MONTHLY DAIRY AND MILK MARKET REVIEW

With the January Production report we now have seen six months of reduced production and the number of cows has also shown a decrease from a year ago.

During early January, milk prices fell but there has been a slow steady recovery in milk prices during the rest of the month. Both the Class III and the All Milk price projections were lowered for 2010.

However, USDA is projecting that feed price should be lower than the last two years, which should increase milk per cow and profitability. When the USDA final crop report came out, production of corn and soybeans were higher than expected. Corn dropped 50 cents that next day and soybeans dropped 90 cents which also affected soybean meal. This is not good for grain producers but affects the feed prices for livestock producers who purchase most inputs.

The USDA milk production forecast was raised due to the slower than expected cow reduction loosing 9,000 head in November and 3,000 head in December. That was compared to 176,000 head in the previous 5 month period.

Since August dairy cow slaughter has dropped through November putting November’s slaughter at November 2005 levels. December 2009 levels were the largest since the December 2003 level of 244,000 head.

Exports for 2009 were revised up slightly and imports were revised down. As the economy recovers, cheese prices should strengthen and exports should improve in 2010.

The Milk Production Report was issued from USDA NASS on January 19, 2010.

· Milk production in the 23 major states for December 2009 was 14.6 billion pounds, down 0.8 percent below last year.

· November was revised upward 24 million pounds over a year earlier.

· Milk production per cow increased 29 pound above December 2008 with the 23 states average of 1,758 pounds.

· December dairy cow numbers in the 23 major states was 8.31 million head. 206,000 head less than a year ago and unchanged from November 2009.

· South Dakota Quarterly milk production for October to December 2009 was 468 million pounds, up 2 million from a year earlier and up 7 million from the previous quarter.

· South Dakota Cow numbers were unchanged from the same quarter in 2008, down 2000 head from the July to September 2009 quarter.

· South Dakota still is the only state in our region with a steady increase in milk production from a year earlier since the January to March 2004 quarter making it 24 quarters in a row.

The USDA World Ag Supply and Demand report was issued on January 12 that has All Milk price projections.

· When released, the USDA 2010 All Milk price projections were down for the first quarter 25 cents, down 20 cents for the second quarter, and down 15 cents for the third quarter of 2010.

· The new projections were for the 1st quarter of 2010 is $15.70, $15.70 for the 2nd quarter, $16.20 for the 3rd quarter and $17.15 for the fourth quarter of 2010.

· The All milk projections were above the Class III futures contracts the day before the release for all quarters.

· This means that if you agree with USDA when milk futures are below the USDA projections you might use options contracts to forward price your milk production.

The Class III USDA Milk price projections on December 20th were $13.81 for the 1st quarter of 2010 and $14.54 for the 2nd quarter, $15.20 for the 3rd quarter, and $15.59 for the fourth quarter of 2010.

· This is a decrease of 58 cents for the 1st quarter of 2010, a 36 cent decrease for the second quarter of 2010, and a 21 cent decrease for the third quarter of 2010.

· The Class III milk price projections were below January through March and June of 2010. The rest of the projections were above.

· When futures prices are above USDA projections prices it would suggest using futures to lock in prices.

· You can compare the forward contract price offered with your milk buyer to the cost of placing a futures or option contract yourself.

The monthly USDA NASS Dairy Products report was issued January 5, 2010.

· November 2009 butter production was 121 million pounds, 9.7 percent below a year ago, but 6.9 percent above October 2009.

· Total cheese production for November 2009 was 844 million pounds, 1.9 percent above last year but 2.1 percent below October 2009.

· American type cheese production for November 2009 was 332 million pounds, 1.8 percent below year ago and 4.3 percent below October 2009.

· Italian cheese production for November 2009 was 363 million pounds, up 6.5 percent above last year and up just 0.6 percent above October 2009.

· November 2009 Swiss cheese production was 5.1 percent above last year and up just 0.4 percent above October 2009.

· November 2009 Mozzarella cheese production was 7.5 percent above last year and up just 0.4 percent above last month.

· South Dakota total cheese production for November 2009 was 18.5 million pounds which is 12.8 percent below last year and 8.8 percent below October 2009. This includes Mozzarella, American, Cheddar and other cheeses. South Dakota total cheese production is 2.19 million pounds above the total last year through November.

The NASS Cold Storage report was issued January 22, 2010.

· The December 31st butter stocks in cold storage were 133.7 million pounds, up 12 percent above last year, but down 6 percent below last month. Of that amount, 110.9 million pounds were in public warehouses, leaving 22.8 million pounds in private storage..

· Total cheese stocks in cold storage on December 31st were 13 percent above last year to 966.9 million pounds and up just 1.0 percent above last month. Of that amount, 567.7 million pounds were in public warehouses, similar to last month.

· American cheese stocks were 587 million pounds, 9 percent over last year and up just 1 percent over last month. Swiss cheese stocks were up 9 percent above last year and just 1 percent above last month.

The monthly USDA Livestock Slaughter report was released January 22, 2010.

· Dairy cow slaughter in December was at 231 thousand head.

· Dairy Cow Slaughter for December 2009 was up 22,000 head from last month and up 2,000 head above a year ago.

· This brings the total dairy cow slaughter to 2.815 million head and is 224,000 more dairy cows slaughtered compared to 2008.

Know your production costs per hundred pounds of milk produced to be able to use forward pricing alternatives to obtain a profit on your dairy farm. If you need assistance in calculating your unit cost of production, contact your local Extension Office to set an appointment!

Watch for the next South Dakota Dairy and Milk Market Update the end of February 2010.

In the Stanchion:
Central Plains Dairy Expo is March 31 and April 1 at the Sioux Falls, S.D., Convention Center and Sheraton Hotel.

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