Tag Archives: Milk production

Editorial: What was really behind ‘rockier road’ this summer? USDA revisions show fewer cows, less milk June-August

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By Sherry Bunting, Farmshine, October 27, 2023

EAST EARL, Pa. — In the June 30 and July 7 editions of Farmshine, we covered the milk market conditions behind the drama that sent farm-level milk prices spiraling lower. The two-part “rockier road for milk prices” series explored factors and asked questions about a situation that was not making sense.

Farmshine readers will recall that we questioned dubious math on the huge milk price losses in farm milk checks – far beyond the predictions for modest declines – in the April through August period. 

We questioned the accuracy of government milk production reports and the USDA’s World Ag Supply and Demand Estimates that kept telling us there would be more milk cows on farms and that milk production would continue higher for the year because of… more cows.

We doubted this was possible given the semiannual cattle inventory reports over the past year showing static to shrinking milk cow numbers and major shrinkage in the number of dairy heifer replacements (down 2% in Jan. 1 inventory, down 3% in mid-year inventory, a drop of over 100,000 head!). We have reported the escalating dairy replacement cattle prices setting multi-year record highs that are bearing these inventory numbers out.

We asked: Where are all these cattle coming from?

The June and July two-part series also indicated the 51% increase in the volume of Whole Milk Powder (WMP) imports coming into the U.S. compared with a year earlier in the January through May period — the highest volume for that 5-month period since 2016. (WMP is basically dehydrated milk for use in making any product or reconstitution.)

We also consulted Calvin Covington for his read of the situation. He reported to us that his calculations showed a 15% cumulative increase in total milk solids imported January through April, and that this extra volume was equal to 63% of the year over year increase in ending stocks on a total solids basis.

Well, what do you know! On Thursday, October 19, USDA issued its monthly milk production report for September. The report also went back and revised downward the previously reported totals for milk production and cow numbers for April through August.

Lo, and behold, in June and July while markets crashed, U.S. farms milked 13,000 and 34,000, respectively, fewer cows than a year ago. The September Milk Production report has now gone back to shave around 0.1% off of several months of previously reported milk production, and it has revised milk cow numbers lower than previously reported as follows: The May revision added 1000 head vs. prior report, the June revision shaved 4000 head off the prior report, July’s revision shaved 11,000 head, and August 14,000 head.

How convenient that while the Milwaukee Sentinel and area news stations were reporting five weeks of milk dumping in the sewers during June and July, and USDA Dairy Market News was reporting six to eight weeks of spot milk loads selling at $10 to $11 under the abysmal Class III price as it hit multi-year lows, the USDA reports had been telling us we were milking more cows than a year earlier, and those cows were making more milk.

Prices had plunged by more than 37%, and no one was talking about the scale-back of mozzarella cheese production and the ramp up of whole milk powder imports.

Sure, they were talking about the softening of dairy exports, and maybe that’s the point. The industry had to get the U.S. price levels below global levels in a hurry to honor the global goals set by the national dairy checkoff under previous USDEC president Tom Vilsack to keep growing exports on a Net-Zero pathway to get to 20% of milk production on a solids basis.

We wrote with concern in June and July about how even those prior numbers did not make sense at those previously incorrect levels, how a tiny change such as milking 7000 more cows in May vs. year ago and a little more milk per cow through the period could result in prices falling this hard in June and July. We have even more questions as even those small supply-margin factors have now been edited by USDA to be lower than previously reported for the April through August period.

Cow numbers have always been a driver for milk prices. Now we know there was an average of 21,000 fewer cows milked in the June-July period. And, by July, there were actually 34,000 fewer cows on U.S. farms vs. year ago.

For the Q-3 July through September period, the revisions show an average of 33,000 fewer cows nationwide compared with the third-quarter of 2022. Maybe this will also be revised lower in the future — as it includes the number of milk cows on U.S. farms in September that is now said to be 9.37 million as a preliminary figure.

In the space of six months, U.S. total milk production has gone from running 1% above year ago in Q-1 to nearly 1% (0.7%) below year ago in Q-3. But within that difference lies a revision that begs big questions about what was really going on while prices were plunging.

According to the tables in the September milk production report, the reality of the situation in June and July — while milk prices hit rock bottom and milk was being dumped and sold for $10 to $11 under class — we were already milking 13,000 fewer cows in June compared with a year ago and a whopping 34,000 fewer cows in July vs. year ago, according to these revised numbers. Now, in September, we’re milking 36,000 fewer cows in the U.S. vs. year ago.

In fact, these revised reports show that milk cow numbers have fallen by 74,000 head from the March 2023 high-tide – an unrevised and supposed 9.444 million head — to the August revised number of 9.376 million head and the September preliminary 9.37 million.

Think about this for a moment. We had unprecedented sets of proposals for milk pricing formula changes flowing into USDA in April and May with USDA announcing in June that a hearing of 21 proposals in five categories of formula changes would begin August 23rd.

While this was staging, we saw milk pricing drama unfold.

How useful this drama was for processors during the first eight weeks of the USDA Federal Milk Marketing Order hearing that has now been postponed due to “scheduling conflicts” to pick up where it left off on Nov. 27. 

How convenient it was for processor representatives to be able to point to dumped milk, below-class spot milk prices and negative premiums as justification for their proposals to increase make allowances while attempting to block farm-friendly formula changes — all in the name of investments needed in capacity to handle “so much more milk!”

(A year earlier, Leprino CEO Mike Durkin warned Congress in a June 2022 Farm Bill hearing that, “The costs in the formula dramatically understate today’s cost of manufacturing and have resulted in distortions to the dairy manufacturing sector, which have constrained capacity to process producer milk,” he said, calling the situation “extremely urgent” and warning that immediate steps needed to be taken to “ensure adequate processing capacity remains.”)

Fast forward to the first eight weeks of the USDA FMMO hearing in Carmel, Indiana in August, September and October. We listened as large global processing representatives (especially Leprino) pontificated about how the make allowances are set too low, saying USDA is setting the milk prices too high. They pointed to all of the drama this summer as proof that farmers are suffering because processors can’t afford to invest or retain capacity to handle “all this extra milk.”

Now here we are, September milk production nationwide is down 0.2% from a year ago, product inventories are tight to adequate, prices have improved… but along the way the industry managed to shake out hundreds of dairy farms — large and small — that have liquidated during the steep downhill slide this summer that so few were prepared for, as no one had a clue it would be this bad given the tight number of milk cows and replacements steadily reported in inventory.

What was really behind the dairy cliff we just experienced, where even USDA Dairy Market News recently reported a significant number of herds milking 200 cows or less have recently liquidated in the Upper Midwest?

With record WMP imports, a pull-back in fresh Italian cheese production, and other elements behind the scenes… was the fall-out of a so-called milk surplus manufactured to prove a point? (Remember, Leprino’s Durkin warned that if make allowances aren’t raised, sufficient processing capacity may not remain. And take note that other Leprino representatives warned during the USDA FMMO hearing last month that they may not invest in U.S. processing capacity in the future, if make allowances are not raised and FMMO minimum prices lowered.)

Or was the fall-out this summer manufactured to fulfill the dairy checkoff’s goals for exports? You see, we are told there was excess product in Europe and New Zealand, and our overseas sales were softening, but still well above 2020 and about even with 2021. The industry is driven to get the deals to secure more global market each and every year, even if the means to those ends are detrimental to how we serve our domestic market in the future.

Given the pullback in mozzarella production during this “rockier road for milk prices”, we have to wonder about the testimony of Leprino representatives in the FMMO hearings. They have been doing the loudest complaining.

Leprino is also a major strategic partner with DMI and the organizations under that umbrella: USDEC, Innovation Center for U.S. Dairy, Net Zero Initiative, and on and on.

They want FMMO milk prices lowered, they said, so they can pay premiums again (?), and they believe you, the farmers, should help pay for their sustainability pledges within the make allowance formulas as a cost of doing business.

They likely want to free up capital out of the FMMO pricing levels to pay for Scope 3 emissions insets from RNG-project dairies to compete with other industries that can buy those renewable clean fuel credits as offsets.

They likely want to use your milk money to pay for concentrated manure-driven expansion in the Net Zero wheel-of-fortune pathway that has been constructed with your checkoff money.

They want FMMO make allowances high enough to cash flow plant capacity investments based on byproduct whey, while they make mozzarella cheese that is not surveyed, is not price-reported, and is not included in the end product pricing formulas for dairy farm milk checks.

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Part One: What’s driving rocky road for milk prices?

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The stunner in the USDA FAS data is the U.S. imported 51% more Whole Milk Powder (WMP) in the January through May 2023 period vs. year ago. Looking at import volumes vs. All Milk prices, Fig. 1 shows the pattern: From 2008 to today, whenever there is a period of high farm milk prices, WMP imports increase, and farm milk prices fall. While cheese imports are down 3% YTD, non-cheese dairy exports are up 80% for a 9.2% total increase based on straight volume. Retired co-op executive Calvin Covington recently figured the January through April imports up 15% on a total solids basis. Graphic by Sherry Bunting compiled from USDA FAS and NASS data

— WMP and other imports accelerate, cow-less lab-protein analogs become ‘extenders,’

— Class I sales keep declining, fresh Italian cheese production down, inflation drives CPGs to reduce unit-sizes,

— RNG-driven dairy construction accelerates concentrated growth in cheese-heavy Central U.S.

By Sherry Bunting, Farmshine June 30, 2023

EAST EARL, Pa. — Current milk futures and dairy commodity markets have turned sharply lower and signal a rocky road ahead for farm level milk prices. Because of the lag times built into federal milk pricing, the most recent steep losses in spot cheese markets will hit the Class III price and create more Class I mover losses via the ‘average of’ method to hit milk checks in July, August and September. 

Factors driving this include: declining Class I sales and fresh Italian cheese production, inflation-driven unit-size shrinkage, two months of reduced dairy exports and five months of increased dairy imports, and the advertising of cow-less lab-protein analogs as ‘extenders’ for food processing.

The May Milk Production Report confirmed that the Central U.S. is, indeed, “awash in milk.” Part two of this series will zoom into the geographic shifts in the concentration of milk growth, driven largely by Renewable Natural Gas digester projects for the California RNG gold rush. Much of the new dairy construction in the cheese-heavy Central U.S. is focused on manure to energy, not necessarily on milk and cheese to consumers.

The Production Report was released after the futures closed on June 21. In the next four trading sessions from June 22 through 27, Class III contracts for July through September lost $1.50 per cwt, on top of previous losses of more than $2. 

By June 28, the expiring June Class III milk futures contract was at $14.92, and at $14.91 in the June USDA announced.

The ‘market’ has simply ignored USDA’s May 30 announcement that the government will bring in a ‘game changer’ to purchase 47 million pounds of cheese for food banks and schools as block and barrel cheese plunged to $1.31 and $1.39 per pound, respectively, by Tues., June 27.

USDA confirmed last week that the first round of its bid solicitations for the first phase of the 47 million pound cheese purchase won’t open until October. Bids and deliveries will come in stages from fourth quarter 2023 through mid-2024. 

This means cheap milk will make cheap cheese, which could get even cheaper if inventories build in anticipation of selling that cheese at a tidy profit into the seasonal demand increases that begin in October, along with these announced government cheese purchases. (Who needs a make-allowance raise with this game in town?)

For the past several weeks, USDA Dairy Market News has been reporting spot loads of milk in the Central U.S. selling as much as $11 per cwt below the Class III price. DMN also reports milk from the Central U.S. growth region is moving farther to find a home. We are also hearing from readers about substantial milk being dumped in the Midwest, while a few independent dairies in Minnesota, one milking over 1000 cows, have been told by their creamery that their milk is not needed after schools close.

May milk production, nationwide, was up only 0.6% from a year ago. The 24 major monthly states were up by 0.8%. Milk cow numbers did not grow from April to May and are running just 13,000 head above year ago. This modest increase comes on the heels of no net gain in milk production for 2022.

All year, the monthly USDA World Ag Supply and Demand Estimates (WASDE) kept increasing the 2023 U.S. milk production forecasts, based on what it said are ‘more milk cows and less output per cow.’ The most recent WASDE walked that production forecast back a bit, but still expects U.S. dairies will milk an average of 9.415 million cows in 2023. 

Then, somehow, the May Production Report pegged the number of milk cows on farms at 9.424 million head, even after the loss of 18,000 milk cows in a fire in west Texas in April. This is how tight the figuring has become on what we are told today is a surplus of milk and a lackluster demand.

The idea of a milk surplus that is big enough to drive these current price losses does not line up with USDA’s Jan. 1 cattle inventory report. So, in May, the WASDE began to walk it back, noting higher feed costs, reduced milk margins and higher beef cattle prices will slow the flow of milk.

