U.S. milk production remains above a year ago but not by much. The Agriculture Department’s latest Milk Production report showed preliminary output at 18.28 billion pounds, up 0.2% from August 2018. Output in the top 24 states hit 17.4 billion pounds, up 0.4%. Revisions added 40 million pounds to the original July total, now put at 18.37 billion pounds, up 0.2% from July 2018.
    August cow numbers in the 50 states totaled 9.32 million head, down 2,000 from July’s number which was revised higher by 10,000 cows, but is 71,000 below a year ago, and the lowest in three and a half years. Output per cow averaged 1,962 pounds, down 9 pounds from July but 19 pounds above a year ago.
    California output was up 1.5%, thanks to a 35 pound gain per cow offsetting the 6,000 fewer cows milked. Wisconsin was down 0.5% on 7,000 fewer cows. Output per cow was unchanged from a year ago.
    Virginia again showed the biggest decrease, down 11.4% on 9,000 fewer cows, followed by Illinois, down 7.9% on 7,000 fewer cows. Pennsylvania was down 6.0% on 34,000 fewer cows. Arizona was down 6.1%, on 13,000 fewer cows.
    Idaho was up 2.9%, thanks to 15,000 more cows and a 10 pound gain per cow. New York was up 1.1%, on 5,000 more cows and a 5 pound gain. Minnesota was up 0.5% on a 25 pound gain per cow offsetting a loss of 4,000 cows.   
    Michigan was up 1.6% on a 25 pound gain per cow and 2,000 more cows. New Mexico was down 1.6%, on 5,000 fewer cows. Output per cow was unchanged. Oregon was up 2.8% on a 20 pound gain per cow and 2,000 more cows. Texas was up 4.6%, thanks to 25,000 more cows. Output per cow was unchanged.
    Vermont was unchanged, thanks to a 15 pound gain per cow offsetting the loss of 1,000 cows. Florida was also unchanged, despite a loss of 4,000 cows. Output per cow was up 50 pounds. Washington State was down 0.5% on 7,000 fewer cows. Output per cow was unchanged from a year ago.
    Dairy farmers culled more cows in August than in July but the number was below a year ago. The Agriculture Department’s latest Livestock Slaughter report shows an estimated 266,600 head were slaughtered under federal inspection, up 9,800 head from July but 13,100 or 4.7% below a year ago. The eight month cull count climbed to 2.16 million head, up 72,800 or 3.5% from a year ago.
    U.S. dairy product commercial disappearance in July had some good news and some of the other, according HighGround Dairy’s (HGD) Lucas Fuess in the Sept. 23 “Dairy Radio Now” broadcast.
    Total cheese disappearance continued above prior year levels for the sixth consecutive month and put year to date disappearance up 2.1%, setting a new record. And, for the first time on record, more than 1 billion pounds of cheese has been absorbed domestically in each month so far this year, says HGD. Fuess adds that even cheese exports looked “adequate” despite the trade struggles.
    Butter disappearance however remains disappointing, down 7.8%, which followed June’s 7.3% decline. That represented a loss of 23.1 million pounds in the two months versus a year ago, according to HGD. Fuess believes butter will seasonally tick higher but plenteous supplies will keep the price in check.
    Domestic disappearance has driven total nonfat dry milk and skim milk powder demand higher in both June and July, says HGD, “overcoming steadily lower exports seen in each month so far this year.”
    Dry whey disappearance was up for just the second time this year, following May’s climb. HGD adds that, while exports dropped to their lowest monthly volume of the year to date, domestic demand moved higher versus the prior year for the third consecutive month and for the fourth time this year. China’s African Swine Fever has greatly influenced whey demand, says Fuess. A quick footnote; China waived its retaliatory tariff on U.S. permeate for feed on Sept. 17.
    The global dairy market looked a little more positive this week. Tuesday’s Global Dairy Trade auction (GDT) saw its weighted average of products offered end three consecutive declines. The average jumped 2.0%, following a 0.4% slip on September 3, 0.2% on August 20 and 2.6% on Aug. 6. Sellers brought 82.3 million pounds of product to the market, down from 87.5 million in the last event.
