US milk production took a hit in May, likely driven by falling milk prices due to the pandemic and reduction programs mandated by milk handlers. Preliminary data in the USDA’s latest Milk Production report showed May output at 18.84 billion pounds, down 1.1% from May 2019 and the first shortfall since June 2019.
    Output in the top 24 producing states was 18.0 billion pounds, down 1.0% from 2019. Revisions lowered the original April 50-state total by 47 million pounds, now put at 18.65 billion, up 1.2% from April 2019, instead of the reported 1.4%.
    May cow numbers totaled 9.37 million head in the 50 states, down 11,000 from April but 37,000 above a year ago. Output per cow averaged 2,011 pounds, down 31 pounds from a year ago or 1.5%.
    California output was down 52 million pounds, or 1.5%, from a year ago on 4,000 fewer cows and a 25 pound drop per cow. Wisconsin was down 82 million pounds, or 3.1%, on 12,000 fewer cows and a 45 pound drop per cow.
    Idaho, one of seven states in the top 24 showing an increase in output, was up 4.8%, thanks to 27,000 more cows and 10 pounds more per cow. Michigan was off 0.4%, on a 25 pound drop per cow but had 3,000 more cows than a year ago. Minnesota was down 1.9% on a 15 pound loss per cow and 5,000 fewer cows. New Mexico had the biggest decrease, down 7.2%, on a 185 pound per cow plunge, a result of reduction measures, but cow numbers were up 4,000 head.
    New York was down 3.7% on a 75 pound loss per cow and 1,000 fewer cows. Oregon was unchanged with 2,000 more cows offsetting a 30 pound drop per cow. Pennsylvania was down 3.0% on 10,000 fewer cows and a 20 pound loss per cow. Texas was up just 1.9%, despite milking 25,000 more cows but output per cow was down 50 pounds. Vermont was down 6.4%, on a 75 pound drop per cow and 3,000 fewer cows. Washington State was off 0.5%, on a 20 pound drop per cow but cow numbers were up 1,000 head.
    The May Slaughter report will be issued June 25 but dairy cow slaughter was relatively high in April, according to the latest Livestock, Dairy, and poultry Outlook, and totaled 279,400 head, up 10,900 from April 2019. But slaughter rates fell below those of the previous year for the weeks ending May 9 through May 30, according to the Outlook which stated; “As butter and cheese prices rose, some dairy farmers likely made decisions to retain milk cows based on improved expectations.”
    Milk powder powered the June 16 Global Dairy Trade (GDT) auction as the weighted average was up 1.9%, following a 0.1% gain on June 2.
    Skim milk powder led the gains, up 3.1%, following a 0.5% slip last time. Whole milk powder was up 2.2%, after gaining 2.1%, and GDT Cheddar was up 1.4% after dropping 5.3% last time. Lactose inched 0.4% higher and anhydrous milkfat was up 0.8%, following a 2.9% descent last time.
    Butter was the only decline, down 1.0%, after dropping 4.4% last time.
    FC Stone equated GDT 80 percent butterfat butter to $1.5920 per pound US, down 1.5 cents from the last event. CME butter closed Friday at $1.85. GDT Cheddar equated to $1.6469 per pound, up a nickel, and compares to Friday’s CME block Cheddar at a world high $2.65. Skim milk powder averaged $1.1834 per pound, up from $1.1477, and whole milk powder averaged $1.2833, up from $1.2522. CME Grade A nonfat dry milk closed Friday at $1.0325 per pound.
    CME Cheddar blocks started the third week of June Dairy Month losing 2 cents and stayed there until Friday when they rocketed up 15 cents on 3 unfilled bids to a new record high $2.65 per pound, up 13 cents on the week and 82.50 cents above a year ago. The barrels finished at $2.2850, down 4.75 cents on the week, 54.75 cents above a year ago, and 36.50 cents below the blocks. Trading activity saw 7 cars of block sold on the week at the CME and 6 of barrel.