Where are the cattle coming from? The Jan. 2023 inventory showed milk cow numbers were virtually unchanged from Jan. 2022 at 9.4 million head. The number of dairy heifers over 500 pounds was down 2% at 4.337 million head — the lowest number since 2006. Within that heifer number, expected calvings from Jan. 1, 2023 to Jan. 1, 2024 were also 2% lower than for Jan. 2022 to Jan. 2023. The next semi-annual cattle inventory report will be released in three weeks on July 21.

The Report’s smaller dairy replacement inventory is believable given the fact that offerings have been selling $300 to $500 per head above year ago levels, and the few weekly dairy cattle auctions throughout the U.S. have seen offerings down 30% below year ago… until June, when prices came under pressure on a suddenly increased offering at auctions over the past two weeks. 

Meanwhile, dairy cow slaughter rates are also increasing, according to USDA, especially in the Midwest and Southwest, up 31 and 47% above year ago, respectively.

While the WASDE has forecast per-cow output to fall by 55 pounds per cow per month in 2023, the May Production Report pegged an 11-pound per-cow per month increase.

This means, it took just 13,000 more cows nationwide, and just 11 more pounds of milk output per cow per month to flip the switch to sharply lower milk prices based on – suddenly — too much milk? (Geographic concentration of milk growth plays into this equation, and we’ll discuss that in Part Two.)

In Part One, we look at the other supply and demand factors that are having a direct impact on where farm level milk prices are headed. These factors fill in the gaps left by the perplexing and contradictory sets of USDA dairy data.

I.               Fresh fluid milk sales and fresh Italian cheese production both declined, pushing more available spring-flush milk into storable products.

Fluid milk sales January through April were down 2.8% from a year ago, and as bottlers slowed school packaging ahead of summer recess, the June 5th Dairy Products Report showed April production of fresh (made to order) Italian cheeses also declined 2.6% vs. year ago.

Meanwhile, butter production was down 4.9% while nonfat dry milk production increased just 1.9%, and skim milk powder production was down 22.4%. This put more of the available ‘spring flush’ milk into production of American cheese, up 2.3% vs. year ago in April, and the accompanying dry whey and whey protein concentrate production up 1.7 and 7.2%, respectively. 

Record volumes of dry whey and cheese have been coming to the daily CME spot auction, driving down the spot prices that drive the National Dairy Product Sales Report prices that are then used in federal class and component pricing formulas.

II.            Inflation pressures consumer demand, but inventories are not burdensome.

The May Cold Storage Report released on June 23 was a head-scratcher. Despite the ramped up American cheese production in the Dairy Products Report, the Cold Storage Report showed both the total amount of cheese in inventory, and the amount of American cheese in inventory, are both actually down 1% from a year ago at the end of May, while butter inventory was up 14% against last year’s higher-price-driving short supply.

Meanwhile, producers in the Midwest are being told that milk co-ops and buyers are facing cheese sales declines and that there’s not enough capacity to process all the milk now being produced in the region, with the existing capacity also experiencing labor and transport disruptions.

Dairy demand has stagnated, the analysts say, after months of high inflation. The May dairy consumer price index (CPI) was more bearish than the overall CPI. Dairy CPI was up 4.6%, with cheese up 3.6%, ice cream up 8% and other dairy products up 9.3% while whole milk decreased 3.4% and other non-whole milk increased 0.6%.

Inflationary pressure is driving some consumer packaged goods companies (CPGs) to trim unit-sizes for an appearance of stable consumer pricing. For example, we see unit-size shrinkage in cheese packages and slices. Not all American cheese slices today are 8 ounces, some are 6. Such moves effectively ration demand. 

III.            The stunner is dairy imports, up 9.2% with Whole Milk Powder imports up 51% year-to-date.

Looking at import volumes vs. All Milk prices, the pattern is clear (Fig.1). From 2008 to today, whenever there is a period of high farm milk prices, Whole Milk Powder (WMP) imports increase, and farm milk prices fall. 

WMP is basically farm milk from another country, in bulk dried form, not a specialized product. It can be used in processing virtually any dairy product, containing all of the milk components — both fat and skim solids.

From December 2022 through April 2023, the U.S. imported the highest percentage of dairy production equivalent since 2016. And there is more milk equivalent comparison today than in 2016. The National Milk Producers Federation’s monthly market report confirmed this. 

Then May imports worsened this trend. 

Digging into the June 12 USDA Foreign Ag Service (FAS) Import Circular, the U.S. imported 80% more non-cheese dairy products from January through May vs. year ago. At the same time, cheese imports were down 3.3%. Combined, the total cheese and non-cheese imports were up 9.2% vs. year ago.

But the stunner in the data is the U.S. imported 51% more WMP in the January through May 2023 period vs. year ago. 

It’s no wonder that the USDA Dairy Market News reported on June 15 that, “Dry whole milk processing (in the U.S.) is limited, despite hearty milk volumes.” 

The report went on to say that even as seasonal milk output recedes “market contacts suggest dry WMP market tones may remain steady (at the current lower price levels) due to lighter demand.”

Not surprising, given the U.S. imported more WMP in May (550,000 kg) than for any month since April of 2020. WMP was imported at a record-setting pace during the pandemic while milk was being dumped in the U.S. and production-base-programs were tightened on U.S. dairy farms by milk cooperatives and buyers. 

As the cumulative 2023 WMP imports accelerated in May, milk prices are set to take the sharp turn lower.

The year-to-date imports of butter, butterfat and butter oil are also well above year ago as part of that 80% increase in non-cheese imports January through May 2023 vs. year ago.

The June WASDE raised dairy import forecasts, yet again, especially on a fat basis, and it again lowered dairy export forecasts. The Report sees butter and nonfat dry milk (Class IV) continuing to sell stronger on better demand, while demand and prices for cheese and whey (Class III) are further reduced. 

This combination reduced the WASDE forecast for the 2023 All Milk price to $19.95, down 55 cents from the May forecast. Part of this is the Class IV over III divergence that is substantially lowering the Class I fluid milk price under the ‘average of’ method, which took more than $1.00 off the advance Class I price mover for July, announced last week at $17.32. It would have been $18.34 using the previous ‘higher of’ method.

IV.          Lab-created dairy protein analogs are advertised to processors as ‘extenders.’

Another emerging factor is the lab-created dairy protein analogs, which are the excrement of microorganisms that have been bioengineered with bovine DNA. These proteins are advertised in dairy food and manufacturing magazines as carbon-footprint-lowering, interchangeable ‘extenders’ for production of cheese, ice cream and other dairy foods.

The companies that are ramping up this fermentation-vat-lab-protein are doing limited consumer marketing. Mainly, they pursue a B2B model (business to business, not business to consumer) and try to capitalize on ESG scoring benefits based on who-knows-what-calculations that large processors are seeking as they navigate the investment, credit, and retail shelf-space ESG decisions up and down the supply chain.

No one knows how much lab-dairy-protein is being used at this time — or in what brands of dairy products — because these proteins do not have to be labeled, and they are not part of any dairy market or production report.

The Bioengineered Food Disclosure Law was passed by Congress in July 2016, and USDA established the national mandatory standard for disclosing foods that are, or may be, bioengineered in December of 2018. This Standard was implemented on Jan. 1, 2020 with mandatory compliance for all food manufacturers by Jan. 1, 2022.

According to USDA, the Standard defines bioengineered foods as “those that contain detectable genetic material that has been modified through certain lab techniques and cannot be created through conventional breeding or found in nature.”

The lab-dairy-protein-analogs are the harvested excrement of fermentation-vat-grown bioengineered yeast, fungi and bacteria, so BE labeling is not required due to the ‘detectable genetic material’ loophole. The modified genetic material is in the microorganisms, not their excrement.

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MILK MARKET MOOS — May 18-25, 2022

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Market Moos is a weekly column in Farmshine by Sherry Bunting

US Apr. milk output off 1%, Georgia surpasses Florida

In its May 18 report, USDA pegged total U.S. milk production at 19.2 billion pounds — down 1% from a year ago. The report tallied 9.4 million milk cows on U.S. farms reflecting a 98,000-head decrease (-1%) from a year ago, with output per cow unchanged.

Among the 24 monthly-reporting states, output per cow fell 0.1%, and cow numbers were off 78,000 (-1.1%), pushing production 0.9% below year ago in those major states.

USDA’s May 18 GAIN report noted an even larger pull-back in Australia’s 2022 output, forecast to be down more than 4% for the year, and New Zealand’s first quarter milk production is reported to be running 6% below year ago and the lowest level since 2013. 

Milk collection in the European Union is also running behind first quarter 2021 by a smaller degree, down 0.3%, according to an EU milk situation report delivered in Brussels last week. And, milk deliveries are reported to be 4% below year ago in Great Britain for the first quarter of 2022 — 3.3% below year ago in Ireland in March.

Throughout the world, these reports note that farmers are exiting the dairy industry. “The slump in milk production (in Australia) is largely due to farmers continuing to exit the dairy industry through farm sales, and some dairy farms partially or fully transitioning to less labor-intensive beef cattle production,” the GAIN report said.

In the U.S., the national impact of this trend is being buffered by the large production growth in places like Texas and South Dakota offsetting reduced production almost everywhere else.

In addition to the U.S. milking 98,000 fewer cows in April compared with a year ago, dramatic movements of cows out of some regions and into others is occurring. Notable shifts are also occurring within regions. (See chart above)

One region — the Mideast — that had been growing rapidly is now going through a substantial pull-back. The Mideast lost 35,000 cows and 68 million pounds of monthly milk production in April compared with a year ago. That is a collective 3.6% year-over-year decline broken down as -3.4% in No. 6 Michigan, -3.8% in No. 12 Ohio and -4.1% in No. 15 Indiana. Technically, western Pennsylvania is included in the Mideast when we look at the Federal Milk Marketing Order map, and the Keystone state, as a whole, recorded a 2.2% decline in milk production in April.

The Northeast and Midatlantic region lost 15,000 cows and 31 million pounds (-1.3%) of milk production with most of the decline coming from No. 8 Pennsylvania, down 8,000 cows and 2.2% in milk output vs. year ago while No. 5 New York (-0.8%) and No. 19 Vermont (-0.9%) were just under the national average.

In the Southeast region, the big news is Georgia’s milk production outpaced Florida for the first time, moving the relative 24-state newbie into 21st place and Florida to 22nd. Georgia and Florida were dead-even in March.

Georgia’s 12.1% year-over-year milk increase in April eclipsed Florida’s 12.1% year-over-year decline, with Georgia producing 1 million more pounds of milk with 7,000 fewer cows compared to Florida. Georgia producers milked 91,000 cows in April — up 9,000 head from a year ago. Florida producers milked 98,000 cows in April — down 12,000 head from a year ago.

As noted last month, Texas surpassed Idaho in March as the No. 3 milk-producing state. However, even the 4.7% increase in year-over-year April production in Texas (up 63 million pounds) could not overcome the 12.9% decline in No. 9 New Mexico’s production (down 92 million pounds), for a net 1.4% loss of 29 million pounds of milk from the Southwest region.

Regions holding steady-ish — lower by less than the national average — are the Upper Midwest down 10,000 cows and -0.4% in milk output and the Mountain States / High Desert down 3,000 cows and -0.3% in production, with No. 4 Idaho unchanged in both cow numbers and production vs. year ago.

In the Upper Midwest, No. 2 Wisconsin was almost steady as production was down just 0.1% with 1,000 fewer cows in April, while No. 7 Minnesota milked 9,000 fewer cows and made 1.4% less milk than a year ago in April.

The West Coast showed a net-loss of 1% just like the U.S. average: No. 1 California had -0.6% production (but milked 2,000 more cows), and the 2.7% production increase in No. 18 Oregon was not enough to make up for the 5.4% loss in No. 10 Washington State.

The Central U.S. was the only region to see a net gain — owing to a 0.9% increase in No. 11 Iowa and the whopping 16.7% (48 million pound) increase in milk production in No. 17 South Dakota, where cow numbers are up by 25,000 head. South Dakota is nipping at the heels of No. 16 Kansas (-2.2%), despite Kansas overtly seeking dairies to fill expanded processing there according to dairy market podcast advertising messages at the International Dairy Foods Association website. Elsewhere in the Central U.S., in addition to production losses in Kansas, declines were also recorded to the east for No. 23 Illinois (-3.8%) and to the west for No. 13 Colorado (-1.1%).

All of this bears note as farmers face escalating costs and milk futures are hesitatingly recovering the past three weeks of losses but under market conditions that are again creating divergence between Class III and IV that could create producer price differentials (PPDs). When milk is de-pooled from Federal Orders in these circumstances, we see inequitable distribution of losses and of value that can contribute even faster to the way the milk production map is changing.

At the same time, the USDA World Agricultural Supply and Demand Estimates for May highlighted an expected increase in fat-basis exports as the world is tight on butterfat, but a decline in skim-basis exports, which could change if China resumes its earlier level of milk powder imports. 

On the flip side, the WASDE report forecasts 2022 U.S. dairy imports to run well ahead of previous years’ on both a fat- and skim-solids basis. The WASDE report stated this increase in dairy imports will be boosted by larger than expected importation of products that contain dairy.

