the previous week but 600 head, or 1%, above a year ago.
Dairy cow slaughter has exceeded 2021 levels for three consecutive weeks, according to StoneX; however, the market share of dairy cows being processed as part of the beef market has fallen from year-ago levels. Total cattle slaughter is also up and has exceeded year-ago levels for the last seven weeks. Feed costs and availability are blamed. That coupled with the strong cash price for cattle is lending plenty of fuel to incentivize farmers to sell their cows.
International dairy markets remain bearish. The Oct. 18 Global Dairy Trade weighted average dropped 4.6%, following the 3.5% decline Oct. 4. Traders brought 64.8 million pounds of product to market, down from 68 million Oct. 4. The average metric ton price fell to $3,723, down from $3,911.
Declines were led by skim milk powder, down 6.9%, following a 1.6% slip Oct. 4. Whole milk powder was down 4.4% after slipping 4%. Cheese was down 3.9% following a 3.8% decline. Anhydrous milkfat and butter were down 2.7% and 2.6% respectively, after AMF fell 1.7% Oct. 4 and butter was down 7%.
StoneX said the GDT 80% butterfat butter price equates to $2.1468 per pound, down 5.8 cents after dropping 16.50 cents in the last event, and compares to CME butter which closed Friday at a world high $3.20. Cheddar, at $2.1632, was down 9 cents after losing 8.2 cents, and compares to Friday’s CME block cheddar at $2.0575. GDT skim milk powder averaged $1.4744 per pound, down from $1.5864 (11 cents). Whole milk powder averaged $1.5519 per pound, down from $1.6208 (7 cents). CME nonfat closed Friday at $1.42 per pound.
StoneX said Southeast Asia purchases declined substantially from the last event along with Europe and Africa, while North Asia purchases increased.
HighGround Dairy said so far, buyers are not concerned about the slow start to the New Zealand milk production season.
The GDT is waiting on China. President Xi Jinping kicked off his Communist Party Congress Oct. 16. His zero-COVID policies remain in place, locking down major cities, which has greatly weakened China’s economy and its purchases.
Cooperatives Working Together sales this week totaled 1.1 million pounds of American-type cheese and 77,000 pounds of cream cheese. The product is going to customers in Asia and Middle East-North Africa through February.
CME cheddar blocks closed Oct. 21 at $2.0575 per pound, up 0.75 cents on the week and 24.75 cents above a year ago. The barrels climbed to $2.2050 on Wednesday but closed Friday at $2.09, down 3.50 cents on the week after losing a dime the week before, but were 22.75 cents above a year ago and just 3.25 cents atop the blocks. Only one car of block was sold all week and 13 of barrel.
Midwest cheesemakers view the barrel-block price inversion as an inhibitor, said Dairy Market News. Barrel averages have topped the blocks since April as barrel inventories remain snug. Cheese demand for all varieties is strong, and Midwest vats are running as actively as cheesemakers are either keeping up or running behind orders. Milk availability has tightened despite growing output, said DMN.
Looking westward, export cheese demand remains strong, especially from Asian buyers. Cooler weather is contributing to cow comfort and thus milk output.
Butter climbed to $3.20 per pound Tuesday and stayed put, up 2.50 cents on the week and $1.3650 above a year ago. There were no sales all week at the CME.
Butter demand is exactly where contacts expected it to be in mid to late October: vigorous, said DMN. Plants are churning or micro-fixing to their full ability to keep up with demand, but minds ponder how long the price will remain in the clouds. Cream availability continues to grow, and contacts do not foresee a tight cream market in the near-term, particularly as the holidays approach, said DMN.
The higher milk output and resulting cream supply is a result of cooler weather out west, and milk is moving steadily into Class II production. Some plants are acquiring additional cream to maximize production and meet current demand. Other plant’s schedules are limited due to labor shortages or scheduled maintenance. Some retail customers are fervently looking for additional butter, said DMN, as they underestimated their fourth quarter needs.
Grade A nonfat dry milk fell to the lowest price since Oct. 5, 2021, closing Friday at $1.42 per pound, 11.75 cents below a year ago. Thirteen cars sold on the week.
CME dry whey closed Friday at 44 cents per pound, a quarter-cent lower and 17.75 cents below a year ago, with one sale reported on the week at the CME.