    Most Midwestern cheesemakers continue to report six and seven day workweeks and mid-week spot milk prices were at least 50 cents over Class. Pizza cheese producers report gains in customer activity as more pizza shops report stronger sales numbers.
    Some western contacts say they are running more milk through cheese vats than ever before. Retail demand has remained strong. Food service accounts are still below seasonal purchase levels, but buyers are trying hard to refill the pipeline. That, plus the surge of government purchases, keeps production at full capacity, with some at over 125%. The down side is that US cheese prices have risen to a point where they are not as competitive as the EU so exports are slowing.
    The Dairy and Food Market Analyst reports that cheese processors are reluctant to produce unlimited product for fear of having to write-down inventory values and the Analyst’s ear to the rail says “Customers are balking at record costs and postponing orders.”
    “Historic prices are the outcome of a historic supply-demand imbalance,” the DFMA states. “This week, we found more evidence to uncover the drivers of this unusual event: While the industry has focused its attention on foodservice companies ‘restocking,’ new data available this week points to an idea that most think is an impossibility; limited-service restaurants (heavy cheese users) are experiencing above-year-ago sales at the same time that retail sales of cheese are up double-digits. Because of the strength of total cheese demand, we now think cheese prices will remain well supported through much of July,” the DFMA stated.
    Cash butter fell to $1.80 per pound Wednesday but closed Friday at $1.85, 2 cents lower on the week and 54 cents below a year ago on 25 sales.
    Central butter makers tell DMN that cream remains out of their fiscal reach. Bulk butter offers are quiet and butter availability is a concern, in general. A growing number of butter marketers are concerned about inventories coming into the fall.
    Retail butter sales are solid in the west. Export interests have declined as US butter does not have a competitive advantage. Butter sales in food service are steady to still sluggish depending on the area. Some restaurant owners have no interest in reopening, says DMN, despite the easing of phase restrictions.
    Grade A nonfat dry milk climbed to a Friday close of $1.0325 per pound, up 2.75 cents on the week but 1.25 cents below a year ago. 33 cars sold on the week.
    Dry whey closed at 32.75 cents per pound, 1.5 cents higher on the week but 1.5 cents below a year ago, as the increased cheese production results in increased whey output. 25 cars exchanged hands on the week at the CME.
    Checking demand, USDA’s latest data shows cheese disappearance plummeted in April due to the crash in foodservice demand and HighGround Dairy (HGD) points out that domestic and export demand were both lower in the month.
    “The year over year decline was easily the steepest on record (data back to 1995),” says HGD, “and was the lowest of any month since May 2016. Total disappearance was down 119.1 million pounds versus the prior month, consistent with the 108 million pound monthly stocks build in April.”
    Retail cheese demand in May however was exceptionally strong, according to HGD’s Lucas Fuess in the June 22 Dairy Radio Now broadcast. Sales were at double-digit growth versus the prior year on a year to date basis, and “IRI data confirmed dairy aisle sales were up 20.7% year over year, outpacing total store dollar growth of 12.4% for the week ending May 24. Cheese sales were up 18.2% on a volume basis and 26.6% on a dollar basis,” according to HGD.
    “April butter disappearance held slightly higher versus prior year levels for the second consecutive month as extremely strong retail demand balanced out a foodservice demand collapse,” according to HGD, and “was the strongest total April butter disappearance since 2014, but total disappearance remained below a year ago.”
    “May demand has been the strongest, up 33% year-to-date,” says HGD, “with a 50% jump reported in the latest week’s data. Frozen pizza sales were up 19.6% by volume and 21.9% on a dollar basis from prior year at the end of May,” and HGD says “There are notable gains on ice cream sales, up 13.4% that week.”
    April nonfat dry milk demand remained below a year ago for the fourth consecutive month, as lower domestic demand negated strong exports and saw the lowest April disappearance since 2011, according to HGD.