WASDE: 2022 imports up

According to the World Agricultural Supply and Demand Estimates (WASDE) last week, the 2022 All Milk price is forecast to average $25.75, down a nickel from April’s forecast.

The May WASDE raised the 2022 milk production forecast on what it says are higher milk cow inventories more than offsetting slower growth in milk per cow. But it is important to realize the April milk production report this week (as reported above) showed otherwise.

Cheese and butter price forecasts are raised from the previous month’s report on strong demand, but non-fat dry milk and whey prices are lowered. The Class III price is unchanged and Class IV is lowered.

Some are suggesting that higher retail prices for butter and cheese and other dairy products are negatively affecting demand and that the food industry can shift from butter to oils. However, recent reports from many sources indicate the global supplies of food oils and butter substitutes are also in reduced supply and rising in price at wholesale and retail levels.

Biden orders Operation Fly Formula via Dept. of Defense

Operation Fly Formula was ordered by President Biden invoking the Defense Production Act on Wed., May 18, sending military planes abroad to bring infant formula home to America’s babies, especially the specialty hypo-allergenic formulas for babies with allergies to milk or special health needs. Parents currently face 45 to 60% out-of-stock shortages in infant formula and two military cargo plane loads of hypoallergenic specialty formula have arrived from Europe and the UK over the past 7 days.

Spot out-of-stock undercurrents in baby formula and specialized milk-based meal replacements have been mentioned in this column several times over the past few months, but the situation has worsened. The USDA announced WIC vouchers allowing participants to buy brands other than sanctioned low-bidders.

By Thurs., May 19, the American Academy of Pediatrics had issued a statement telling parents it is safe to switch to whole cow’s milk for babies over 6 months of age that are not on “special” formula, making sure they are consuming other iron-rich foods or talking to their own pediatricians about supplemental iron.

Discussion is rampant through social media about goat milk as a substitute for formula. There’s something to this because goat’s milk is A2A2 in its protein composition, as is sheep’s milk and human milk. There are A2A2 cow’s milk brands available now also. Parents are urged not to switch to plant-based beverages that do not have the nutrition of whole milk and to be cautioned that lactose free milks may not have sufficient carbohydrate for electrolyte balance since the lactose IS the carbohydrate in milk.

The FDA also struck a deal to get the Abbott plant back up and going by June 4 after product recalls and a plant closure related to bacteria tests occurred in February, in part because of a whistleblower’s report that was delayed for months by a “mail room disruption” according to FDA.

‘Confusion is real’

Anxiously waiting for the expected FDA decision on label standards of identity for milk and dairy, NMPF reported this recent exchange between FDA Commissioner Robert Califf and U.S. Senator Tammy Baldwin of Wisconsin at a recent Ag Appropriations Subcommittee hearing. Baldwin chairs the Senate subcommittee that sets spending levels for FDA. Baldwin asked the Commissioner for his thoughts on how plant-based beverages masquerading as dairy products should be labeled. His response noted that when people think about dairy vs. plant-based beverages, they “are not very equipped to deal with what’s the nutritional value” of the products. Yes, the confusion is real.

Milk futures flip higher, Class III and IV diverge

Green ink the past two weeks replaced three weeks of red ink as milk futures posted back to back gains despite some waffling on the Class III side due to a report this week showing record natural cheese inventories. By Wednesday, May 25, the Class III contract average for the next 12 months was 25-cents higher than the previous week and fully steady compared with the end of April at $22.96. The Class IV milk futures went roaring $1 to $1.50, spots $2 higher — tripling the spread between the two. On the close Wed., May 25, Class IV contracts for the next 12 months averaged $24.05 — up $1.03 from a week ago and 60 cents higher than the end of April. Class IV continues to top Class III, with the average divergence now at $1.10. Aug. through Nov. contracts on the CME futures board now diverge by more than the $1.48 threshold that suppresses the Class I mover value under the new averaging formula.

Dairy products rally higher

CME spot cash dairy product markets have reversed course to move higher for two consecutive weeks, capped by a strong rally on Class IV products (butter and nonfat dry milk) driven by a 22% decline in butter inventories. Compared with the end of April, the May 25 daily spot prices for the four commodities used in federal milk order pricing are: Butter up 28 cents at $2.89/lb after 12 consecutive days of gaining more than 2-pennies per day in active trade volume; Nonfat dry milk up 13 cents at $1.84/lb; Cheese steady compared with a month ago at $2.30/lb, Dry whey firming up the 8-cent loss at 50 cents.

April blend up $1-1.50

The April uniform prices across the 11 Federal Milk Marketing Orders (FMMOs) moved $1 to $1.50 higher, with the Upper Midwest closer to $2 higher than previous month. This is the 6th straight month of gains, reported as follows:

  • FMMO 1 (Northeast) SUP $26.07 PPD +$1.65
  • FMMO 33 (Mideast) SUP $24.91 PPD +$0.49
  • FMMO 32 (Central) SUP $24.65 PPD +$0.23
  • FMMO 30 (Upper Midwest) SUP $24.55 PPD +$0.13
  • FMMO 126 (Southwest) SUP $25.43 PPD +$1.01
  • FMMO 124 (Pacific Northwest) SUP $24.79 PPD +$0.37
  • FMMO 51 (California) SUP $25.08 PPD +$0.66
  • FMMO 131 (Arizona) uniform price $25.52
  • FMMO 5 (Appalachian) uniform price $27.17
  • FMMO 7 (Southeast) uniform price $27.35
  • FMMO 6 (Florida) uniform price $29.13

June Class I ‘mover’ $25.87

The June Class I base price, or ‘mover’, was announced Wed., May 18 at $25.87. This is 42 cents higher than the May Class I ‘mover’ and $7.58 higher than a year ago. This marks the 9th consecutive month of Class I mover gains.

The June 2022 Class I mover is 61 cents higher under the current average-plus formula than it would have been using the previous ‘higher of’ for the second consecutive month after being a loss under the averaging formula for the previous four consecutive months. In 2022, alone, the average-plus Class I mover formula produced no difference in January and was 51 cents below the ‘higher of’ method for February, 79 cents lower for March and 50 cents lower for April before turning 17 cents higher in May and now 61 cents higher for June.
Since implementation in May 2019, the new formula has been negative more months than positive (18 of 38 months) for a net loss in Class I value of over $725 million from May 2019 through June 2022.

U.S. dairy herds fall below 30,000: Milk’s changing landscape prompts lawmaker’s interest in revitalizing dairy and rural economies in Southeast and beyond

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The map shows the annual data released by USDA of licensed dairy herds, cow numbers and milk production by state for 2021 vs. 2020 as the number of dairies fell below 30,000 even though the number of exits, 1799, was below the 20-year annual average (2300) and milk production grew by 1.3% nationwide. Compiled by Sherry Bunting from USDA NASS data.

By Sherry Bunting, published in Farmshine, March 4, 2022

WASHINGTON, D.C. — The U.S. produced 226.3 billion pounds of milk in 2021, up 1.3% compared with 2020, with 56,000 more cows and 1799 fewer dairy herds nationwide.

In fact, the average number of licensed dairy herds fell below 30,000 in 2021 — reported by USDA at 29,858, down 5.7% from 2020. This was less than the larger than average loss of 2550 dairies in 2020 and less than the 20-year average of 2300 exits annually.

The average number of milk cows for the year increased 0.6% in 2021 to an estimated 9.45 million head. Output per cow was slightly higher for the year, but slipped in the second half of 2021 compared with the previous year.

It is important to note that USDA’s annual data released on Feb. 23 computes the average number of cows and the average number of licensed dairy herds for 2021 compared with 2020. This is more like a rolling average for the year. These are not end-of-year numbers.

Furthermore, the landscape of change is getting the attention of some influential lawmakers ahead of 2023 Farm Bill discussions  as interest centers on the economic health of rural communities, and where Dairy thrives, it brings jobs and vitality.

2021 started out strong in production gains, but in the second half of the year, cow numbers began to shrink heading toward 2022, along with output per cow. 

The USDA semi-annual All Cattle and Calf Inventory Report, in fact, estimated 1% fewer milk cows on farms as of Jan. 1, 2022 compared with the previous year and 3% fewer dairy replacement heifers. That is significant compared to the higher 2021 average numbers.

Some of the data shown in the USDA production report raise questions about how milk production is counted and the reliance of NASS on Federal Milk Marketing Order data — given the significant decline in the percentage of U.S. milk production participating in FMMO pools today.

In 2011, an estimated 82% of total U.S. milk production participated in FMMO pools. This fell to 60% in 2021.

Looking over the data, the Eastern Seaboard saw declines in the number of herds, number of cows and in milk production for 2021. The exceptions were New York, Georgia and North Carolina in terms of production.

Starting with the Southeast, past data show the region held its own in 2020, but sustained collective losses of herds, cows and milk in 2021.

The two major reporting states of Florida and Georgia went in opposite directions. As Florida’s trends have pointed lower, Georgia dairies are expanding to take up some of the slack.

In Georgia, where the average herd size has grown by more than 300-head over the past four years, there was an average of 110 dairies in 2021, down by 20, but they milked 1000 more cows to produce 1.5% more milk. The average herd size grew to 745. January’s monthly milk production report shows Georgia is starting the year strong on production and cow numbers as well.

Innovation grants, avid promotion partnerships with retailers and a strong focus on heat stress mitigation, heat-resistance genetics and crossbreeding as well as programs for improved production per cow and milk quality throughout the Southeast are helping progressive herds in some areas take advantage of opportunities to grow or diversify, unless cooperative base programs get in the way.

By contrast, Florida’s dairy herd number fell to 75 in 2021, milking 5000 fewer cows and producing 5.1% less milk, with the average herd size stable at 1440.

North Carolina is not among the 24 major reporting states, but their annual production grew by 2.5%, according to the USDA report, even though they lost 5 dairies and milked 1000 fewer cows.

Virginia is among the 24 major reporting states, and annual production there fell by 3.4% as 54 fewer dairies milked 2000 fewer cows.

Kentucky and Tennessee each had 2000 fewer milk cows with production falling 3.4 and 6.3%, respectively, with 30 fewer dairy herds in Kentucky, 20 fewer in Tennessee.

Collectively, the Southeast region from Virginia to Florida to Arkansas totaled 1,531 licensed dairy herds in 2021 – down 199 (11.5%) from the 1730 reported in 2020. 

Cow numbers in the Southeast region declined by 15,000 head from 430,000 in 2020 to 415,000 in 2021.

During the Kentucky Dairy Partners conference in Bowling Green Feb. 23, John Newton, chief economist for the U.S. Senate Ag Committee Republicans talked about the upcoming 2023 Farm Bill and referenced these herd losses. 

The Kentucky native mentioned Senate Ag Committee Ranking Member John Boozman’s concern about the decline of dairy farms in the Southeast.

“One of the Senator’s dairy initiatives is to look at this. There are only 30 dairies left in his home state of Arkansas. They have lost nearly 90% of their dairies over the last couple of decades. He wants to figure out how to revitalize dairies in the Southeast,” said Newton referencing the secondary map showing the significant exodus.

“Sen. Boozman wants to look at how do we protect the Southeast dairy industry to grow and to revitalize these rural economies so our next generations are not leaving the farm for other economic opportunities,” Newton said, observing that broad band and available labor are two big issues the committee will look at that affect all rural communities.

Newton talked about the average loss of 2300 U.S. dairy farms annually from 2003 to 2020, putting percentages to the numbers and shading the states according to the rate of exodus. States heavily shaded in yellows and reds are losing dairy farms at the fastest rates; however, for different reasons. In the Southeast, Midatlantic and Northeast, the decline in farm numbers is accompanied by a decline in production except for New York, Georgia and North Carolina. Elsewhere, the rapid decline in farm numbers is replaced by larger dairies. States in the Central U.S. like Texas, South Dakota, Minnesota and Wisconsin are seeing significant milk production increases along with decline in dairy herd numbers. This is also true of the Mideast region — Michigan, Indiana and Ohio.

“The Senator’s concern about revitalizing rural economies extends beyond the Southeast to other parts of the country as well,” said Newton. His map illustrated similar concerns in the Northeast and MidAtlantic region, and anyone drilling down into data for communities throughout the rest of the country can see consolidation is reaching a tipping point.

Pricing formulas and inequitable distribution of revenue could be playing a role and will be part of Farm Bill discussions that have already begun, said Newton. He encouraged Southeast producers to be thinking about a better way to price milk and bring it to the broader industry discussions because the outcome has to work for dairy producers in all regions.

The swath of states in the Central U.S. and West is where milk production has grown substantially — in many cases this occurred because state initiatives were set in motion a decade ago to specifically attract dairies and bring processing plant construction and jobs to the rural economies in those states.