Checking demand; August total cheese utilization hit 1.2 billion pounds, up 1.9% from August 2021, up 1.6% domestically and up 5.9% on exports, according to HighGround Dairy’s Lucas Fuess in the Oct. 24 Dairy Radio Now broadcast.
August marked the strongest year-over-year gain since March, he said, driven mostly by firm demand for American-style cheese. And, while the data is delayed here in October, he said it helps explain why prices have remained above $2.
Butter disappearance totaled 185.6 million pounds, down 3.3% from a year ago, with domestic usage down 7.5%, while exports were up 118.8%. Fuess blamed the higher prices for the domestic downturn, but the weaker butter production and declining stocks keep the price firmly supported. He warned that the timing of the butter price downfall could come any day. As soon as end users realize they are good on supply into the holidays and traders become concerned over holding that last load of expensive butter, then we might tumble pretty quickly.
Nonfat-skim milk powder totaled 221.7 million pounds, down 3% from a strong year ago number. Domestic use was up 39.8% while exports were down 17%.
U.S. fluid milk sales looked a little better in August. The latest data shows sales of U.S. packaged fluid products totaled 3.6 billion pounds, down just 0.8% from August 2021. Conventional product sales totaled 3.4 billion, up 0.7% from a year ago. Organic products, at 241 million pounds, were up 2.1% and represented 6.6% of total sales for the month.
Whole milk sales totaled 1.26 billion pounds, up 3.1% from a year ago, up 1.2% year to date and represented 34.2% of total sales YTD. Skim milk sales, at 186 million pounds, were down 2.8% from a year ago and down 8.2% YTD.
Packaged fluid sales for the eight months totaled 28.6 billion pounds, down 2.2% from 2021. Conventional product sales totaled 26.6 billion, down 2.3%. Organic products, at 1.9 billion, were down 1.5% and represented 6.7% of total sales.
The November federal order Class I base milk price was announced at $24.09 per hundredweight, up $1.38 from October, $6.11 above November 2021, and the highest November price ever, topping to the November 2014 high by 3 cents. It also equates to $2.07 per gallon, up from $1.55 a year ago. The 11-month average stands at $23.76, up from $16.61 a year ago and $16.64 in 2020.
Fluid consumption used to utilize over a third of U.S. milk output, but those days are long gone. The Sept. 28 Daily Dairy Report stated that fluid use in the first six months of 2022 only accounted for 18.5% of U.S. total output, down from 18.9% in 2021, but compares to 25.3% in 2012, for example.
As I pointed out last week, Coca-Cola’s Fairlife product is making a gallant attempt to bring milk drinkers back. It has reportedly seen double-digit growth this year, according to the Sept. 26 Dairy Industry SmartBrief.
The Oct. 7 Dairy and Food Market Analyst said plant-based brands are embracing dairy because the plant-based category is no longer growing, and many companies are finding themselves in trouble. For example, compared to its peak, Beyond Meat’s stock price has decreased by 94%.
Similarly, oat milk producer Oatly’s stock has decreased by 92% compared to its peak, and the Very Good Company, a Canadian plant-based cheese and meat brand, is down 98% from its high. Though not to the same extreme, Danone, the owner of plant-based milk company Whitewave Foods, has seen its stock price struggle. Since announcing the purchase of Whitewave July 16, the company’s stock has decreased by nearly one-third, the Analyst said.
Down on the farm, margins continued to decline the first half of October on weaker milk prices and steady to higher cost feed, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.
USDA’s October WASDE report confirmed lower yield and production estimates for corn and soybean crops which reduced forecasted ending stocks, the MW reported. This along with a slower-than-normal start to planting in Argentina due to abnormal dryness has helped to maintain a firm tone in the markets. Although milk prices have declined recently, they remain elevated from a historical perspective, supported by strong exports and butter prices.
Speaking of crops, the USDA’s latest Crop Progress report shows the U.S. corn harvest is 45% complete, as of the week ending Oct. 16, up from 31% the previous week, 5% behind a year ago and 5% ahead of the five-year average. 53% was rated good to excellent, 7% behind a year ago.
The report also shows 96% of the soybeans dropping leaves, 2% ahead of a year ago and 2% ahead of the five-year average. Harvest is at 63%, up from 44% the previous week, 5% ahead of a year ago and 11% ahead of the five-year average. 57% of the beans are rated good to excellent, 8% ahead of a year ago.
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