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Jan 03, 2024

Processors dump surplus milk due to labor shortages

You’ll recall March milk production was only up 0.5% from 2022. The March Dairy

You’ll recall March milk production was only up 0.5% from 2022. The March Dairy Products report shows most of the extra milk went to the dryer and churn.Cheese production totaled 1.229 billion pounds, up 11.7% from February output which was revised down nine million pounds, but was down 0.2% from March 2022, the first year over year drop in 2023. Output for the three months stands at 3.5 billion pounds, up 1.0% from the same period a year ago.Wisconsin produced 302.1 million pounds of the March total, up 10.9% from February but 3.0% below a year ago. California produced 218 million pounds, up 8.0% from February and 1.7% above a year ago. New Mexico produced 83.1 million pounds, up 12.1% from February but 0.3% less than a year ago. Idaho added 91.2 million pounds, up 26% from February and 2.1% above a year ago.Italian cheese totaled 511.7 million pounds, up 11.5% from February but 1.5% below a year ago. American output climbed to 498.5 million, up 12.5% from the February level, which was revised 9.9 million pounds lower, and was up 3.2% from a year ago. Mozzarella, at 402.5 million pounds, was down 1.4% from 2022.Cheddar production, the cheese traded daily at the CME, saw output jump to 345.6 million pounds, up 28.5 million or 9.0% from the February count, which was revised down 8.3 million pounds, and was up 12.1 million pounds, or 3.6%, from March 2022. Year to date cheddar stood at one billion pounds, up 3.3% from 2022.Butter output climbed to 205 million pounds, up 17.8 million pounds or 9.5% from February, and up 2.8 million pounds or 1.4% from a year ago. Year to date butter output was at 593.5 million pounds, up 2.0% from a year ago.Yogurt production totaled 444.9 million pounds, up 3.6% from a year ago and hard ice cream output hit 66.4 million pounds, 0.2% above a year ago.Dry whey production totaled 78.0 million pounds, up 11.2 million pounds or 16.7% from February and 200,000 pounds or 0.3% above year ago. Year to date whey stands at 221.5 million pounds, up 1.2%. Stocks grew to 78 million pounds, up 11.1 million or 16.7% from February and 0.3% above a year ago.Nonfat dry milk output climbed to 200.2 million pounds, up 17.7 million pounds or 9.7% from February and 8.4 million or 4.4% above a year ago. Stocks jumped to 319.1 million pounds, up 3.3 million pounds, or 1.0% from February, and up a whopping 31.2 million pounds or 10.8% from a year ago.Skim milk powder production totaled 36.0 million pounds, down 1.2 million or 3.3% from February, and 6.9 million pounds or 16.1% below a year ago.The U.S. makes a lot of cheese and it's a good thing because American's love it. The May 8 Daily Dairy report (DDR) says "Cheese consumption has been booming for decades. While cheddar, Italian styles, and charcuterie board worthy artisan cheeses get most of the attention, their poorer cousins, processed and powdered cheeses, are also popular. Mozzarella and cheddar are the favored cheeses, with 2021 per capita consumption at 12.28 pounds and 11.41 pounds, respectively, but processed cheese consumption is not far behind at 8.24 pounds," the DDR stated.Pizza is likely the biggest favorite food that includes cheese however the DDR says macaroni and cheese is right up there. I hate to think where milk prices would be if we didn't have a love affair with cheese.StoneX says in its May 10 Early Morning Update, "Even with inflation persisting, consumers remain willing to spend on food service. The U.S. food service index has actually risen from the end of 2022 while on the contrary the retail food sales index has dipped slightly. The food service index is well above last year's levels and 2021 levels while the retail food remains below the last two years."Broker Dave Kurzawski, in the May 15 Dairy Radio Now broadcast, said retail sales normally increase in times of recession as people eat at home, but to see food service so strong, "We don't know if it's because the economy is so strong or is this a hangover from COVID?" "They’re spending money on food and they’re spending a premium to feed themselves," he said. "If you look at the unemployment rate etc. the economy is still chugging along despite inflation."Kurzawski admits this good economic news is not showing up in farm milk prices yet, "but it's coming." May class III is hovering around a low to mid-$16 