The trend in the Southwest has hit some speed bumps in New Mexico and Arizona, but Texas, Kansas, and Colorado are still big gainers. The Upper Midwest and Central Plains are the areas of strong growth too in the past two to three years, followed by the Mideast region – all having seen the building or expansion of significant Class III or IV milk processing capacity owned jointly by cooperatives and global corporations.

Like the Southeast, the Northeast and MidAtlantic region held its own overall in 2020, but milk production fell across the region in 2021, except for New York.

New York’s production grew 1.6% in 2021 with 1000 more cows and 220 fewer dairies. 

However, Empire State was surpassed by the Lone Star State in total milk production. Rapidly growing Texas is now number four in the nation for milk production. New York is number five.

Among the other major reporting states in the Northeast and MidAtlantic milkshed, Pennsylvania’s production for 2021 was barely above 10 billion pounds and 1.6% lower than in 2020.

The number of dairy herds in the Keystone State in 2021 fell by 230 to 5200, and cow numbers fell by 8000 head to 472,000 for the year. In January, the monthly reporting shows the number of milk cows on Pennsylvania farms fell below 470,000 for the first time. 

Pennsylvania remains 8th, having been surpassed by Minnesota for 7th in 2020.

In Vermont, the number of licensed dairy herds in 2021 fell by 60 to 580, and 2000 fewer cows were milked — pushing production 1.4% below year ago.

Of the other states in the Northeast / MidAtlantic milkshed, New Jersey took an almost 11% hit on milk production while Rhode Island declined 7.3%, Delaware 4.3% and Maryland was more stable, down 0.7%, losing 20 dairies. The remaining New England states ranged 1.5 to 4.5% lower in milk production for 2021.

Moving west to the Mideast states of Indiana, Ohio and Michigan — where a huge new processing plant in Michigan became operational a little over a year ago — production grew 4.6% in Indiana, 2.3% in Michigan and 0.4% in Ohio with 24,000 more cows milked collectively in the tristate region on 220 fewer farms in 2021.

Wisconsin had a story of its own, where the 2021 milk production increase on a pounds basis set records after being lower for the year in 2020. The No. 2 dairy state lost more dairy herds than any other state, but the 340 exits were half the number seen a year earlier. 

The number of dairy herds in the Dairyland State fell to 6,770; however, those dairies milked 15,000 more cows, and milk production grew by 3.1% in 2021.

Just south in Iowa and Illinois, production split trends, down fractionally (0.7%) in Illinois, with 1000 fewer cows and 30 fewer dairies, but growing 3.1% in Iowa, with 8000 more cows and 85 fewer dairies.

Throughout the rest of the growing Central region, South Dakota produced 15.5% more milk with 21,000 more cows and 15 fewer dairies. Just east, Minnesota continued to grow milk production 3.7% over year ago in 2021, milking 13,000 more cows on 135 fewer dairies. To the west, Wyoming’s herd numbers were cut in half at 5, but those 5 dairies milked 1000 more cows and grew the state’s production by almost 16.6%. Colorado lost 10 dairies but gained 6000 cows and a 2.3% increase in milk production.

Rounding the bend in Kansas and Nebraska, the trends were split. Kansas saw production growth of 1.9% in 2021, milking 2000 more cows on 10 less farms. Nebraska’s production fell 2.5% on 1000 fewer cows.

In the Southwest, Texas continued its multi-year rapid growth pattern as production increased 5% with 27,000 more cows milked on 20 fewer dairies.

New Mexico was a different story. After holding somewhat steady in 2020, production fell by 4.5% in 2021. The big reason was the exodus of 12,000 cows from the state and the loss of 20 dairies. Arizona also lost cows and production, down 1.5% from a year ago.

The No. 1 dairy state for milk production, California grew milk output by 1.3% in 2021, with 3000 fewer cows and 20 fewer dairies.

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MILK MARKET MOOS: Jan. 2022 milk down 1.6%, licensed herd average falls below 30,000 in 2021, futures higher, spot commodities lower

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Milk Market Moos, by Sherry Bunting, is a weekly feature in Farmshine. Portions are republished below with the prices updated to Fri., Feb. 25 after the print edition went to press Wed. evening, Feb. 23.

Milk production in all U.S. states collectively during January fell by 1.6% vs. year ago. In the 24 major reporting states, the decline was 1.4%. December’s production was also revised lower than the estimate last month.

January’s production decline came from a combination of reduced output per cow and 63,000 fewer cows compared with a year ago. Cow numbers in January are 5000 fewer than December.

This trend could go on for some time, as we noted recently in this column, that the Jan. 1 semi-annual All Cattle and Calf Inventory Report recently showed a 1% decline in milk cow numbers compared with Jan. 1 2021 and a whopping 3% decline in replacement dairy heifer numbers vs. year ago.

The 2021 production total for the U.S. was also released in the Feb. 23 USDA Milk Production Report showing last year’s U.S. milk production total was 1.3% above 2020.

At the same time, the average number of licensed herds in the U.S. during 2021 (not an end-of-year number) was reported at 29,858 — down 1,794 compared with the average number of licensed herds in 2020 and the first time the number fell below 30,000. This is a 5.7% decline in the average number of licensed dairy herds nationwide. In 2020, there was a 7.5% decline as the nation lost 2550 dairy herds that year.

In the Northeast and Midatlantic milkshed, among the major reporting states, Pennsylvania’s production was 2.9% below year ago in January with 6000 fewer milk cows on farms; 2021 production in the Keystone state was 1.6% below 2020 and the average number of cows on PA farms last year was 8000 fewer than in 2020.

January’s production in New York was down 0.6% with 5000 fewer cows; 2021 production in the Empire State was up 1.6% with the average number of cows on NY farms in 2021 numbering 1000 more than in 2020.

Vermont’s cow numbers fell by 1000 head in January 2022 vs. Jan. 2021 and milk production was off by 1.8%; 2021 production in the Green Mountain State was down 1.4% vs. 2020 with 2000 fewer cows as an average for the year.

The average number of licensed herds in Pennsylvania in 2021 was 5200, down 230 from 2020 (4.3% drop); New York 3430, down 220 (6% drop); and Vermont 580, down 60 (a 9.4% drop); Virginia 421, down 54 (11% drop).

In the Southeast milkshed among major milk producing states, Florida’s average number of herds was 75 in 2021, down 10 from 2020 (11.8% drop); Georgia 110, down 20 (15.4% drop). Production and cow numbers were mixed with Georgia growing output by 1.4% in 2021 vs. 2020 with 1000 additional cows; Florida’s production declined 5.1% with 5000 fewer cows, and Virginia’s production was down 3.4% with 2000 fewer cows.

Georgia’s production last month was up a whopping 5.1% as one of only 5 states to show a year over year production increase in January 2022 with 3000 more cows than a year ago even though the number of farms fell by over 15%.

By contrast, January’s production totals in Florida and Virginia were down 3.5% and 3.8% with 4000 and 3000 fewer milk cows, respectively.

Four other states gained production in January vs. year ago, (in addition to Georgia). They were: Iowa, up 1.7% with 3000 more cows vs. year ago; Idaho up 0.6% with 4000 more cows, Texas up 3.5% with 12,000 more cows, and South Dakota up a whopping 18.3% with 28,000 more cows.

The two largest milk production states saw a pullback in January: Wisconsin’s production was off fractionally while California, the largest producing state, saw a 1.9% decline in year over year production in January.

New Mexico’s trend deepened. 2021 production was 4.5% lower than 2020 with 12,000 fewer cows. In January 2022, production was below previous year by 12.1% with 42,000 fewer milk cows. New Mexico’s average number of licensed herds in 2021 came in at 120, down 20 (down 14.3%).

Texas also saw 20 fewer licensed herds last year, at 340 (down 5.6%). However cow numbers grew 27,000 in in the Lone Star State during 2021 with production beating 2020 by 5%.

Texas officially surpassed New York as the 4th largest milk producing state with 15.6 billion pounds of milk vs. New York’s 15.5 billion pounds in 2021. The January 2022 figures show 12,000 more cows and 3.5% more production vs. year ago in Texas.

South Dakota lost 15 herds at an average 165 for 2021 (down 8.4%). However, South Dakota gained 21,000 cows and 15.5% in milk production for 2021 vs. 2020. Neighboring Minnesota, the 7th largest milk producing state gained 13,000 cows and 3.7% in production in 2021 at 10.5 billion pounds — putting more daylight ahead of Pennsylvania, the 8th highest producing state at 10.1 billion pounds in 2021.

Look for more analysis of the yearend report in the next print edition of Farmshine and here at agmoos this week.

Cl. III and IV milk futures mixed,12-mo. Cl. III avg. $21.51, IV $23.25

Class III and IV milk futures were mixed when Farmshine went to press at midweek, Feb. 23 — before global reports showed a shrinking milk supply and before the Russian invasion of Ukraine commenced. Figures in the Farmshine print edition of Milk Market Moos have been updated using milk futures quotes at the close of Friday, Feb. 25 trade below.

Class IV split the trend with first half 2022 steady to lower, second half firm to higher, while Class III was mostly higher, except March and April contracts under downward pressure. In the Class III trading, new contract highs were set for August through December 2022.

The bullish USDA milk production report came out at the close of CME trade on Feb. 23 — prompting after hours trade to tick higher Feb. through Aug. by 25 to 65 cents on Class III, strengthening further at the end of the week on news of global supply deficits tempered by the uncertain impacts of war in Eastern Europe.

Class III milk futures recouped twice as much as was lost last week, averaging $21.63 for the next 12 months on the close of trade Wed., Feb. 25. This is 29 cents higher than the average a week ago,

Class IV futures averaged $23.46 for the next 12 months, generally steady at midweek compared with the previous week’s average, but gaining 22 cents Thursday and Friday on the average.

The average spread between the Class III and IV milk futures contracts for the next 12 months Feb. 2022 through Jan. 2023 stood at $1.83/cwt on Feb. 25 — 10 cents narrower than a week ago with Feb. through August contracts $1.80 to $2 apart and narrowing to right around the $1.48 threshold by September.

CME spot dairy commodities lose ground

CME spot dairy prices moved higher on Class III products (cheese and whey) before turning lower at the end of the week. For Class IV products (butter/NFDM) the trend started lower and continued lower through week’s end.

By Fri., Feb. 25, butter lost two-thirds of last week’s huge gain, pegged at $2.5785/lb with 2 loads trading. This was 20 cents lower than the previous Wednesday, with 8 cents of the loss occurring in a single session Friday.

Grade A nonfat dry milk (NFDM) lost 5 pennies this week then gained one back on Wed., Feb. 23 when the spot price was pegged at $1.86/lb — down 4 cents from a week ago with 12 loads trading. Thursday’s trade saw a penny and a half increase, which was lost Friday, to end the week at $1.86/lb.

On the Class III side of the ledger Wed., Feb. 23, 40-lb Cheddar blocks were firm at $1.99/lb, gained 3 cents Thursday, but lost 7 cents Friday, Feb. 25, when 40-lb blocks were pegged at $1.9450/lb, down 4 1/2 cents from a week ago with a single load changing hands; 500-lb barrels at $1.90/lb were 1 1/2 cents lower than a week ago with 2 loads trading Friday.

The spot market for dry whey gained a penny, at 81-cents on Wed., Feb. 23, with no loads trading, but then lost 3 cents in end of week trading, pegged Fri., Feb. 25 at 78 cents, no loads traded.

Grain market rallied

Corn rallied 10 to mostly 30 cents per bushel higher last Wed., Feb. 23 on the eve of the Russian invasion of Ukraine, most strength near term; soybean meal $10 to $30/ton higher with far off contracts $5 to $10/T higher than a week ago. Those levels followed wheat higher on the news in the wee hours of Thursday morning of the Russian invasion of Ukraine, a global exporter of wheat, corn and other grains and oilseeds, number one crop being sunflowers.

By Friday, Feb. 25, the run-up had tamped down, but with near-term contracts still much higher than a week ago — May corn closed at $6.55 down from highs over $7 the previous day; May soybean meal closed at $442.70 Friday.

Auction prices for market cows, calves, dairy fats backoff a bit after big gains two weeks ago

Market cows, fat dairy steers, and return to farm Holstein bull calves, especially beef crosses, jumped significantly higher two weeks ago and edged off a bit in the Feb. 17 to 22 auction market trade in Lancaster County. Choice and Prime Dairy steers averaged $115.00, Breaking Utility cows $81.10, Boning Utility $74.50, Lean cows $65.75. Holstein bulls 90 to 125 lbs averaged $143.00 with beef crosses bringing more than double, averaging $340.00; 80-100 lb $130.00, beef crosses $280.00.

