Monday’s USDA milk production reports for August showed an abundance of milk and dairy cows for the market to absorb. Not only were the previous month’s figures revised higher, but the August total showed continued growth in the herd, with over 11,000 heifers more than prior month, a record for the year.
We are now trailing August 2021 numbers by only 21,000 head and milk output is now considerably higher year on year. If we continue to add even a nominal number of milking cows over the next few months, we should pull even with both herd and total milk output as we enter Q4.
August U.S. milk production was up 1.6 percent. Yield was a record for August at more than 65 lbs of milk per cow per day. Yield in 2022 to date has been excellent in every respect, and now the herd recover nicely. School is back in session, so more milk from the shed will be headed to bottling plants to provide Class I fluid drinking milk to lunch programs, but overall milk availability is good.
Fonterra’s Global Dairy Trade auction saw few surprises, with composite dairy product prices up 2 percent, although both skim milk powder (down 0.7 percent) and butter (down 0.2 percent) lost ground.
Finally, the cold storage report last week showed a drop in butter stocks of 31 million lbs to 283 million lbs. This is the lowest stock number for August since 2017 and has been the primary driver for the rally in prices to historic highs.
Perceived as bullish, CME butter prices rallied 4 cents per lb in the wake of the report.
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