The Agriculture Department’s monthly Livestock, Dairy, and Poultry Outlook, issued November 15, mirrored milk price and production projections in the November 8 World Agricultural Supply and Demand Estimates report.
    But there were “significant revisions to milk cow numbers, with downward revisions of 2,000, 17,000, and 21,000 head for June, July, and August, respectively. NASS estimates that cow numbers fell to an average of 9.367 million head in September, 12,000 less than August and 32,000 less than September 2017. Milk per cow was 1,855 pounds, 30 pounds higher than September 2017.”
    “Due to revisions of cow numbers for July and August and the fall in cow numbers reported in September, the estimate for the size of the milking herd in the fourth quarter of 2018 was lowered 35,000 head to 9.365 million. Milk per cow was forecast slightly higher for the fourth quarter, at 5,740 pounds. The lower forecast for the size of the milking herd more than offsets the increased yield per cow, resulting in a fourth-quarter milk production forecast of 53.8 billion pounds, 100 million pounds lower than last month’s forecast.”
    “A smaller milking herd in late 2018 is expected to persist into 2019,” says USDA, ‘therefore, the milk cow forecast was lowered to 9.375 million head, 35,000 less than last month’s forecast. However, with increased culling of the herd, higher milking efficiency is expected, motivating an increase in the milk per cow forecast to 23,565 pounds. With these changes, overall milk output for 2019 is now forecast at 220.9 billion pounds, 500 million pounds lower than the last forecast.”
    Meanwhile; September milk use was up from September 2017. Demand for cheese was mostly higher, while NFDM and butter were lower.
    FC Stone’s Dave Kurzawski wrote in his November 12 Early Morning Update that “These numbers, in and of themselves won’t move markets, but it’s interesting to see demand weakness in butter and powder (fairly stable prices over the past few months) and small gains in cheese demand (fairly weak prices over the past few months).”
    September American cheese demand was down 2.2 percent from a year ago and down 7.8 percent versus previous-month levels. Demand for the “other” cheese category increased 2.0 percent from 2017 but was 1.7 percent lower than August. Total cheese use was up 0.3 percent from a year ago but 4.1 percent below August. American cheese use was up 2.7 percent and other than American cheese was up 2.8 percent, which put total cheese use up 2.7 percent.
    September nonfat dry milk use slipped 0.7 percent and butter demand was down 8.6 percent from a year ago. Month-to-month, commercial disappearance of butter was down 8.0 percent while nonfat dry milk dropped 18.2 percent. But, nonfat dry milk use was up 8.6 percent in 2018 and butter was up 2.0 percent.
    CME dairy prices strengthened the week before Thanksgiving. The 40-pound Cheddar blocks fell November 12 to $1.35 per pound, lowest price since May 25, 2016, then rebounded and closed Friday at $1.4525, up 7 1/4-cents on the week but 16 3/4-cents below a year ago. The 500-pound Cheddar barrels finished at $1.36, up 5 1/2-cents on the week, 26 3/4-cents below a year ago, and 9 1/4-cents below the blocks. 28 cars of block were sold on the week and 11 of barrel.
    Dairy Market News says cheese contacts are “concerned about the potentiality of lasting market recuperation, following a bearish onset to fourth quarter 2018.”
    Midwestern cheese producers have downshifted production and holiday work schedules are lighter than previous years. This has helped busier producers obtain spot milk at lower costs, with prices ranging $3 under to $1 over Class, a noticeable slide in the price range from week 45. “Some cheese plant managers who planned to wait until after the holiday to corral favorably priced milk loads were met with deals they could not refuse,” says DMN
    Cheese production continues to be active in the West, with higher milk output noted in many areas. Retailers, food service managers, and pizza manufacturers are taking a bit more cheese however, “holiday buyers haven’t been manifesting themselves that much despite steady to lower cheese prices.”
    The strong value of the dollar is not helping with international sales either. In addition, the weaker euro value and existing trade tariffs on U.S. products are pushing some buyers and end users toward European markets. Processors hope that as the holidays get closer they will be able to sell more product and decrease the inventories they are currently holding, according to DMN.
    CME butter jumped 3 1/4-cents Monday, dropped 2 1/2-cents Tuesday, then regained 4 cents Wednesday, a jump some attributed to a fire at a butter plant in Wisconsin, and closed Friday at $2.2750 per pound, up 8 1/4-cents on the week and 6 cents from a year ago. 18 cars traded hands on the week.
    Cream availability has shown very little change week over week, and butter producers are typically holding back from purchasing cream, according to DMN. Butter stocks vary by producer, but some are relaying very tight supplies with no spot availability. “Butter markets continue to provide evidence of what analysts have been relaying from second quarter to present: butter markets are steady, typically range bound between $2.20 and $2.40 per pound.”
    Western butter makers report that print orders have maintained a strong pace but warn that the current swiftness will not likely continue to the end of the year. Some contacts feel the holiday pipeline is getting filled and a slower tempo is near. Cream supplies have tightened in the West, but are still adequate. Butter makers, trying to manage inventories, are weighing options, looking to find the right balance between churning and selling cream. Some manufacturers are finding a market for bulk butter further east, where cream is less available.
    Cash Grade A nonfat dry milk closed Friday at 88 1/2-cents per pound, 2 1/2-cents higher on the week and 16 cents above a year ago, with 13 cars finding new homes on the week.
    Speaking of powder; the EU Commission accepted bids to sell 30,067 metric tons of skim milk powder (SMP) out of its intervention program last week for the tender closing Tuesday, Nov. 6. The lowest accepted bid was about 65 cents per pound. Up until this point about 190,000 metric tons or about 419 million pounds have been sold out of intervention. This older product may be keeping fresh powder prices contained, says FC Stone.