Supply and demand are the real story behind chaos in cream markets

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istock photo purchased and used with permission
As shortages of cream products become more obvious in retail and foodservice channels, USDA’s Dec. 8 fluid milk and cream report acknowledged raw milk cream supplies are “tight to extremely tight” in the eastern U.S. at the same time that processors nationwide are trying to ramp up production of cream cheese, butter and seasonal products to meet sustained strong demand. In the midwestern markets, USDA notes Class I bottling needs have risen instead of declining like they normally do in December, and in the eastern markets, Class I bottlers are taking in more milk for steady to strong sales. istock photo

By Sherry Bunting, Farmshine

BROWNSTOWN, Pa. — What’s the real story with the availability of cream products and whole milk, especially in the population centers of the eastern U.S., and why the continued base penalties, base reductions, warnings of greater deductions on future milk checks — even for the base-obedient producers? Why the talk of overproduction of milk — especially in the Northeast and Mid-Atlantic region — when headlines are noticing a crimp in supplies?

A paradox, for sure.

One clue that makes this a true supply and demand situation — as opposed to purely a sign of supply chain disruptions — is the most recent USDA dairy products report showing 1.6% less butter was produced in October compared with a year ago, attributable to increased demand for cream and declining milk production.

The U.S. also exported more fat in the product mix than prior years.

In relation to this, October butter stocks, according to USDA NASS, are down 13% from September and 6% lower than a year ago after being double-digit percentage points higher than year earlier for the previous two to three years. The seasonal increase of 11.2% more butter produced in October than September was not as robust as previous years and it met an increased drawdown that has left cold storage stocks short heading into the holiday baking season in competition with cream product-making season.

While processor leaders from IDFA did a second Washington D.C. fly-in last week, talking with members of Congress about the trade disruptions, exports have continued strong and domestic shortages of milk and cream products are popping up all over the place – especially in the Northeast and Mid-Atlantic region.

It’s clear that trucking and worker shortages contribute, but it’s also clear the issues go beyond the frequently-cited packaging shortages, given the fact that bulk product is also becoming limited in foodservice channels.

So much so that the Dec.4 New York Times covered what has become a worsening cream cheese shortage in New York City. This pertains to the bulk cream cheese base that bagel shops purchase to tailor-make their own schmears. Consumers report retail packs of cream cheese in short supply at chain stores in New York while the bulk cream cheese base is tenuous for foodservice.

In both New York and Pennsylvania, shoppers confirm scarcity of cream cheese and other cream products while stores are placing limits on purchases. Reports from Boston indicate stores are “screaming” for half and half. Others observe that eggnog production is exacerbating already tight cream supplies, but acknowledge the issues are bigger than just the seasonal beverage production.

Fox News picked up the story Dec. 6 and 7. They interviewed NYC bagel shop owners to learn how they are navigating the problem. One owner talked about begging his vendors for product, then locating some cream cheese in North Jersey and driving 90 minutes in his own truck three times to transport a total of 2000 pounds of the schmear.

The Fox and Friends morning hosts checked with Kraft-Heinz, the parent company of Philadelphia Cream Cheese, conveying the company’s statement that they are seeing a 35% spike in demand for the product, which they then blamed on panicking restaurateurs stockpiling it.

“We continue to see elevated and sustained demand across a number of categories where we compete. As more people continue to eat breakfast at home and use cream cheese as an ingredient in easy desserts, we expect to see this trend continue,” Kraft-Heinz spokesperson Jenna Thornton told Fox News in a written statement.

Fox and Friends host Steve Doocy, who does a lot of cooking, chimed in that he can’t find cream products, and they all wondered out loud, what’s the deal with no whole milk in the stores?

Facebook responses to queries about what’s happening in different areas confirm many are having trouble finding half and half, heavy cream, cream cheese, even butter, and some reported spot depletion of whole milk or all milk.

A Pennsylvania store owner texted a note claiming he simply can’t get whole or 2% milk for his store.

A ‘Lunch Ladies’ group on facebook discussed numerous incidents of milk order shortings, delays and non-deliveries lasting more than a week, in some cases several weeks.

In both eastern and western Pennsylvania, shoppers are reporting purchase limits and limited or non-existent supplies of whole milk and cream products at major supermarket chains. (In my own shopping over the weekend, a Weis location just outside of Lancaster had a decent supply of milk, but only a few off-brand unsalted butter packages in the case. I was lucky to pick up the very last Land O’Lakes butter pack lingering way back in the corner. In the baking aisle, the canned evaporated milk shelf was bare.)

A reader from Virginia reached out to say her local Walmart was full with milk Saturday, but not a jug to be found Sunday.

An anecdotal report from a shopper in Florida, after stopping at two stores, found no half and half, no heavy cream, limited fluid milk, a buying limit on cream cheese – but “lots and lots of non-milk ‘milk.’”

Coffee houses are also randomly affected, with reports out of New York and New England. in the Twitterverse noting both real-milk and oat-milk shortages as people tell of stopping at multiple locations for morning lattes. Mothers were also tweeting frustration this week over limited supplies of infant formula in some areas.

Perhaps complicating the issue – waiting in the wings — is the foray of DNA-altered yeast-excrement protein analogs being tested in the supply chains of large global corporations – like Starbucks. A headline from three weeks ago read “Perfect Day’s Dairy-identical Alt Milk lands at Starbucks.”

Starbucks is among the multinationals testing Perfect Day’s DNA-altered yeast-excrement deemed as dairy analogs in select West Coast locations. The Perfect Day company claims to be “on a roll” with the brand valued at over $1.6 billion and recently raising $350 million in its admitted efforts to “remove cows from the dairy industry, without losing the dairy.”

One aspect of the Perfect Day ramp up is the company works B2B with processors, not making their own consumer-facing products. If other companies are experimenting with the goal stated by Perfect Day last year of 2 to 5% augmentation of dairy processing with the yeast-excrement protein analog by 2022, there’s a scenario in this to think about: These protein analogs may be deemed “identical” to whey and casein in processor application, but they do not bring along the healthy fats, minerals, vitamins and other components of real milk.

Could current chaos in cream markets and product availability be a glimpse of future disruptions by protein analogs as the B2B model seeks to dilute real dairy under the guise of cow climate action? That’s a story for another day, but it bears watching in the context of the current paradoxical supply and demand situation right now.

For its part, USDA Dairy Market News reported Dec. 1 that milk output was rising in the East, but demand was still beating it. Then the Dec. 8 report said Northeast milk production had flattened under the pressure of rising input costs and penalties on overbase production.

Specifically, USDA DMN cites steady to higher bottling demand and active cheese production schedules soaking up supplies.

“Cream demand is strong throughout the East,” the Dec. 1st report said. “Some market participants have noted that widespread logistical issues – including driver shortages and delivery delays – pose a greater hindrance to cream-based operations than the tighter cream availability, itself, at this point.”

By December 8th, USDA DMN reported that eastern handlers were working to secure milk spot loads from other areas as local supplies are tight, noting that eastern cream supplies are “tight to extremely tight,” and some dairy processors reported very limited spot load availability.

The report also sought to explain the cream cheese shortage in retail and foodservice channels, noting multiple factors, including “logistics bottlenecks, labor issues and supply shortages at manufacturing facilities.”

While the report indicated stepped up butter production this week, one Pennsylvania milk hauler observed two empty silos and no trucks to be seen at the Carlisle butter/powder plant at the start of this week, which is unusual.

Related to cream cheese production in Northern New York, producers there say they were told plant worker shortages this fall meant less processing of their milk. This resulted in multiple occasions of having to dump milk that could not be processed, but the incidents were deemed “overproduction” with producers footing the bill.

Meanwhile, USDA DMN indicated more outside milk coming East to meet processing needs.

At the same time, dairy producers from multiple cooperatives in the Northeast and Mid-Atlantic region confirm they are still incurring stiff penalties on over-base milk. While some of the penalty levels have softened a bit from earlier highs, most are still being held to their base levels, or in the case of DFA, the Northeast and Mid-Atlantic producers are still being penalized for milk that is above 88% of their base.

This means in the face of reduced supply vs. strong demand, DFA continues its 12% reduction in base allotments that became prevalent, especially in the Northeast and Mid-Atlantic region, at the start of the pandemic. 

Furthermore, producers with other cooperatives report they have been warned to expect further deductions on their milk checks this winter – even if they did not exceed their bases — because there is still “too much milk,” they are told.

Attempts to gain further insights on the situation from major milk cooperatives and USDA went unanswered at this writing, so stay tuned for updates.

Dairy situation analysis: What’s up with milk production?

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Record high milk growth vs. record high losses, dissected

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By Sherry Bunting, both parts of a two-part series in Farmshine, July 2021

The dairy industry continues to wait for USDA to provide details on three areas of dairy assistance already approved by Congress or mentioned as “on the way” by Ag Secretary Tom Vilsack.

The fly in the ointment, however, is the record-high 2021 milk production (Table 1) and accelerated growth in cow numbers (Table 2) at a pace the recent USDA World Agriculture Supply and Demand Estimates (WASDE) expect to continue into 2022.

USDA is reportedly looking at production reports — up vs. year ago by 1.9% in March, 3.5% in April, 4.6% in May — to determine how to assist without adding fuel to expansion that could threaten late 2021 milk prices in the face of rising feed costs and a worsening western drought. (The latter two challenges could temper those forecasts in future WASDEs.)

May milk production a stunner

U.S. milk production totaled 19.9 billion pounds in May. This is a whopping 4.6% increase above 2020 and 2018 and a 4.1% increase over May 2019.

Let’s look at year-to-date. For the first five months of 2021, milk totaled 96 billion pounds, up 2.3% vs. the 93.8 billion pounds for Jan-May of 2020, and it is 4.4% greater than the 91.9 billion pounds of Jan-May milk produced in pre-pandemic 2018 and 2019. Of the four years, only 2020 had the extra production day as a Leap Year.

Milk per cow was up 3% over year ago in May. Compared with 2019, output per cow is up 2.2%, according to USDA.

Cow numbers vs. 2018 tell the story

Milk cows on U.S. dairies in May 2021 totaled 9.5 million head, up 145,000 from May 2020’s 9.36 million, up 172,000 from 2019’s 9.33 million, and up 83,000 head from 2018’s 9.42 million.

Counter to the national trend, Pennsylvania had 48,000 fewer milk cows than May 2018 — dropping 30,000 into 2019; 10,000 into 2020, and 8,000 into 2021.

Elsewhere in the Northeast and Southeast milksheds, among the 24 major monthly-reported states, New York had 4000 more milk cows in May 2021 than 2018, Vermont 8000 fewer. Georgia dropped 1000, Florida 12,000, and Virginia 11,000. In the Central states, Illinois was down 10,000 head.

The total decline in cow numbers for the 24 lesser quarterly-reported states, the collective loss in cow numbers is 59,000 head from May 2018 to May 2021

Accelerated growth is coming from three key areas where major new processing assets have been built or expanded.

In the Mideast, where the new Glanbia-DFA-Select plant became fully operational in Michigan this spring, there is a net gain of 32,000 cows for 2021 vs. 2018, Ohio’s cow numbers that had been declining 2018-19, began recovering in 2020-21. Indiana had 18 months of substantial growth, and Michigan returned to its growth pattern in 2020. Taken together, the Indiana-Ohio-Michigan region had a loss of 8,000 cows heading into 2020, but gained a whopping 40,000 cows over the past year.

In the Central Plains, where new plant capacity is starting up this spring and summer — Minnesota, South Dakota and Iowa, combined, added 40,000 cows May 2018 to May 2021.

In the Southern Plains, where joint-venture processing capacity continues to grow, Texas has continued full-steam-ahead, gaining 87,000 cows from 2018 to 2021, along with 29,000 added in Colorado and 17,000 in Kansas. New Mexico regained earlier losses to be 2000-head shy of 2018.

The growth patterns in these regions somewhat mirrored dairy exits from other areas — until Jan. 2020 (Table 2). The past 17 consecutive months of year-over-year increases in cow numbers leave the U.S. herd at its largest number in 26 years (1995).

However, the assumption that ‘dairy producers are okay because the industry is expanding’ ignores several essential factors. The playing field has become more complicated and inequitable. There are four main factors at play. We’ll look at them one at a time.

Ben Butler of South Florida posted this photo that went viral on Twitter April 2, 2020 of milk being dumped in Florida because there was no home for it. A few days later, he tweeted photos of milk gallons also being donated to Palm Beach County families in need. Challenges abound in the dairy supply chain. The unofficial tally of milk dumped in the Northeast and Mid-Atlantic region the first week of April 2020 was north of 200 loads, with additional reports of 130 loads dumped in the Southeast. Meanwhile, stores were not well stocked, most were limiting purchases and foodbanks were getting more requests as over 10 million people were newly out of work.

Factor #1 — Milk dumping and base programs 

A year ago in April and May 2020 — at the height of the Coronavirus pandemic disruptions — the dairy industry saw dumping of milk, stricter base programs and bigger milk check deductions. Producers culled cows, dried cows off early, changed their feeding programs, even fed milk in dairy rations.

But milk production still grew, according to the USDA data.

Some cooperatives and milk buyers, like Land O’Lakes, had base programs already in place and triggered them. Others made changes to prior programs or implemented new ones.

