The KDM Dairy Report 05/17/2019

There were no major dairy reports out this week, but a Milk Production Report is due out on Monday. Was today’s rally in anticipation of a bullish report? It’s hard to say at this point, but Dairy Market News updates this week continue to point to a spring flush that is anything but challenging for processors. Unlike recent years, spot loads of milk continue to trade near Class; severely discounted milk is simply not available. In fact, the Western update noted that milk output in Arizona is down enough that they are importing some loads from the Midwest to keep processors running at full capacity. Milk is past the peak in the Southeast while more reports of feed issues are coming up in the Central region. Farmers are light on rations. Cheese demand is a mixed bag, with reports of less interest in the Midwest, but solid sales on either coast. With a lighter flush, cheese output is trending lower as manufacturers opt out of spot loads of milk. Market contacts remain bullish cheese, noting the price correction this week could spur additional buying.

Weekly cold storage numbers are showing a decent demand picture. Butter stocks at USDA-selected storage centers were down 1% (314k lbs) over the period 05/01 through 05/13, while cheese stocks decreased 1% (1.03 million lbs) over the same time frame.

Weekly dairy cow slaughter numbers were below year-ago levels for the first time in 2019. For the week ending 05/04, just 57,100 head were culled, vs. 57,500 head last year at this time. It was also the lowest weekly total since January. It could be that farmers were busy trying to get fields planted during a brief window of good weather.

Corn prices were sharply higher as the extended weather forecast for much of the grain states looks very wet. Some analysts commented that it’s the worst they’ve seen in 30 years. The window for corn planting is rapidly closing.

Not only do we get a Milk Production Report on Monday, but a Cold Storage Report on Wednesday and Livestock Slaughter Report on Thursday. It looks like a data-packed week in store, with implications for futures prices. President Trump announced today that the U.S. will be dropping steel and aluminum tariffs against Canada and Mexico. That could result in Mexico dropping their dairy tariffs against the U.S., which would certainly help exports. The strong move today and weekly higher close portends further strength in the dairy sector. As weather continues to warm across the country, both milk and components will decline. Hang on for what could be a volatile week ahead!