range and that will ding a lot of dairy farmers, he said, but this is the time of year that price lows are made, as we have plenty of milk. "This is a much more normal year for the first time this decade," he concluded. "The price strength and better demand should be on tap (for farmers) the second half of the year."We export a lot of our cheese and those exports in March totaled 91.6 million pounds, down 0.4% from March 2022. Mexican demand soaked up a hefty 34% share, according to HighGround Dairy (HGD), and U.S. export volume to that market grew 16%. Cheese sailing to Australia jumped 39%, while exports to Asia fell, down 61% to South Korea and down 23% to Japan.March U.S. dairy exports showed a lot of negatives, however. From a volume standpoint, total exports fell from March 2022, but historically speaking, HGD says they were in the top three, just behind 2022, according to U.S. Census data.Mexican demand remained robust, says HGD, up 25%. During first quarter, the U.S. exported 408 million pounds of dairy products to its southern neighbor, an increase of 33%, and through first quarter, Mexico held a nearly 28% share of U.S. exports, compared to first quarter 2022, when that figure was slightly above 21%.Exports to South Korea were down 54%, warned HGD and dropped 33% compared to the first quarter of 2022. Exports to China rose annually in March and on the quarter, driven by whey, fluid milk, cheese and butter shipments.Nonfat dry milk exports totaled 172 million pounds, down 2.7%, though year to date were up 3.0%. Shipments to Mexico soared by 45%, totaling almost 93.6 million pounds, a 54% market share, says HGD. Lost sales to Asian markets, such as China, the Philippines, and Vietnam, drove the overall drop in volume.Butter exports totaled 8.6 million pounds, down 36%, in fact the U.S. was a net butter importer by 5.8 million pounds, as high year end prices took a toll. Butter exports to key markets like Canada, Mexico, and South Korea were down. Kiwi butter made up 93% of the imports to the U.S., according to HGD.Dry whey exports totaled 46.9 million pounds, up 8.3% from a year ago, with year to date exports up 8.8%.The Daily Dairy report credits a strong Mexican peso for "making American dairy products look like a bargain, which suggests shipments will remain robust."Exports continue via the Cooperatives Working Together program. Member cooperatives accepted two offers of assistance this week on sales of 51,000 pounds of American-type cheese and 44,000 pounds of whole milk powder. The product will go to customers in South America and Asia through August.Tuesday's Global Dairy Trade Pulse auction saw 2.2 million pounds of Fonterra whole milk powder sold, up fractionally from the April 25 Pulse and at $3,175 per metric ton, up $70 from the last Pulse, but down $15 from the May 2 GDT.HGD points out that "After three consecutive weeks of bullish momentum, whole milk powder prices moved lower this auction as ample supplies were enough to meet the current level of demand allowing buyers to secure product without pushing prices higher."CME 40-pound block cheddar climbed to $1.67 per pound Wednesday but closed the second Friday of May at $1.53, down 8.25 cents on the week, lowest since July 21, 2021, seventh week of decline and 77.75 cents below a year ago.The 500-pound cheddar barrels closed Friday at $1.49 per pound, four cents lower on the week, a whopping 90.50 cents below a year ago but a more normal four cents below the blocks. Sales totaled 20 block and 58 of barrel on the week.Midwestern cheese demand is mixed, says Dairy Market News (DMN). Some plants say cheese demand is steady to strong and are turning away orders as capacity is full. Others are scheduling maintenance downtime due to slower demand. Milk remains abundant in the region with spot offers as low as $12 under class III at mid-week. Prices ranged $2.50 under to 50 cents over a year ago. Current prices are not expected to increase until flush level milk runs its course, says DMN.Retail and food service demand is strong to steady for cheese in the west. A few manufacturers indicate tight inventories for retail demand, as production keeps moderately ahead of contracted obligations. Sources indicate softening exports though Mexico and South America show strong to steady demand while purchasers for Asia look to focus on additional fourth quarter bookings.The May 11 Daily Dairy report says the Northeast Federal Milk Marketing Order has authorized cooperatives and processors