    The infant cash dry whey market slumped to 42 1/2-cents per pound on Wednesday, lowest price in 16 weeks, but closed Friday at 43 cents per pound, down a half-cent on the week, with a hefty 32 cars trading hands on the week.
    The latest Crop Progress report shows 84 percent of US corn is now harvested as of the week ending November 11, up from 76 percent the previous week and 81 percent a year ago, and compares to 87 percent for the five-year average.  
    Soybeans are at 88 percent harvested, up from 83 percent the previous week but compares to 93 percent a year ago and 93 percent in the five year average.
    Cotton is at 54 percent harvested, up from 49 percent the previous week and compares to 63 percent a year ago, and 61 percent for the five year average.
    The nation’s Number 1 milk producing state became a part of the Federal Milk Market Order system on November 1. California will see its first Federal Class I milk price on November 21 and next month will its Class 4a and 4b prices become Federal Class III and Class IV prices.
    In the November 19 Dairy Radio Now broadcast, I asked Dave Kurzawski about the ramifications for dairy producers in other states from adding 3 million pounds plus of milk per month to the system. He stated that, at first glance, it looks like California dairy producers will see about 40 to 60 cents per hundredweight added to their cheese milk price, as a result of becoming a Federal order. “Theoretically, if you make more money you’ll make more milk,” he answered, “and that could keep a damper on all milk prices for the nation.”
    But Kurzawski says we can’t assume that because that’s not the environment California producers are in. He argues that margins are not tremendous there and the climate for doing business there is not such that it would “foster a material growth in production to the point that it will be noticeable.”
    “A lot of damage has been done to California dairy producers over time between public policy as well as fixed costs,” he said. The Federal order will help alleviate some of that potentially but “right now it’s looking like it’s a small help.”
    When asked if he saw better dairy prices ahead from Christmas and New Year holiday buying, he answered; “This has been the year without a holiday rush.” He said the seasonally typical drop in cheese prices came five to six weeks early and “You can’t have a year without a holiday rush and then expect to have a really weak December, January, and February.”
    While he admits that could happen, “The reality is that there’s going to be a pipeline refill because the reason that cheese prices have been able to fall during the holiday rush season is because manufacturers and end users have worked off inventories. At some point they’re going to want to replenish those inventories and it’ll probably come when you least expect it,” he concluded. He added a hopeful note in his November 12 Early Morning Update; “The booming economy is running headlong into what could be a record-breaking retail holiday season.”
    Looking globally, the EU continued efforts focused on enhancing dairy trade with other countries. The International Trade Committee of the European parliament voted in favor of ratifying the EU-Japan agreement and the EU-Singapore agreement. January through August EU cheese output increased 1.8 percent from the same period last year, according to Eurostat.
    Looking down under; DMN reports that Australia’s spring is moving closer. “There was little rain in most of the country the last two weeks. Hay from the new season is reaching the market. This is welcome to many dairy producers who have low carryover stocks. Feed grain prices remain at unwelcome high levels in much of Australia. Absent more rain in coming weeks, there is little expectation of relief for grain supplies and prices, especially in northern Australia.”
    “New Zealand has experienced not only higher milk production than had been projected, but high levels maintaining longer than had been expected,” according to DMN. “There was a high production peak, which has probably passed, but higher than normal milk volumes are continuing, even as production seasonally goes down. By some measures higher milk production is beneficial, but now that is weighing on New Zealand dairy producer pay prices.
    A secondary factor is that the sustained higher milk output has led to scheduling more production of higher volume dairy powders to absorb the milk volumes.
    Speaking of international markets; Cooperatives Working Together (CWT) members accepted 20 offers of export assistance this week from CWT to help capture contracts to sell 2.048 million pounds of Cheddar and Monterey Jack cheese, 606,271 pounds of butter and 879,645 pounds of whole milk powder.
    The product is contracted for delivery in Asia, Central America, the Middle East, North Africa, Oceania and South America through April 2019 and brings CWT’s 2018 export sales to 53.777 million pounds of American-type cheeses, 13.842 million pounds of butter (82 percent milkfat) and 52.823 million pounds of whole milk powder to 36 countries on five continents.
    In politics the National Milk Producers Federation (NMPF) called on Congress to make passing a new farm bill a top priority in its lame-duck session. Jim Mulhern, NMPF president and CEO, stated that “dairy farmers harmed by low prices would benefit from the certainty and improvements likely to be part of the final law. Given the sustained low prices dairy farmers have faced, coupled with uncertainty in agricultural trade policy, it is more important than ever that Congress quickly enact the 2018 Farm Bill before adjourning for the year.”
    He said the House and Senate-passed bills include “important reforms to dairy policy, making the Margin Protection Program a more effective safety net for producers and expands producer access to additional risk management options.”
    Lastly; the U.S. International Trade Commission held a two-day hearing this week to investigate the likely impact of the U.S.-Mexico-Canada Agreement (USMCA) on the American economy, specific industry sectors and consumers. The agreement still has to be approved by Canada and Mexico plus Mexico has yet to remove its 25 percent tariff on U.S. cheese exports.
    A total of 45 industry groups and stakeholders were invited to provide testimony, including Michael Dykes, D.V.M., president and CEO of the International Dairy Foods Association.
    Dykes outlined the importance of global trade and new free trade agreements to the U.S. dairy industry. He noted that the U.S. now benefits from a dairy trade surplus of more than $2 billion, after being a net importer of dairy products only a decade ago, and that American companies export dairy products to more than 140 countries.
    “Free trade agreements like the USMCA that open markets and lower trade barriers are crucial to continuing this trend of growing U.S. dairy exports,” he said. “Maintaining and expanding access to international markets is essential for the future success of the U.S. dairy industry.”