Dairy cattle slaughter increasing

2012-08-30T08:00:00Z Dairy cattle slaughter increasingBY ROBIN SCHMAHL Agri-View
August 30, 2012 8:00 am  • 

It had been a virtually sideways pattern for October through December Class III milk futures with closing prices alternating between higher and lower all week. Prices spent the majority of the week above $20, but could not hold onto that level by week’s end.

The inability of underlying cash cheese prices to break out to higher levels kept a lid on the market. Cheese buyers are interested in picking up extra supply if it is offered, but do not seem willing to push prices higher. They are concerned over future milk supply and thus cheese supply, but current inventory and production is sufficient for demand.

Spot cheese trading was active, but resulted in only limited price movement. For the week ending Aug. 24, Cheddar blocks closed at $1.8525, down 1.75 cents with 18 loads traded. Barrels declined 3.25 cents to close at $1.8025 with 11 loads traded.

Milk is being moved around to areas of greatest need and better returns. Some milk was diverted from barrel manufacturing into nonfat dry milk production. Strong price increases over the past few weeks was the result of tighter supply. Current contracts are being filled, but supply above contracted amounts is virtually non-existent. Demand for condensed skim milk from cheese manufacturers is limiting what is available for nonfat production according to USDA’s Dairy Market News.

Butter price continued to edge higher, gaining another 0.75 cents for the week closing at $1.80 with no loads changing hands. Churning activity remains mixed. Churning is increasing in areas where cream supply is more available due to the standardization of school milk. Ice cream production is beginning to slow also allowing for extra supply to be available for butter production. The September Federal Order Class I price was announced at $17.59, up $1.05 from August and the highest price since January.

DAIRY CATTLE SLAUGHTER UP

Manufacturers remain concerned over future milk supply. High feed prices and limited supply is expected to result in heavy culling. Most cattle from foreclosures or those throwing in the towel are going to slaughter. Many farms are not interested in purchasing more mouths to feed at this time. Many farms are moving into survival mode. July dairy cattle slaughter totaled 239,000 head. This was an increase of 10,000 head from June and 32,000 head more than a year earlier. This pattern is expected to continue for some time with numbers increasing as the rest of the year progresses. Total year-to-date slaughter is 1.762 million head. This is 97,000 more than the same period of the time last year.

JULY COLD STORAGE MIXED

USDA released the July “Cold Storage” report, which considered somewhat neutral. American cheese stocks totaled 634.0 million pounds, up 4.8 million pounds from June, but 2 percent lower than a year ago. This was a surprise to some as they anticipated a decrease in stocks. Swiss cheese stocks increased 2,000 pounds, but remained 3.87 million pounds below last year. Other cheese stocks declined 9.7 million pounds or 2 percent from June. This put total cheese stocks at 1.043 billion pounds, down 4.9 million pounds from June. Butter stocks declined 11.2 million pounds from the previous month, but remained 24 percent above last year.

CROP TOUR ESTIMATES YIELD

The advisory firm Pro Farmer released their estimate for this year’s crop based on their results of their annual crop tour, which took place last week. They estimate the corn crop at 10.478 billion bushels with a yield of 120.25 bushels per acre. Soybeans production is estimated at 2.60 billion bushels with a yield of 34.8 bushels per acre.

AMS PRICES

For the week ending Aug. 18, Agricultural Marketing Service (AMS) prices were mixed. Prices for 40-pound cheddar blocks increased 3.8 cent to $1.76. The price for 500-pound barrels, adjusted to 38 percent moisture, averaged $1.78, up 6.7 cents. USDA grade AA butter averaged $1.72 for the week, up 5.2 cents. Nonfat dry milk averaged $1.26, up 1.1 cents. Dry whey averaged 54 cents, up 1.0 cents.

The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in commodity trading may not be suitable for recipients of this publication.

Robin Schmahl is the owner of AgDairy LLC, a full-service commodity brokerage firm located in Elkhart Lake, specializing in marketing plans and trade execution in all agricultural markets. He can be reached at 877-256-3253 or rschmahl@agdairy.com.

Copyright 2015 Agri-View. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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