    The gains were led by lactose, up 5.6%, after a 0.9% slippage on Sept. 3. Skim milk powder was next, up 3.4%, after it inched up 0.7% last time. Butter was up 2.7%, after holding steady last time. Whole milk powder was up 1.9%, after slipping 0.8 percent.  Anhydrous milkfat was up 0.6%, following a 1.5% drop, and GDT Cheddar was up 0.4%, after a 0.8% loss last time.
    Rennet casein was the only product in negative territory, down 0.1%, after gaining 4.6% last time.
    FC Stone equated the GDT 80 percent butterfat butter price to $1.8271 per pound U.S., up 4.4 cents from Sept. 3. CME butter closed Friday at $2.1150. GDT Cheddar cheese equated to $1.7446 per pound, up almost a penny and compares to Friday’s CME block Cheddar at $2.05. GDT skim milk powder averaged $1.1791 per pound and compares to $1.1338 last time. Whole milk powder averaged $1.4210, up from $1.3952. CME Grade A nonfat dry milk closed Friday at $1.0825 per pound.
    Subsidized exports continue under the Cooperatives Working Together (CWT). Member cooperatives accepted 8 offers of export assistance this week on sales of 79,366 pounds of butter, 456,357 pounds of Cheddar cheese, 220,462 pounds of cream cheese, and 2.425 million pounds of whole milk powder. The product is going to Asia, the Middle East and South America from October through January.
    Most mid-September dairy product prices plummeted, as traders awaited the August Cold Storage report. The 40-pound Cheddar blocks shot up to $2.2375 per pound Monday, highest CME price since October 22, 2014, but then plunged to $2.0450, and closed Friday at $2.05, down 15 1/2-cents on the week, after pole vaulting 20 3/4-cents the previous week, but is 41 1/2-cents above a year ago.
    The 500-pound barrels hit $1.94 Monday but fell to $1.6550 Friday, down 26 1/2-cents on the week, 29 1/2-cents above a year ago, and a record 39 1/2-cents below the blocks. 17 cars of block were sold on the week and 21 of barrel.
    FC Stone’s Dave Kurzawski says “The CME spot market is in the throes of finding a sense of equilibrium.” “Bull market corrections are jarring and violent. They represent a rapid swing in both prices and sentiment. They can be terribly confusing. But they rarely, if ever, change the underlying supply/demand fundamentals.” He adds that the spot market “appears to have gotten ahead of the real-world conditions last week, spiking too high and forcing buyers to find product elsewhere or cancel orders. And prices fall. But this correction doesn’t change the broader underlying supply/demand fundamentals at play. Weak milk and cheese production, good domestic cheese demand and light inventories remain supportive for cheese prices over the next month, at least.”
    Cheesemakers reported a little more variety regarding demand, according to Dairy Market News, but sales are steady. Some barrel producers suggest orders have slowed a bit. Spot milk markets were quiet though milk was on the tighter side in the region and ranged $1.00 over to $1.50 over Class. More milk was moving into the Southeast region where farm milk output is light.        
    Western block cheese availability is very tight and prices are higher than usual. Domestic buyers were reluctant to make purchases above their immediate needs as they believed the prices were inflated. Overall, cheese production remains active with enough milk finding its way to the vats.
    Mozzarella demand is improving due to increased pizza sales in the region. Barrel stocks are accessible because sales are not as strong as blocks. The gap between them has been on the minds of traders, wondering how that will be corrected. The strong value of the dollar is not helping export sales and DMN warned that “Low feed costs are likely to result in more milk production and subsequently more cheese output, which could impact the cheese market tone.”
    Cash butter also had a rough week, falling to $2.1025 per pound Thursday, lowest price since February 16, 2018, but regained a penny and a quarter Friday to close at $2.1150, 10 3/4-cents lower on the week and 12 cents below a year ago. Only 7 sales were reported for the week, down from 55 the previous week.
    Cream is accessible, according to butter producers but they are keeping churning somewhat light to manage end-of-fiscal-year stocks. Contacts suggest cream cheese production is light, therefore cream has been easily attainable. Butter producers say demand has ebbed so trading is quiet throughout the region.  