Dairy Farmers of America — the nation’s largest milk cooperative, largest North American dairy processor and third-ranked globally by Rabobank — quickly implemented a new base program in May 2020, seeking 10 to 15% in production cuts from members, varying by region, with overage priced on ‘market conditions.’

It is difficult to assess the ‘equity’ in these base programs and the cross-layers among producers between and within regions, or to know how these ‘bases’ are being handled presently. When questioned, spokespersons say base decisions are set by regional boards.

Meanwhile, product inventory and pricing schemes affect all regions, and milk rides between FMMOs in tankers and packages — with ease.

According to USDA, the 11 FMMOs dumped and diverted 541 million pounds of milk pooled as ‘other use’, priced at Class IV, during the first five months of 2020, of which 350 million pounds were in April alone. This is more than three times the ‘other use’ milk reported by FMMOs during the first five months of pre-pandemic 2019 (171.4 million pounds). By June, the amounts were double previous years.

Of this, the largest amount, by far, was the 181 million pounds of ‘other use’ milk in the Northeast FMMO 1 during Jan-May 2020, comprising one-third of all the dumped and diverted milk pooled across all 11 FMMOs in that 5-month period.

In the Southeast milkshed, the Appalachian, Florida and Southeast FMMOs 5, 6 and 7, together pooled 88 million pounds of ‘other use’ milk in the first five months of 2020. The Southwest FMMO 126 had 106.2 million pounds of ‘other use’ milk; Upper Midwest FMMO 30 had 46.1 million pounds; Central FMMO 32 had 36.7 million pounds; Mideast FMMO 33 had 30.7 million pounds; California FMMO 51 had 28.9 million pounds; Arizona FMMO 131 had 21.7 million pounds; and Pacific Northwest FMMO 124 had 1.3 million pounds.

The dumping had begun the last week of March 2020 and was heaviest in the month of April. Producers also saw deductions as high as $2/cwt. for balancing costs, lost quality premiums, and increased milk hauling costs. Unaccounted for, were the pounds of milk that had reportedly been dumped on farms without being pooled on FMMOs.

All of this against a backdrop of pandemic bottlenecks and record-high March-through-August imports of butter, butteroil, milkfat powder, and blends — adding to record-high U.S. butter inventories and contributing to the plunging Class IV, II and I prices vs. Class III (PPD).

Meanwhile, not only did production growth in key areas move ahead, so did strategic global partnerships. Just one puzzling example in October 2020, after eight months of deflated producer milk checks, depressed butterfat value, burdensome butter inventory, record butterfat imports, and a plunging Class IV milk price that contributed to negative producer price differential (PPD) losses, Land O’Lakes inked a deal to market and distribute cooking creams and cream cheeses — Class II and IV products that use butterfat — from New Zealand’s Fonterra into United States foodservice accounts.

The New Zealand press reports were gleeful, citing this as a big breakthrough that could be followed by other of their cheeses entering the “huge” U.S. foodservice market through the Land O’Lakes distribution.

Factor #2 — Class price wars and de-pooling

As reported in Farmshine last summer, dairy farmers found themselves in uncharted waters. As Class IV prices tumbled from the get-go with all of the ‘other use’ dumping and diverting, butter inventory building as butter/powder plants tried to keep up with diverted loads at a disruptive time, the USDA Food Box program started drawing products in the second half of May, and really got going by July 2020. 

Cheese, a Class III product, was a big Food Box winner. The cheese-driven Class III milk price rallied $7 to $10 above Class IV, and massive volumes of milk were de-pooled by Class III handlers, which has continued through May 2021.

Reviewing the class utilization reports, an estimated 80 billion pounds of Class III milk normally associated with FMMOs has been de-pooled over the past 26 months.

At the start of this ‘inequitable’ situation, academic webinars sought to explain it.

“We’re seeing milk class wars,” said economist Dan Basse of AgResource Company, a domestic and international ag research firm in Chicago, during a PDPW Dairy Signal webinar a year ago. 

He noted that under the current four-class pricing system, and the new way of calculating the Class I Mover, dairy farmers found themselves “living on the edge, not knowing what the PPD (Producer Price Differential) will be” (and wondering where that market revenue goes).

“A $7.00 per hundredweight discount is a lot of capital, a lot of income and a lot of margin to lose with no way to hedge for it, no way to protect it, when the losses are not being made up at home as reflected in the PPD,” Basse said in that summer 2020 webinar.

What does this have to do with year-over-year milk production comparisons?

Two words: Winners. Losers. 

Some handlers, and producers won, others lost — between and within regions.

Here’s why all of this matters from a production comparison standpoint: Dairy economists — Dr. Mark Stephenson, University of Wisconsin, and Dr. Marin Bozic, University of Minnesota — are both on record acknowledging that USDA NASS uses FMMO settlement data, along with producer surveys, to benchmark monthly milk production.

So, on the one hand: How accurate are these data for comparison over the past 26 months, given the inconsistent FMMO data from dumping, diverting and de-pooling? 

On the other hand: Did the negative PPDs and de-pooling, resulting in part from the 2018 Farm Bill change in the Class I Mover, allow Class III handlers to capture all of that additional market value and use it to fuel the 2020-21 accelerated milk growth for regions and entities connected to the new Class III processing assets?

Factor #3 — New dual-processing concentrates growth

Accelerated growth in cow numbers is fueling record production in 2021. It is patterned around ‘waves’ of major new processing investments in some areas, while other areas — largely fluid milk regions — are withering on the vine or growing by smaller margins with fewer cows. 

In the 24 major milk states, production growth was even greater than the All-U.S. total — up 4.9% vs. year ago. In part one, the breakdown was shown vs. 2018.

Here’s the breakdown for just the 12 months from May 2020 to May 2021 — a time in which the industry dealt divergences that created steep losses for some and big gains for others, while FMMOs became dysfunctional. 

In just one year, over 40,000 cows were added in Indiana, Ohio, and Michigan, combined, and milk production was up in May 2021 by 12.6, 3.2 and 5.1%, respectively. The draw is the massive new Glanbia-DFA-Select joint-venture cheese and ingredient plant that began operations late last year in St. Johns, Michigan. Sources indicate it reached full capacity this spring. Add to this the 2018 Walmart fluid milk plant in Fort Wayne, Indiana and other expansions in Ohio and Michigan.

Ditto for the Central Plains, where new cheese and ingredient line capacity became operational this spring and summer. Supplying these investments, Minnesota grew production 6%, South Dakota 14.6%, and Iowa 6.2% over year ago. 

Number two Wisconsin grew by 5.6% in May 2021 vs. year ago.

Milk production was up 5% in number one California, even though cow numbers were down by 1000 head, and dairy farmers in a referendum voted recently by a slim margin to keep their quota system. They are also dealing with a devastating drought that news reports indicate is now impacting both the dairies and the almond growers.

Then there’s Texas, where growth continues to be a double-digit steamroller, up 10.8% in May 2021 vs. 2020 — pushing New York (up 4.2%) to fifth rank. 

The Southern Plains has had several strategic investments, starting in Texas and New Mexico (up 6% vs. year ago).

In Colorado, where production was up 5.3% in May, DFA’s joint ventures and strategic partnerships with Leprino, Kroger and others have fueled growth.

Kansas grew milk production 7.3% vs. year ago. In 2018, a state-of-the-art whole milk powder and ingredient plant became fully operational in Garden City, Kansas. The plant was to be a joint-venture between DFA and the Chinese company Yili but ended up as a joint-venture between DFA and 12 of its member farms that are among the 21 Kansas dairies shipping milk to it.

DFA’s Ed Gallagher gave some insights on this during a May 2021 Hoards webinar. He said, “We went through a period of investing in powder plants in the U.S. It seems like there is a follow-the-leader approach when deciding on investments, and it goes in waves. The industry just completed a wave of a lot of investment in Class IV manufacturing plants, and now… it’s flipping to Class III.”

Looking back on the Class IV ‘wave’ 2013 through 2018, there were several times in those years that Class IV beat Class III, leading to FMMO de-pooling, but not to the extreme extent seen in the past 12 months as Class III now beats all other classes, including Class I, leading to negative producer price differentials (PPDs).

Gallagher sees Class III and IV prices “coming together” in the “next period of years” because the ‘wave’ of capacity investment has flipped from Class IV to III. He predicted more Class III capacity will be added.

Are these past 26 months of PPD net losses for producers the industry’s answer to, in effect, increasing processor ‘make allowances’ without a hearing?

The average PPD value loss (see chart) across the seven multiple component pricing FMMOs was $2.57 per hundredweight for 26 months, which began with implementation of the new Class I pricing method May 2019 through the most recent uniform price announcements for June 2021 milk. 

Applying a conservative 5-year average PPD (prior to Class I change) for each FMMO, only the few gray blocks on the chart represent ‘normal.’

This means even positive-PPDs show margin loss for farm milk pooled on FMMOs. In fact, the CME futures markets as of July 14 show August through December divergence between Class III and IV above the $1.48 mark, indicating Class I value loss and negative PPDs or smaller positive PPDs could return after barely a two-month reprieve.

Many handlers that don’t pool on FMMOs also use the uniform prices as a benchmark.

This $2.57 net loss for seven MCP FMMOs across 26 months represents almost a doubling of the current make allowance levels.

Current USDA make allowances and yield factors add up to a processor credit of $3.17 per hundredweight on Class III and $2.17 on Class IV. This already represents 11 to 25% of farm milk value, according to 2018 analysis by John Newton, when he was Farm Bureau’s chief economist.

Why is this important? Because we are already seeing additional margin transfer from Class I to Class IV as the industry moves to blended beverages that mostly use ultrafiltered (UF) milk solids. Blends using whey would fall under Class III.

Looking ahead, DFA now owns most of the former Dean Foods’ Class I fluid milk plants since May 2020. New manufacturing synergies are undeniable, considering the direction of dairy checkoff’s fluid milk revitalization plan emphasizing these dairy-based-and-blended beverages and ‘dual-purpose’ processing facilities. 

Dairy + Almond is a Live Real Farms beverage made by DFA and was launched through DMI’s Innovation Center with checkoff funds paid by all dairy farmers. The milk in this beverage is not priced as Class I, though it competes in the dairy case and is being promoted as a “Purely Perfect Blend.”

As low-fat UF milk solids are blended with other ingredients in a manufacturing process to make new combined beverages, the result is a competing beverage, and the milk in the beverage drops from Class I to Class IV.

Meanwhile, these beverages cost more at the grocery store, and the ingredients are not part of the USDA end-product pricing ‘circle’. Therefore, no new make allowances should be requested because processors are already getting a reduced class value, and a higher margin.

DMI’ vice president of global innovation partnerships, Paul Ziemnisky, gave some insights into this “future of dairy beverages” — and how it ties into new processing plants investments during the virtual Pennsylvania Dairy Summit in February.

Ziemnisky went so far as to say new processing facilities will “need to be built as beverage plants able to handle all kinds of ingredients” for the blended products of the future. In essence, he said, the future of fluid milk is “dual purpose” processing plants.

DMI’s usdairy.com website touts the checkoff launches of ‘blended’ dairy-‘based’ beverages — key to DMI’s fluid milk revitalization plan. Not flavorings, these blends dilute milk out of Class I, the highest farm-level pricing, and mainly into Class IV, the lowest. The resulting beverages compete in the dairy cooler with Class I fluid milk. Screen view

While 11 of the top 24 states had milk production increases of 5% or more in May, the 13 states with increases below 5%, or negative, are mainly located within traditional Class I fluid milk marketing areas: Florida, up 0.5%, Georgia up 2%, Virginia down 2.3%, Illinois up 1.9%, Arizona, down 0.5%, Washington, down 0.9%, Pennsylvania and Vermont both up 1.8%, and New York up 4.2%. 

Idaho and Utah, up 2% and unchanged, are outliers and largely unregulated by FMMOs. Some beverage assets are coming to that region in the form of ultra-filtration and aseptic packaging, including a plant renovation to make Darigold’s FIT beverage. Additionally, a new Fairlife filtration membrane plant was opened near Phoenix, Arizona in March, and Kroger is doing filtration and aseptic packaging in Colorado.

Meanwhile, Pennsylvania is often described as a ‘fluid milk state’ with a Milk Marketing Board setting minimum prices for fluid milk, and a string of independent milk bottlers that figure prominently in their communities.

Ranked fourth in milk production in 2006, Pennsylvania was passed by Idaho in 2007. By 2016, Michigan had pushed Pennsylvania to sixth. The very next year, in 2017, Texas leapfrogged both Pennsylvania and Michigan. Now, Minnesota has pushed the Keystone State to eighth.

How does the future of dairy affect traditionally ‘fluid milk’ states like Pennsylvania, or the Southeast for that matter?

New dairy-‘based’ beverage innovations can be made anywhere and delivered anywhere, often as shelf-stable products. Most are not Class I products unless they meet the strict FMMO definition which was last spelled out in the USDA AMS 2010 final rule. 