    Dry whey declined slightly, versus the prior year after a slight March increase, and was pulled lower by weak domestic demand even as exports climbed to the highest monthly volume since August 2018, according to HGD, and saw the lowest total disappearance for the month of April since 2015.
    The Agriculture Department announced the July Federal order Class I base milk price at $16.56 per hundredweight, up $5.14 from June but 62 cents below July 2019. It equates to $1.42 per gallon, up from the COVID-inspired 98 cents a gallon a month ago. The 2020 Class I average stands at $15.94, down from $16.12 a year ago and compares to $14.60 in 2018.
    Checking the bottom line; dairy farm margins were fairly flat over the first half of June with the exception of spot third quarter which continued to strengthen dramatically on surging milk and cheese prices, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.
    “While this has been a very difficult spring for the industry,” the MW stated “Dairy remains a bright spot for forward margin opportunities relative to other sectors that will continue to face significant profitability struggles including the hog, crop and beef cattle industries.”
    “Increased retail demand has met with renewed orders from both foodservice and food banks following the USDA’s Farmers to Families Food Box program which has been implemented much faster than previous government farm aid programs,” the MW says. “The buying is putting pressure on processors as they are now handling renewed orders from the foodservice sector with 43 states having relaxed dining restrictions to allow for more on-establishment dining options besides only take-out and delivery.”
    “Feed prices have increased slightly from significantly depressed levels, although both the corn and soybean crops are off to a good start,” the MW stated.
    In politics, the US Dairy Export Council (USDEC) and National Milk Producers Federation (NMPF) sharply criticized Canada’s allocation of its tariff-rate quotas (TRQ) under the USMCA.
    USDEC and NMPF charged that the TRQ allocations “undermine the intent of the USCMA’s dairy provisions by thwarting the ability of the U.S. dairy industry to make full use of the trade agreement’s market access opportunities.”
    A joint press release stated that USDEC and NMPF “have repeatedly warned that the full benefits of this carefully negotiated trade agreement will not materialize without careful monitoring and stringent enforcement of Canada’s USMCA commitments. The US dairy industry urges the US Trade Representative to immediately raise this issue with Canada and insist that Canada adheres faithfully not just to the letter of its commitments under USMCA, but to its spirit as well.”
    Meanwhile NMPF and the International Dairy Foods Association called on the committee charged with recommending dietary guidelines for Americans to “Consider the full range of studies on different types of fats and their role in a healthy diet when crafting its final report, noting that scientific understanding has evolved.”
    The comments were made in letters to Dr. Barbara Schneeman, chairwoman of the committee, as well as the secretaries of Agriculture and of Health and Human Services and stated; “We would like to reiterate our strong view, as explained more fully in previous comments to the Dietary Guidelines for Americans Committee, that a body of science in recent years has found that dairy foods, regardless of fat level, appear to have either neutral or beneficial effects on chronic disease risks.”
    On a brighter note, one of the results of the COVID pandemic was the “resetting consumer grocery habits,” says NMPF. “Early signs are that that some of these changes, including increased milk purchases, are continuing as the country re-opens.” The media has reported that milk sales are down while plant-beverages are rising, however “While it has been a factually accurate statement in its own limited scope, it can be used toward fantastical ends, such as overhyping the rise of plant-based drinks or crafting a false narrative about dairy trends when dairy, as a whole, is seeing its highest per-capita consumption levels in decades.”
    The latest Crop Progress report shows 95% of the US corn crop was emerged, as of the week ending June 14, up from 89% the previous week, 21% ahead of a year ago and 3% ahead of the five year average. 71% of the crop is rated good to excellent, up from 59% a year ago.
    Soybeans are at 93% planted, up from 86% the previous week, 21% ahead of a year ago, and 5% ahead of the five year average. 81% are emerged, 32% ahead of a year ago, and 6% ahead of the five year average.
    Cotton is planting is at 89%, 4% ahead of a year ago, but 2% behind the five year average. 43% is rated good to excellent, down from 49% at this time a year ago.