Milk Cow Numbers Recede, Dairy Prices Steady to Up

Dairy workers prepping and putting milkers on in a parlor. ( Wyatt Bechtel )

The dairy herd posted a 1,000 head decline during April, following 17,000 head decline in March, according to the USDA-National Agricultural Statistical Service (NASS). Milk production was close to unchanged (+0.1%) from a year earlier during April, after a 0.6% decline in March. Cow productivity rebounded to a 1% increase year-over-year, after a paltry half percent increase in March.

This year started out encouraging as fluid milk product sales were only down 0.6% in January from a year earlier. But, fluid milk product sales trends finished the winter quarter on a weak note with March volume down 4.7% 2018’s, that was the biggest year-over-year monthly drop since last September. The average fluid milk product sales volumes were down 2.5% from the same quarter in 2018.

Production of butter, powder, and cheese during the first quarter paralleled the trend of milk production that was little changed from a year earlier. Butter and milk powder production was down 1% from a year earlier during the January-March interval and cheese production was unchanged.  American-type cheese production declined about 1% while other types of cheese production (mostly Italian-types) was up 0.5%.

Prices for milk destined for the cheese market (Class III) averaged $14.30 per cwt.during the first quarter compared to $13.87 a year earlier. The cheese market has been where most of the excitement has been in the dairy market in the last three months, as the Class III price increased by close to $1 per cwt in both March and April. Weekly cheddar cheese price quotes have settled down in recent weeks, suggesting that Class III milk price in May may not extend the recent up-trend.

Wholesale butter prices were static during the first four months of 2019, in a range between $2.25 and $2.28 per pound on a monthly basis. Prices in May came alive, ticking up close to 10 cents above the range of the first four months.  Inventories of butter in cold storage at the end of April were down 5% from a year earlier, compared to only being down 1% from a year ago at the start of April. Rising prices in May could be an indication that butter inventories have continued to slip.

Wholesale non-fat dry milk prices have shown the same stability as butter during the first four months of the year, ranging from 97 to 99 cents per pound on a monthly average basis. Those prices were 37% higher than a year earlier and 9% higher than the last quarter of 2018. Milk powder exports were up 18% from 2017 to 2018 and the rising prices may be having an effect on exports. Milk powder exports in March were 9% lower than in March 2018 and for the first quarter exports fell 10%.

The USDA-NASS estimate of milk price received by farmers in March (latest data) was $17.50 per cwt. At the end of 2018, this price was $16.60 per cwt and a year earlier the price was $15.70. The rise in Class III milk prices during April mentioned above should support a small increase in the April “all” milk price received by farmers, to be reported by USDA-NASS at the end of this month. Beyond that, the slight increase in butter and powder prices so far in May and stable cheese prices suggest the May farm milk price will be similar to April. Prospects for the summer months may hinge on the demand for cheese and fluid milk sales volumes that can hold up within 1% to 2% of a year ago. With milk production this summer quarter similar to a year ago (fewer cows in the herd offset by improving trends in per animal cow production), modest gains in cheese use suggests an all milk price about $18 per cwt., well above last year’s $16.00.

 
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