click image to zoom The relative increase in milk production is showing strength. Compared to a year ago, U.S. milk production was estimated to be up 1.5% for May and 1.9% for June. These are relatively strong increases, considering a year ago May production was running 1.2% above the previous year, and June’s production was 1.6% higher.
Due to sequestration, year-ago milk production per cow is not available, but one would assume that milk per cow is improving as producers feed for higher production, with lower feed costs and favorable margins, as well higher quality forges now available.
Dairy producers are also adding milk cows. Dairy cow slaughter is 11% lower than a year ago thus far this year. No doubt more dairy replacements are being brought into the herd as well. Milk cow numbers started to increase last December, increased by 11,000 head in June, and by 64,000 head this year.
Compared to June a year ago, milk production was up in Western states by 2.1% in Arizona; 1.7% in California; 2.1% in Idaho; 1.3% in New Mexico; and a strong 8.3% in Texas. Increases for the Northeast were: Michigan, 3.2%; and New York and Pennsylvania, just 0.3% and 0.2%, respectively. Ohio continuing to see a decline of 1.5%.
Production was up only slightly for Upper Midwest states, with Iowa up 1.0%; Minnesota just 0.1%; and Wisconsin, 0.6%. South Dakota continued to show a strong increase of 5.4%.
Despite the relative increase in milk production, dairy product prices and resulting milk prices have held up.
On the CME butter prices averaged $2.263/lb. in June, and will average higher in July. As of July 18, butter had increased to $2.48/lb. Several factors support strong butter prices. Cream supplies have been tight keeping butter production lower than a year ago. Butter exports through May were 80% higher than a year ago. Domestic sales have been higher. The result is lower butter stocks. Butter stocks on May 31 were 40% lower than a year ago.
The question is how long will butter prices hold? World butter prices have fallen well below U.S. prices and interest by world butter importers in U.S. butter has declined. This already showed up in May when butter exports were 8% lower than a year ago.
Cheese prices have also held. On the CME, cheddar blocks were above $2/lb. this year until May 13; went above $2 again on May 22, only to fall below $2 on July 1; but returned again to $2 on July 15. The cheddar block price continued to increase, to $2.0275/lb. on July 18. Cheddar blocks have average above $2 or every month through June, and this will continue for July.