Milk Production up 2.5%, Cheese Hits Record Prices

By Robert Tigner, Iowa State University, published in the Iowa Farm Outlook. April 2008 23 major dairy states milk production rose 2.5%. Production per cow was only 12 pounds higher for April.
calendar icon 27 June 2008
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Iowa State University Extension

Milk cow numbers were 152,000 more than April 07 and 8000 more than March 08. March milk production was revised down by 10 million pounds or 0.1%.

Iowa April 08 milk production was the same as one year ago. Again cow numbers were higher than one year ago, 5000, but milk production per cow was 40 pounds lower. March 08 cheese production was 18.3% higher than one year ago and 7.4% more than Feb 08.

Source: Milk Production, NASS

Source: Dairy Market News

Source: Dairy Market News

Demand or Disappearance

Cheese inventories continue below year ago levels for the 12th straight month. The day before the “Cold Storage” report was released, CME block cheese prices rose 12 cents and barrels rose 10 cents per pound. May 2 was the last date cheese prices had a decline.

Year to date fluid milk consumption is down 1.2% from the same period one year ago. Organic milk consumption is up 28.6% and 32.8% for whole and fat-reduced milk respectively. Buttermilk consumption is also up 17.1% year to date.

All dairy products disappearance is up 4.2% for the Dec 07-Feb08 period. During the same period butter demand was +9.8%, American style cheese +4.2%, other cheese +3.75% and NDM +12.7%.

Source: Dairy Market News

Source: Dairy Market News

Exports for dairy products have been strong during first quarter 08. Cheese exports +5.4%, butter +798.6% and NDM exports were +73.5%. Dry whey exports dropped 5.5%.

Even though milk production has increased, cheese production has been weak. Cheddar cheese for March was -1.7% from one year ago. CA, the second largest cheese producer, cheese manufacturing was -20.7% for cheddar and -10.7% for all cheese.

As of April 30, butter stocks are 3% higher than one year ago, but cheese is down. Total cheese stocks are -5% from April 07. American cheese stocks are 7% lower and Swiss is 25% lower than one year ago. Other natural cheeses are 3% higher.

Source: Dairy Market News


Cheese production and stocks must be viewed a little carefully. Cheese makers knew that milk used for cheese would be purchased at higher prices than they were able to get out of the cheese when sold. So they were reluctant to make cheese except for existing contracts or orders.

USDA reported April dairy cow slaughter was 5700 higher than one year ago. Some of these were part of the last CWT herd reduction. For the last 9 years, April slaughter has averaged 10,600 less than went during April 08. The 23 major dairy states are still increasing dairy cow numbers. The question is why. Recall that the dairy heifer inventory was very large on January 1. In fact since 2000 the replacement inventory is 12.8% higher now.

New Zealand and Australia continue to have milk production difficulties due to drought. The weak dollar and this drought have helped to dramatically increase US dairy exports.

Milk and cheese prices continue to surprise observers. Typically milk and cheese prices would be declining about this time of year. However we have new record cheese prices on the CME. These prices are positive for dairy producers with increasing feed costs.

Source: Dairy Market News

June 2008

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