For now, this also includes the Pa. Milk Marketing Board. Executive secretary Carol Hardbarger confirms that the 50/50 drinks are not regulated under PMMB, which generally uses federal classification, but that a legal interpretation of the Milk Marketing Law with regard to blends may be in order.

The 50/50 blends are already in some Pennsylvania stores and elsewhere in the Northeast, which is the second phase of the ‘undeniably, purely perfect’ marketing plan for fluid milk revitalization.

Factor #4 — USDA, industry coalesce around climate

Ag Secretary Tom Vilsack has been outspoken from the outset about using and aiming every available USDA program dollar in a way that also addresses the Biden administration’s strategies for equity, supply chain resiliency, and climate action.

Speculating a bit as to why USDA is taking so long to announce details about already funded dairy assistance, it could be that Sec. Vilsack is looking at the fit for ‘climate impact.’

Paid around a million a year in dairy checkoff funds to serve 4 four years as CEO of the U.S. Dairy Export Council — between prior and current Ag Secretary posts — Vilsack understands the future plans of the dairy industry’s checkoff-funded proprietary precompetitive alliances on a global scale. 

Vilsack has been privy to the DMI Innovation Center’s discussions of fluid milk revitalization through ‘dual purpose’ plants and blended beverages. He is no doubt looking at the accelerating growth in milk production that is occurring right now for ways to tie dairy assistance to measured climate impacts in the net-zero file.

Producers on the coasts and fringes of identified growth areas have a target — fresh fluid milk and other dairy products produced in regional food systems for consumers who have a renewed zeal for ‘local.’ Fresh fluid milk will have to find a path outside of the consolidating system and cut through the global climate-marketing to directly communicate fresh, local, sustainable messages about a region’s farms, animals, environments, businesses, economies, jobs and community fabric.

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U.S. 2020 milk production up 2.2%, but average number of dairies decline 7.5%

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By Sherry Bunting, Farmshine, Friday, March 5, 2021

WASHINGTON, D.C. — The U.S. produced 2.2% more milk in 2020 compared with 2019 and did so with 51,000 more cows and 2550 fewer farms nationwide. The average number of milk cows for the year increased 0.6% over year ago and the average number of licensed dairies decreased 7.5% compared with 2019. 

While the number of dairy farms lost in 2018 and 2019 were larger, the percentage of decline in dairy farms for 2020 is the largest single year decline because the total number of farms from which to figure the percentage is smaller. 

The number of licensed dairies in the U.S. averaged barely above 30,000 in 2020 at 31,657. The rate of attrition has averaged 5% annually over the past decade with 2018 being 6.5%.

Some data of the data shown in last week’s USDA report raise questions about how milk production is counted and reliance on Federal Order pool information given all the massive depooling of milk we saw in 2020 (and continuing). When additional 2020 data come in, we’ll do some additional analysis.

To be clear, USDA’s annual milk production report, released last week, computes the average number of cows and the average number of licensed dairies for 2020 vs. 2019, so it is more like a rolling average for the year. These are not end-of-year numbers.

In looking over the data, it is interesting to see states in New England, like Massachusetts, Rhode Island and Connecticut, gain production while losing cows and farms even though the larger dairy producing New England state of Vermont saw production slip by 3.5% in 2020, cow numbers down 3.2% and farm numbers fell by 5.9% to 640. 

It is also intriguing to see production gains in the Mississippi data from USDA, despite cow and farm losses there, and despite being next to USDA-reported production declines throughout the rest of the Southeastern states, except for Georgia, where production was about steady, cow numbers were off by less than 1%, and dairy farm numbers were down 7.1% at 130. Florida’s production, cow numbers and dairy numbers all declined by 2.4, 2.6 and 5.6%, respectively.

Some of the states with the largest gains in milk production also had the highest percentage-loss of dairy farms.

Minnesota, for example, grew production by 2.3% despite the number of cows declining by 1000 head and the number of licensed dairies declining a whopping 14%. But the gain in milk production for Minnesota, at 10.15 billion pounds for 2020 has the state’s producers nipping at Pennsylvania’s heels for the 7th place ranking.

Pennsylvania’s 2020 milk production at 10.27 billion pounds was up 1.7% over year ago, although cow numbers were down 8,000 head (off 1.7%), and there were 300 fewer licensed dairies – a 5.3% decline from 2019. The average number of licensed dairies in the Keystone State during 2020 was 5430.

Just north, New York’s production grew 1.4% with roughly the same number of cows but 6.2% fewer dairy farms as the number of New York dairies fell by 240 (6.2%) to 3450 in 2020. Just south, production reportedly grew by 4.5% in Maryland (despite 2.4% fewer cows?). Production also grew 2.1% in Virginia with no change in cow numbers. The number of licensed dairies in Maryland fell by 2.9% to 340, while the number in Virginia fell by 6% to 475.

The Appalachian / Southeast states of Kentucky and Tennessee saw production ebb by 0.4 to 1.4% despite losing 4% and 6.3% of their cows, respectively. Tennessee had 10% fewer licensed dairies at 180, while Kentucky’s dairy numbers fell 6.2% to 450.

However, just north of those states, the Mideast states of Indiana, Ohio and Michigan added a lot more cows in 2020, especially in the third and fourth quarter ahead of the massive new cheese and ingredient plant getting into production at the end of 2020 in St. Johns, Michigan. Indiana grew production 6.2% with 2.8% more cows and 7% fewer dairy farms. Michigan had already been in growth phase for years, stabilized through 2018-19, and grew production 2.6% in 2020 with 1% more cows. However, Michigan lost almost 10% of its dairies in 2020. Ohio also lost 10% of its licensed dairies last year, but grew production 3.6% with 1.2% more cows.

Across to Iowa and Illinois, production grew 1.6 and 2.2%, respectively, but the number of dairy farms fell 5.0 and 8.7%, respectively.

Throughout the growth area of the Central Plains, South Dakota produced 11% more milk with 7% more cows but nearly 8% fewer dairies. Next door, Wyoming’s 10 dairy farms grew the state’s production by almost 29%. Colorado’s dairy numbers stayed the same, but with 5.6% more cows, they made 7.1% more milk. 

Rounding the bend in Kansas and Nebraska, the number of dairies fell 11.1 and 14.3%, while cow numbers grew 4.2 and 1.2% and production grew 5.5 and 3.6%, respectively.

Sandwiched between the rapid growth in the Plains and the Indiana-Ohio-Michigan triumvirate is Wisconsin – the Dairyland State – where 2020 production was just half of one percent (0.5%) above year ago. Cow numbers in Wisconsin fell by almost 1% and the number of dairy farms declined 8% to 7110, a loss of 610 dairies.

In the Southwest and West, Texas continued its multi-year rapid growth pattern as production increased 7.1% with 5% more cows, although the number of dairies fell 5.3%. In fact, Texas is nipping at New York’s heels for the 4th place ranking in milk output volume. In New Mexico, production was about steady, with 1% more cows, and the number of dairies was unchanged. Idaho grew production 3.9% with 1% more cows and 4.3% fewer dairies while Arizona grew production 2.2% with the same number of dairies and a few more cows.

California grew production 1.7% but lost over 3% of its dairies while the Pacific Northwest was generally steady on production and cow numbers but lost roughly 8% of the dairies.

The annual production report can be found here.

op 23 milk production rankings for 2020 milk production are as follows:

  1. California (41.3 bil lbs),
  2. Wisconsin (30.7 bil lbs),
  3. Idaho (16.2 bil lbs),
  4. New York (15.3 bil lbs),
  5. Texas (14.8 bil lbs),
  6. Michigan (11.7 bil lbs),
  7. Pennsylvania (10.3 bil lbs),
  8. Minnesota (10.1 bil lbs),
  9. New Mexico (8.2 bil lbs),
  10. Washington (6.8 bil lbs),
  11. Ohio (5.6 bil lbs),
  12. Iowa (5.4 bil lbs),
  13. Colorado (5.1 bil lbs),
  14. Arizona (4.9 bil lbs),
  15. Indiana (4.3 bil lbs),
  16. Kansas (4.0 bil lbs),
  17. South Dakota (3.1 bil lbs),
  18. Oregon (2.6 bil lbs),
  19. Vermont (2.6 bil lbs)
  20. Florida (2.3 bil lbs)
  21. Utah (2.2 bil lbs)
  22. Illinois (1.8 bil lbs)
  23. Georgia (1.8 bil lbs)

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If you have to divert milk, here’s some advice

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By Sherry Bunting

Production reduction and milk disposal were top-of-mind in a Center for Dairy Excellence industry call last week. Dr. Mike Van Amburgh of Cornell had advice for those dairy producers facing this impact of COVID-19 market disruptions.

Dr. Van Amburgh stressed avoidance of knee-jerk reactions based on hearsay. He urged producers to know, calculate, evaluate, prioritize, monitor, manage and review.

First and foremost, know what your cooperative is actually requiring and what the penalties are and the time frame. Producers should not assume a production cut of 10 to 15% in the next two to four months unless they have received a letter from the buyer of their milk.

Do the math for your herd. “What is the actual penalty for milk shipped over the new base? Figure out how much milk you have to divert. Calculate the pounds and the deduction and spread that over all the milk produced. What does this do to the income average?” The math is important because, he said, “you don’t want to do things that damage the herd’s ability to make milk in the future.”

UdderComfort_FreshCowflipPrioritize cow health, and “avoid strategies that truly damage the ability of your cows to produce milk,” he said. “You don’t want to make decisions that cost you more in the end.”

Go through your records, Van Amburgh advised. If a 10 to 15% reduction is specifically required for your market, set priorities.

Be methodical, not abrupt, he stressed.

Mike_VanAmburgh

Dr. Mike Van Amburgh

Once you determine pounds of reduction to target, Van Amburgh gave these recommendations in order of priority:

1) Dry off cows: “Look first at which cows could be dried off earlier, and do the math on those pounds and percentages.”

2) Cull cows that are not paying their way. “Don’t cull too hard, be methodical,” said Van Amburgh. Even if the beef market doesn’t pay well with plant closures and disruptions, cull the cows that are costing you money and will cost you even more money when over-base penalties kick-in for those producers who have received letters.

He advised culling cows not bred and longer in milk and cows that have a history of milk quality and udder health issues.

Cull the cows that will leave your herd in a better position to bounce back in the future, and cull the problem animals that require more time and labor or have issues with health and quality.  Refine the herd for high quality milk and to have fewer health problems that drain labor resources. High quality milk is an insurance policy in a selective market.

3) Pen cows over 200 DIM separately and adjust. These are the cows to make adjustments with to slow down by feeding differently or milking 2x instead of 3x.

Check your forage inventory to be sure you have enough to do this: Van Amburgh suggests raising NDF levels on later lactation cows. Go back to the basics — 34 to 38% NDF diets are the best way to back off production, he said. To keep the rumen and the cow healthy, bring forage up to 45 to 50%, then 65 to 70%, and pull starch accordingly to slow those later lactation cows down.

By making a group of later lactation cows and pulling back toward earlier dry-off over the next 120 days — load more forage, balance protein and amino acids and pull back on starch, “you can titrate some of that milk down,” said Van Amburgh.

The key, he said, is good NDF management because it is important to manage this strategy so these later lactation cows do not get fat to avoid metabolic issues when they calve back in.

LINGEN834) Focus on health when evaluating strategies and additives. Don’t just take a lot of the extras out, but do it in a way that makes feeding a less expensive but keeps them in good health, said Van Amburgh.

5) When lowering production, keep the butterfat. This helps keep the income from deflating.

6) Feed saleable milk. “One easy way to divert milk is to feed all the calves some of the salable milk,” he said. “Feeding milk to cows or heifers is also a strategy, and we have some Cornell Pro Dairy bulletins on that.”

Van Amburgh reminded producers that feeding milk to older animals creates a little more work than feeding whey. Work with your nutritionist to see if it it’s doable.

7) Add more forage and pull back starch. “It is crucial to focus on maintaining rumen health,” he said. “It’s important to compare how much this pullback will cost you vs. what the penalties are if you don’t divert all the milk you are being asked to divert. Weigh those dollars and consider the longer-term impacts. As the market adjusts, will your herd be positioned to be healthy and productive for future cash-flow opportunities?

Van Amburgh said the Cornell Pro Dairy team is providing diet and management considerations in an effort to help dairy producers and their advisors meet the request, while maintaining cow health and working to ensure capacity to resume normal milk production relatively quickly once the situation stabilizes.

A question asked on the call was: If dairy farmers reduce their milk production with nutritional measures now, what steps can they take to come back four months from now as conditions change?

This question shows the importance of thinking through how you are going to reduce production and weigh into that decision what the market conditions might be four months from now.

“The key to the answer is the four months,” said Van Amburgh. “That’s 120 days. If you are looking at a 365 or 305 day lactation, you aren’t going to be ramping back up that part of the herd in late lactation four months from now.”