to dump surplus milk "due to labor shortages, trucking and freight shortages as well as equipment hindrances." "Upper Midwest milk sellers are dealing with heavy volumes and continued class III plant downtime, which is adding to the struggle of finding homes for milk," says DMN, "and in parts of the West tanker and driver shortages and some processors have more milk than they can handle due to shutdowns for maintenance." Unfortunately, dairy producers bear the brunt of these costs.Cash butter fell to $2.3950 per pound Tuesday, lowest in three weeks, but closed Friday at $2.40, down 4.50 cents on the week and 30.50 cents below a year ago. There were only two sales on the week.The May 5 "Weekly Wire" reports that first quarter butterfat levels hit 4.21%, a new record. Feeding and breeding skills are giving farmers good returns.Central butter churning remains busy, says DMN. Cream multiples were in a similar range to previous weeks, but plant managers say volumes of spot cream on offer have slimmed down by a noticeable margin. Ice cream production is playing a part, but heat in the lower Central region may also be a factor. Cream is still at relatively affordable rates for churning, but expectations vary for how long that may last. Butter demand is lackluster, reportedly, but meeting seasonal expectations. Contacts are somewhat confident butter will remain in a range bound status near term, according to DMN.Cream is plentiful in the West. Manufacturers report heavier to balanced volumes compared to class IV needs. Churns are operating at strong paces, though some are limited by personnel shortages. Shortages of available transportation are also noted. Retail and food service demand is strong to steady and exports steady.Grade A nonfat dry milk found itself at $1.17 per pound Friday, down 2.75 cents on the week and 56 cents below a year ago. There were seven sales put on the board for the week.Dry whey fell to 30 cents per pound Thursday but closed Friday at 30.25 cents, down 2.50 cents on the week, lowest CME price since July 10, 2020, and 23 cents below a year ago. There were 42 loads that exchanged hands on the weekThe May 10 Daily Dairy report (DDR) says one of the key factors in the whey price is "the narrowing margins witnessed by Chinese pork producers, a major user of U.S. whey. As profitability has slipped among this key user group, pork production and whey demand have probably deteriorated" the DDR speculated.Spring planting is moving right along. The latest Crop Progress report shows 49% of U.S. corn was in the ground, as of the week ending May 7, up from 26% the previous week, 28% ahead of a year ago, and 7% ahead of the five-year average. 12% was emerged, up 6% from the previous week, 7% ahead of the previous year and 1% ahead of the five-year average.The report shows 35% of soybeans are planted, up from 19% the week before, 24% ahead of a year ago and 14% ahead of the five-year average. 9% are emerged.Cotton plantings were at 22%, 1% behind a year ago and the average.The week ending April 29 saw 58,800 dairy cows head to slaughter, down 2,000 from the previous week but 7,200 head or 14.0% above a year ago. Year to date, 1.113 million head have been culled, up 50,500 or 4.8% above a year ago.The Agriculture Department lowered its latest 2023 milk production forecast in Friday's World Agricultural Supply and Demand Estimates report. Cow numbers were raised but growth in milk per cow was lowered. The report also gave us our first preview at 2024. I’ll have complete details next week.In politics, the International Dairy Foods Association called on the USDA this week to expand dairy food options provided to children through the National School Lunch Program (NSLP) and the School Breakfast Program (SBP), stating that doing so would "improve nutrition for children of all backgrounds, reduce waste in school meal programs, and increase participation in the federal child nutrition programs."The submitted comments were in response to proposed changes to meal patterns for school nutrition programs. The comments urge USDA to align the NSLP and SBP with the current Dietary Guidelines for Americans (DGA) by encouraging increased consumption of nutritious dairy products like school milk, cheese, yogurt and other dairy products.Lee Mielke is a graduate of Brown Institute in Minneapolis, Minnesota. He's formerly the voice of the radio show "DairyLine," and his column appears in agricultural papers across the U.S. Contact him at [email protected].