Ray Mueller

Correspondent

CHICAGO, IL

Wisconsin continued to run ahead of the national trend with its 2.1 percent increase in milk production for July compared to the month a year ago, according to the monthly report issued a week ago the National Agricultural Statistics Service.

The state's milk production for July was 2.562 billion pounds compared to 2.509 billion pounds in July of 2015. Cow numbers were down by 2,000 to 1.278 million but the average milk per cow was up by 45 pounds to 2,005 pounds, which was topped only in May of this year (2,060 pounds).

U.S. up by 1.4 percent

Although five of the top 23 milk production states reported a decrease in the July comparisons, the United States posted a 1.4 percent increase with a total of 17.9 billion pounds for the month. This was produced by 9.33 million cows – up by 18,000 head from July of 2015 and by 2,000 from June.

The average milk per cow in the United States was 1,920 pounds – 23 pounds more than in July of 2015. Colorado had the top average milk per cow for the month with 2,240 pounds, followed by Michigan with 2,210, Idaho with 2,140, New Mexico with 2,100, and both New York and Washington with 2,045 pounds.

Cow number changes since July of 2015 were highlighted by increases of 11,000 in Michigan, 9,000 in both Texas and Idaho, 8,000 in South Dakota, and 5,000 in Colorado while New Mexico was down by 13,000 head and Florida by 4,000.

Changes by states

Wisconsin's volume increase of 53 million pounds for July was followed closely by New York's increase of 49 million pounds for a total of 1.268 billion pounds or a 4 percent increase. Idaho added 45 million pounds (3.7 percent) for a total of 1.273 billion pounds in July.

Michigan posted an increase for 40 million pounds (4.5 percent) for a July total of 928 million pounds. Texas boosted its July production by 38 million pounds (4.4 percent) to a total of 893 million pounds. Other significant percentage increases were 5.9 in South Dakota and 4.3 in Colorado.

Although California's decline of 28 million pounds to 3.377 billion pounds was the greatest for any state for July, the percentage decline of .8 percent was the lowest in 18 months for the state in the monthly comparisons. Cow numbers were down by 10,000 to 1.768 million head and the average milk per cow was down by 5 pounds to 1,910 pounds for July.

Percentage declines in other states were 5.6 in Florida, 5.2 in Utah, 3.4 in Virginia, and 1.2 to 651 million pounds in New Mexico. Washington held at 560 million pounds of milk in the July comparisons.

USDA cheese purchase

Reacting to requests by the National Farmers Union, the American Farm Bureau Federation, and the National Milk Producers Federation in the wake of a prolonged period of low milk prices, U.S. Department of Agriculture Secretary Tom Vilsack announced on Tuesday of this week that the federal government would spend $20 million to buy 11 million pounds of cheese from private inventories for distribution to food banks and pantries.

The 11 million pounds of cheese would be the equivalent of about 110 million pounds of milk production. That is approximately how much milk Wisconsin's 1.278 million dairy cows have been producing in 1.3 days during recent months.

Other than the indication that the purchase price of this cheese would average about $1.82 per pound, the announcement did not give any specific details for the project. Among them would be the timing of the purchases, the varieties of cheese to be purchased, the suppliers of the cheese, and what process manufacturers or other holders of cheese stocks would have to complete in order to make sales.

Dip in dairy markets

In probable reaction to the USDA's announcement on the cheese purchases, the prices for both Cheddar cheese blocks and barrels dropped sharply in the spot market on the Chicago Mercantile Exchange (CME) on Wednesday morning of this week. Both settled at $1.78 per pound after hitting their 2016 price highs on the CME late last week.

Cheddar blocks fell by 6.5 cents per pound on Wednesday as six carloads were sold to put the week's total at 10 sales. Cheddar barrels dropped by 8.5 cents per pound as the first carload was sold on the CME since August 5 and a bid to buy one carload was not filled.

AA butter continued a six-day run of price losses with a decline of another 3 cents on Wednesday to close at $2.0775 per pound. Five carloads were sold to boost the week's total to seven, a bid to buy one carload was not filled, and an offer to sell one carload was not covered.

The Grade A non-fat dry milk price held at 84.50 cents per pound on Wednesday. The day's market activity consisted of one carload sale, an unfilled bid to buy one carload, and an uncovered offer to sell one carload.

Futures prices fall

In trading through early Wednesday afternoon, Class III milk futures prices fell in step with the setback for dairy commodity prices but not to the same extent. The highest monthly price declines for nearby months were 28 cents per hundred for September and 20 cents for November.

This left the futures at $16.94 per hundred for August, $17.47 for September, $17.28 for October, and in the $16s per hundred for all subsequent months through July of 2018. Contract trading for the Class III futures was brisk on Wednesday for September and October.

The price decline did not carry over to the dry whey futures. Trading prices ranged from a low of 28.45 cents per pound for August to between 39.45 and 41 cents per pound for all months in 2017. Every 1 cent change in the dry whey price converts to about 6 cents per hundred in the Class III milk price.

Pricing patterns

The September Class I fluid milk national base price for milk with 3.5 percent butterfat is $16.56 per hundred. This is an increase of $1.49 from August.

Another indication of price strengthening in the dairy market is the Global Dairy Trade auction held every two weeks in New Zealand. For the two auction sessions held in August, the overall price increases for the eight dairy commodities were 6.6 and 12.7 percent.

Market analysts attributed those increases to slowdowns in milk production in both the European Union and Australia. They also cited indications of improved import demand by China.

On Tuesday of this week, Cooperatives Working Together accepted two bids from one supplier for financial assistance on contracts to export 152,119 pounds of Cheddar and Monterey Jack cheese to buyers in Asia for delivery by October of this year.