    Western contacts suggest butter sales have slowed and buyers are not showing any signs of urgency to make purchases. Shoppers seem willing to wait to see if prices slip further. While market observers think end users have some of their butter needs covered for the next few months, they also expect a surge in activity for fall and winter holiday needs, according to DMN.
    U.S. milk fat prices remain at a premium to prices elsewhere in the world. Some processors feel that while demand has been able to support prices domestically, a few customers may seek imports. U.S. stocks are readily available and growing, according to some. Ice cream production has dropped off and butter makers want to control inventories but plentiful cream keeps moving to the churn.
    Grade A nonfat dry milk marched to $1.0825 per pound by Friday, up 2 3/4-cents on the week and the highest since October 5, 2015, and 21 cents above a year ago. Only 2 cars were sold on the week.
    Dry whey held all week at 39 3/4-cents per pound, 11 3/4-cents below a year ago, with 2 cars finding new homes on the week.
    The Agriculture Department announced the October Federal order Class I base milk price at $17.84 per hundredweight, down a penny from September but $1.51 above October 2018, and the highest October Class I since 2014. The price equates to $1.53 per gallon, up from $1.40 a year ago. The 2019 Class I average stands at $16.64, up from $14.76 a year ago and $16.41 in 2017.
    Dairy margins improved significantly since August due primarily to surging milk prices as feed costs have held steady, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.
    The MW stated that a shortage of Cheddar blocks in the cash market caused prices to spike. “Cheddar barrel availability has not been nearly as tight given the industry’s demand for whey which has caused the block/barrel spread to widen to historical highs.” Class III futures had approached $20 per cwt. in the October contract, the MW stated, however “While deferred contracts are not trading nearly as high, dairy margins through the first half of 2020 are close to the 90th percentile of historical profitability within the last decade.”
    The MW warned; “There is concern that milk production will ramp up through next spring’s flush given the stronger indicated margins, and that is part of the reason for the significant discount in forward contracts relative to spot values.”
    “USDA released their September WASDE report which continued to suggest higher corn yields and larger production than what most analysts expected. Corn yield was reduced from August to 168.2 bushels per acre compared to the average trade forecast of 166.7 with total production pegged at 13.799 billion bushels. This was down 102 million bushels from August but above the average estimate of 13.614 billion. Projected ending stocks of 2.19 billion bushels were close to last month but also higher than the average estimate of 1.965 billion.”
    “By contrast, the soybean balance sheet was more bullish, with ending stocks of 640 million bushels down 115 million from last month and below the average forecast of 661 million. This was despite the fact that similar to corn, both soybean yield and production at 47.9 bushels per acre and 3.633 billion bushels were higher than pre-report expectations based on the average industry estimates,” the MW concluded. Details are posted at www.cihmarginwatch.com.
    This week’s Crop Progress report shows 18% of the U.S. corn crop is rated mature, as of the week ending Sept. 15, down from 51% a year ago and 21% behind the five year average. 55% was rated good to excellent, down from 68% a year ago.
    95% of U.S. soybeans are setting pods, up from 92% the previous week, 5% behind a year ago, and 5% below the five year average. 54% are rated good to excellent, 13% behind a year ago. 41% of the cotton crop is rated good to excellent, up from 39% a year ago.
    The USDA extended the deadline to September 27 for dairy producers to enroll in the Dairy Margin Coverage program for 2019. The deadline was September 20.
    All former U.S. Secretaries of Agriculture since President Reagan announced support for the United States-Mexico-Canada Agreement (USMCA). In a letter to Congressional leaders, former Secretaries John Block (Reagan), Mike Espy (Clinton), Dan Glickman (Clinton), Ann Veneman (W. Bush), Mike Johanns (W. Bush), Ed Shafer (W. Bush), and Tom Vilsack (Obama) underscored the importance of passing USMCA saying, “We need a strong and reliable trade deal with our top two customers for U.S. agriculture products. USMCA will provide certainty in the North American market for the U.S. farm sector and rural economy. We strongly support ratification of USMCA.”