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 June
16, 2000
Milk
production is beginning to slow seasonally. U.S. milk production for
May was estimated to be 2.6% higher than a year ago, but the smallest
year-to-year increase this year. May production was 1.9% higher than
April. The smaller increase in milk production was due to milk per cow
being up just 1.9% compared to increases of more than 3% in previous
months. Despite low milk prices and improved cull cow prices herd
expansions in the West has kept the nation’s cow herd higher than a
year ago. In fact, cow numbers have grown each month this year. The
nation had 35,000 more milk cows in May that January. May cow numbers
were 0.7% higher than a year ago.
Milk
production continues to show strong growth in the West due to more
milk cows and good production per cow. May, compared to a year ago,
showed production to be up 14.0% in Idaho, 4.8% in California, 5.4% in
Arizona, and 12.2% in New Mexico. There was one other state with a
double-digit increase, Indiana at 10.7%.
In
the Northeast milk production has slowed. New York experienced a 2.3%
drop in milk production from a year ago due to both fewer milk cows
and less milk per cow. Pennsylvania had a small increase, 0.6%, with
no change in cow numbers and only 0.6% more milk per cow. Ohio had an
increase of 2.0% with slight increases in cow numbers and milk per
cow.
May
milk production over all was higher than a year ago in the Southeast,
but declining seasonally. Florida, Missouri and Kentucky each produced
less milk in May than April. May, compared to a year ago, was up 3.1%
in Florida, 6.0% in Kentucky, but down 1.0% in Missouri.
In
the Midwest, milk production was still increasing seasonally. Cow
numbers were about 0.9% lower in the Midwest and milk per cow was up
slightly. May milk production compared to a year ago was up just 0.1%
in Wisconsin, 3.0% in Iowa, but down slightly, 0.2% in Minnesota.
The
milk-feed price ratio continued to deteriorate. The May ratio was 2.67
compared to 2.80 for April and 2.89 a year ago. But milk prices will
begin to improve and so will the ratio. Feed prices remain at
relatively low levels.
Milk
prices will start to increase seasonally as both milk production and
milk composition begin to decline seasonally and shipments of Grade A
milk from the Midwest to the fluid deficit South begin in July. This
will tighten the supply of cheese less than 30 days old. Milk prices
will increase with higher cheese prices. CME cash cheese prices were
below support the week of May 22 -- 40 pound cheddar blocks at $1.0875
per pound with support at $1.10 and cheddar barrels at $1.065 per
pound with support at $1.07. But cheese prices started to show some
strength the following week ending on June 2 at $1.125 for barrels and
$1.250 for blocks. Further increases occurred each of the next two
weeks with 40 pound blocks ending at $1.26 and barrels at $1.23 on
June 16. April 30th stocks of cheese, however were still relatively
high at 747.7 million pounds, up 2.9% seasonally from March and 7.9%
higher than a year ago. Nevertheless, as milk production and
milk composition decline seasonally these stock levels will come down.
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Milk
prices will start to increase seasonally as both milk production and
milk composition begin to decline seasonally and shipments of Grade A
milk from the Midwest to the fluid deficit South begin in July.
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Butter
prices showed strength during May. CME cash Grade AA butter was $1.37
per pound on May 26. But prices have fallen since then. The April 30th
stock report showed butter stocks at 106.5 million pounds, still very
ample historically, but down 15.1% from a year ago. However, the
recent CME weekly butter stock report showed an error in their early
reports and CME butter stocks were actually about a third higher than
what was reported earlier. The butter market reacted to this error in
stocks, and CME cash butter prices on June 16 had fallen to $1.18 per
pound.
The
announced Class III price for May was $9.37 per hundredweight. With
the strengthening of cheese prices, the June Class III price may near
$9.70. With expected continued increases in cheese prices, the July
Class III price should show considerable strength, reaching in the
$11.60 to $11.75 range. By September we could see a Class III
price near $12.70 to $12.90. How hot and humid it gets will impact
milk per cow during the summer and will have an important effect on
exactly where milk prices end up.
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