“It’s algebra and biology,” said Van Amburgh. “Yes it is possible, but first sit down and really look at these cows. The last thing you want to do is damage high production cows up front.”

He noted that Cornell is working with herds in New York that if they can’t afford to send that extra milk at a severe discount, take a step by step process for reducing it instead of the knee-jerk reaction of pulling everything out of the program.

UdderComfort_MilkingParlor_18) Going from 3x to 2x milking is the last thing to consider, according to Van Amburgh. That is, unless there are acute labor considerations in the mix. Either way, Van Amburgh advised doing this strategically.

“Weigh this carefully,” he said. “Don’t do it at peak milk. If you are a 3x herd, a smarter strategy is to go to 2x on tail-enders, especially as you move them toward being candidates for an earlier dry-off.”

He said the other group to potentially target for 2x is fresh cows up to 21 days.

These considerations may fit management for some but not all dairies. Every operation will have to determine what might work best for them under their current management conditions. More on this can be found here.

Producers also wondered what they can do privately with milk needing diverted. The answer to this question varies. Robert Barley from the Pa. Milk Marketing Board was on the call, and he said there are no government entities requiring producers to cut production. This means that a producer’s cooperative is best to answer the question about other uses for diverted milk, and the answers may vary.

Producers can also talk with their cooperatives about appropriate donation channels.

On the regulatory side, selling raw milk to consumers is prohibited by most cooperatives, but where it is allowed, producers would have to obtain a raw milk license from their state department of agriculture, and only some states allow the sale of raw milk with a license.

Excess milk can be fed to other livestock on your own farm without a permit. But if it goes into commerce to another operation, it probably needs a permit as it would be identified as commercial feed. Check with your state’s ag department or bureau of plant industry.

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Dairy data show shifting sands

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Pa. production, cow numbers plunge into 2019

By Sherry Bunting, Farmshine, Friday, March 15, 2019

WASHINGTON, D.C. — The U.S. produced 1% more milk in 2018 compared with 2017 and did so with roughly the same “average” number of cows for the year. But there were 2,731 fewer U.S. dairy farms (-6.8%) selling milk during 2018 as the average number for the year fell to 37,468 according to USDA.

USDA is still catching up on its delayed milk production reporting after the government shut down earlier this year, the January 2019 figures were released Tuesday (March 12) along with the 2018 annual totals for production, cow numbers and licensed dairies. The data show shifting sands in the dairy industry even as producers, states and regions fight for their place in a consolidating pipeline.

The January portion of the report did show milk production up 1.3% over year ago after being only 0.8% higher in December. January cow numbers were down by 52,000 head, nationally, from a year ago, but up 2000 head from December.

Like a shot between the eyes, Pennsylvania came into 2019 with a whopping 25,000 fewer milk cows (-4.8%) producing 5.5% less milk in January compared with a year ago.

Licensed dairies, other 2018 data

In the 2018 portion of Tuesday’s report, it’s important to note that USDA describes its licensed dairy numbers as the “average number of dairy farms licensed to sell milk during the year, based on counts collected from State and other regulatory agencies.” This means the number of 2018 dairy farms nationally and by state is more along the lines of a rolling average for the year, not a tally of farms in operation at the end of the year for a tracking comparison.

Changes in cow numbers and production for fourth quarter 2018 vs. fourth quarter 2017 is more telling in terms of what it suggests about the rate of exits, consolidation and geographic shifts in the dairy industry. The figures continue to reflect big milk production and cow number gains with a stable number of farms in growing western states, stable production in the face of dairy farm exits and cow losses in some midwestern states, and falling milk production that directly mirrors farm and cow losses in most eastern states.

PA numbers concerning

For Pennsylvania, the figures are quite concerning as the state falls into this last category – right along with the Southeast. In fact, New York was the exception in the East, as the Empire State had stable production in the face of significant farm and cow losses.

Just 11 years ago, Pennsylvania was the fourth largest dairy production state. It then hung on to fifth place until 2016-17 when Michigan — and then Texas — pushed Pennsylvania to seventh.

USDA reports the average number of licensed dairy herds in Pennsylvania fell from 6,570 in 2017 to 6,200 in 2018. Again, this is an average number of dairy farms selling reported milk during the year, not an end-of-year number of remaining operations.

In July (2018), we asked the Center for Dairy Excellence for a handle on the number of licensed herds operating in Pennsylvania at that point in time. What we learned was that the state does not have a good tracking system for licensed herd numbers and that the state is working with the Pennsylvania Milk Marketing Board to get a better handle on these numbers.

The number we were given by the Center in July 2018 was 5,787 licensed dairy farms, but we were told that we “cannot compare this number to the USDA numbers because it is not the same data set.”

Still, the USDA notes in its report that it relies on state agencies for the numbers it uses to find the “average” number of licensed dairy farms state by state, for the year.

The difference between the number of dairy farms that exited the business in 2018 and the net number of dairies selling milk throughout the year is unknown in Pennsylvania.

Did Pennsylvania lose 370 dairy farms as the year over year “average” reported by USDA suggests? Or is that number closer to 700 if the state could provide end-of-year numbers for comparison?

End-of-year comparisons would be more helpful for policymakers to track the health of the dairy industry, whereas the average numbers reflect the type of information the industry wants to use in “sustainability” or “carbon footprint” claims because a certain level of milk production for the year would be produced by an average number of farms and cows during the year — not by just the number remaining at the end of the year.

Even using the USDA average for the year, Pennsylvania dairy farm numbers were down by 370 (-5.6%) and the average number of cows for the year was down by 6,000 head (-1%). Total annual milk production was 10.6 bil lbs (-2.1%) for 2018.

However, fourth quarter production in Pennsylvania was 4.6% lower than Q4 2017. This shows a deeper rate of decline, which was confirmed by the steep loss in cow numbers and production recorded for January 2019 in which USDA reported 25,000 fewer cows were milked in Pennsylvania, making 5.5% less total milk production for the state.

To put this into perspective, Wisconsin state officials estimate that over 700 dairy farms were lost in 2018, but the USDA report pegs the average number of dairy farms in the Dairyland State at 8500, down 590 (-6.5%) from 2017.

Production in Wisconsin, on the other hand, moved higher, reaching 30.5 billion pounds (+0.8%) for the year. The average number of milk cows in Wisconsin fell by 4,000 head (-0.3%).

With Wisconsin and Pennsylvania being the number one and two states for the number of dairy farms, the data differences are illustrative. While communities sustained high dairy farm exits in Wisconsin affecting community-wide dairy infrastructure, the state is still maintaining national average milk production growth and smaller losses in the number of cows relative to the losses in the number of farms.

This suggests that as farms exit the dairy business in Wisconsin, others have growth making up for it. In fact, January’s production in Wisconsin was up 2.9%, according to USDA, despite 5,000 fewer cows reported. That one is a bit of a head-scratcher.

In Pennsylvania, the situation is much different. As the Keystone State loses farms, the cows and production are leaving also. Those losses are not being replaced with in-state growth.

This means Pennsylvania’s entire dairy infrastructure is at risk, and we are seeing more dairy herd liquidations slated for this spring – just like last spring – both nationally and in Pennsylvania. The question is, will Pennsylvania’s ranking in the top 23 milk-producing states continue to decline or can it be stabilized?

Case in point, 2018 annual milk production for Texas was 12.8 bil lbs (+6.1%). That’s 21% more milk than the 10.6 bil lbs produced by Pennsylvania in 2018. Not quite two years ago, Pennsylvania was producing more milk than Texas.

Another comparison to be made here is with Minnesota. Ranked eighth and nipping at the heels of Pennsylvania. Minnesota saw the average number of licensed dairy farms fall by 230 to 2,980 (-7.16%) in 2018, and cow numbers fell by 5,000 (-1.1%). However, Minnesota’s annual milk production in 2018 was unchanged from 2017 at 9.87 bil lbs. Minnesota came into January with 1.6% more production, still down by 5,000 cows.

Northeast milkshed mixed

Back to the Northeast Milkshed, the USDA figures for New York show a similar pattern to Wisconsin and Minnesota as the average number of farms selling milk in 2018 was down by 280 (-6.3%) at 4,190 while cow numbers were down just 2000-head (-0.3%) and production for the year was stable at 14.88 bil lbs (-0.3%). Milk production in New York came into 2019 at levels 3.4% higher in January with 2000 added milk cows compared with a year ago.

Vermont followed a pattern more like Pennsylvania, with the average number of dairy farms selling milk in 2018 down by 90 farms (-10%) while the average number of cows was down by 2000 head (-1.6%), and annual milk production was 2.68 bil lbs (-1.8%). Vermont’s production stabilized a bit into the new year, with January’s production just 0.8% below year ago.

In Virginia, USDA reported 565 dairy farms (-3.1%) sold milk during 2018 with annual milk production down by 5.4% from 4,000 fewer cows (-4.5%). Virginia came into 2019 with a whopping 9,000 fewer cows producing 11.5% less milk in January compared with a year ago.

These data illustrate a couple of things. First, some cooperatives, including national footprint cooperatives like Land O’Lakes and DFA, are enforcing some type of base/excess or seasonal base penalties. In the case of Land O’Lakes, farmers in the East, namely Pennsylvania, have had three to four months out of each of the last three years where milk was penalized for being over base, and the base the company gives the entire eastern region as its individual base trigger has been reduced over those three years. Meanwhile, the members in Minnesota report they have not been penalized to-date.

The data also illustrate that as fluid milk sales decline in the East where Class I sales have been historically more relevant to milk handling, pooling and pricing, the “balancing” costs are reportedly increasing, and those costs are passed back to the farm level through more milk check deductions.

In some ways, the fluid milk market is diminishing to the point where it could be seen as a balancer for manufactured dairy products — even though that’s not the way the USDA Federal Order pricing works.

Coinciding with these market shifts is the rise in documented incidence of supermarkets being randomly short or depleted of available whole milk and cream products throughout the East and Mideast at intervals during all of the past 12 months.

Meanwhile, tolling agreements with cream separation facilities in the East, especially through Land O’Lakes, bring milk from as far away as west Texas to states like Pennsylvania, where the cream can go into butter and the skim is often what pushes the Federal Order One skim dumping requests. There are a number of methane digesters dotting the Northeast and Midatlantic landscape, and this dumped skim milk can put another drag on the Class I sales pool for the region.

Mideast dynamics interesting

Interesting dynamics are also occurring in the Mideast states of Michigan, Ohio and Indiana, where farm losses as a percentage of total farms were also steep in 2018, but milk production was comparatively stable.

Michigan had grown rapidly in 2014 through 2017. For 2018, however, USDA reported 230 fewer farms (-13%) selling milk while annual production was off by just a fraction of one percent (-0.6%) at 11.17 bil lbs. Michigan milked an average number of cows that was down by 3000-head (-0.7%) in 2018. And yet, Michigan came into 2019 with 6,000 fewer cows but 1.1% more milk in January compared with a year ago. Another head-scratcher.

Ohio lost 180 dairy farms on average in 2018, according to USDA, declining to 2200 dairy farms (-7.5%) while average cow numbers for the year fell by 6,000 head (-1.9%) and production fell to 5.5 bil lbs. (-1.5%). When comparing fourth quarter cow numbers in Ohio, 2018’s total was 10,000 head less than Q-4 2017. January 2019 production in Ohio was 3.8% below year ago.

Indiana’s production was 4.16 bil lbs in 2018 (-2.2%) with 95 (-10%) fewer dairy farms selling milk during the year and 3,000 (-1.6%) fewer cows. Indiana came into 2019 with 6,000 fewer cows and 3% less milk production in Jan. 2019 compared with a year ago.

Southeast slide continues

In the Southeast, Florida had 15 fewer dairy farms in 2018 and Georgia was down by 20. Annual production was down 4.6% and 4%, respectively, in 2018 with an average of 4,000 fewer cows milked in Florida and 2,000 fewer cows in Georgia during the year.

Kentucky had 60 fewer dairy farms selling milk (-10%), an average of 1,000 fewer cows being milked (-1.8%), and annual production fell by 3.2% in 2018, according to USDA.

In Tennessee, the picture was especially tough, but consistent across all categories of figures. Annual milk production in the Volunteer State was down by a whopping 8.5% in 2018, while the average number of cows was off by 3,000 head (-7.5%) and 20 fewer farms sold milk (-7.5%) during the year, according to USDA.

Western gainers gain big

On the growth side of the ledger, Colorado stayed unchanged in the number of dairy farms at 100, milked 14,000 more cows and produced 8.8% more milk during 2018. By January 2019, production was up by 6.7% over year ago. Kansas lost 10 farms but produced 6% more milk with 10,000 more cows in 2018. Kansas also came into 2019 with 6.2% more milk in January.

Texas came into 2019 with 18,000 more cows than a year ago in January, producing 7.3% more milk and South Dakota had 4,000 more cows producing 6.3% more milk.

Look for more milkshed milk math analysis when pricing and other data become available in April and May.

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