The Agriculture Department lowered its 2021 milk production estimate in Monday’s World Agricultural Supply and Demand Estimates report, as slower-than-expected growth in milk per cow more than offset higher forecast cow numbers.
The 2022 estimate was raised, however, based on higher expected cow numbers. The WASDE stated that USDA’s Cattle report, to be released on July 23, will provide a mid-year estimate of the cow inventory and producer intentions regarding retention of heifers for dairy cow replacement.
2021 production and marketings were estimated at 228.2 billion and 227.2 billion pounds. respectively, down 300 million pounds on production from last month’s estimates and 200 million pounds less on marketings. If realized, 2021 production would still be up 5 billion pounds or 2.2% from 2020.
2022 production and marketings were estimated at 231.6 billion and 230.5 billion pounds, respectively, up 500 million pounds on both. If realized, 2022 production would be up 3.4 billion pounds, or 1.5% from 2021.
Cheese, butter, nonfat dry milk and whey price forecasts for 2021 were lowered from last month on relatively high stocks and weaker-than-previously-expected demand. As a result, Class III and Class IV milk prices were lowered.
USDA analysts project a 2021 Class III average of $16.80 per hundredweight, down 65 cents from last month’s projection, and compares to $18.16 in 2020 and $16.96 in 2019. Monday’s futures settlements, added to the already announced Class III prices, would portend a $17.47 average for 2021. The 2022 average was estimated at $16.75, down 40 cents from what was expected a month ago.
The 2021 Class IV average was estimated at $15.40, down 45 cents from last month’s estimate, and compares to $13.49 in 2020 and $16.30 in 2019. The 2022 Class IV average was projected at $15.75, down 20 cents from a month ago.
Price forecasts for cheese and butter in 2022 were lowered on larger expected stocks and higher production, but forecasts for NDM and whey were unchanged.
Cheese climbing
Dairy product prices started July with cheese climbing and powder, whey and butter dropping. The holiday-shortened week saw the Cheddar blocks hit a $1.7250 per pound Friday close, despite the downfall at the GDT, up 17 cents on the week but $1.19 below a year ago.
The barrels got to $1.58, 8 cents higher on the week but 76 cents below a year ago; 10 cars of block found new homes last week at the CME and 30 of barrel.
Monday’s trading took the blocks up a penny on a trade and added 1.75 cents Tuesday on 3 more trades, reaching $1.7525, highest since May 13. Keep in mind it was July 13, one year ago that the blocks set a record high $3.00 per pound.
The barrels jumped 6 cents Monday, with 10 cars exchanging hands, and gained 0.75 cents Tuesday, hitting $1.6475, highest since June 15, and 10.50 cents below the blocks.
StoneX stated in its July 8 Early Morning Update: “It is possible that exports done 4-8 weeks ago and not yet accounted for in data was stronger than expected. But because of the shipping issues faced this year, it’s possible that some of the cheese held in storage in second quarter was spoken for by international buyers but unable to get shipped in a timely manner.”
This morning’s Update speculates: “One area we believe may be underestimated by the trade is schools opening up this August and September. And not just schools, but the expected bump in foodservice as people cover their grills and eat out more. In fact the confluence of both of these factors is normally known and priced in. But this year it’s worth asking if the supply chains have what they need. Are they longer than normal? Are they shorter?”
Meanwhile, discounts remain steep on Midwest spot milk, according to Dairy Market News, and plants are running busy schedules. Cheese demand is “somewhat busy” and inventories are tighter. Some plants were running six- or seven-day schedules and still unable to fulfill extra orders. Cheddar, processed cheese and curd demand was strong and market tones are getting a lift as well. Labor shortages in upper Midwest plants, however, have become a concern and have begun to affect output.
Cheese demand at retail and foodservice markets held steady in the West last week and purchasing for international markets was steady, with notably strong demand from Asian markets. But exports continued to face delays due to limited vessel space and port congestion. Milk continues to be readily available in the West, despite the high temperatures, while producers are running at or near capacity, according to DMN.
Butter held at $1.74 per pound for four consecutive sessions, but closed Friday at $1.6750, down 6.50 cents on the week, lowest since March 22, and 1.50 cents below a year ago. There were 13 sales on the week.
The butter was up 2.25 cents Monday and 1.25 cents Tuesday, hitting $1.71 per pound.
Butter plant managers are beginning to report a tighter cream market. Cream was still available at similar multiples to the previous week but not at the same volume. Butter demand is at seasonal expectations. Retail is unchanged but somewhat slow. Foodservice is much better than a year ago but varies week to week, says DMN.
Cream was a bit tighter in the West last week although demand is generally said to be a little lower as well, due to holiday plant closures last Monday. Some manufacturers were running more active schedules this week. Some plants that were counting on a full week of churning the previous week had to pause production due to the heat. Bulk inventories are stable to growing. Retail demand is steady, albeit seasonally lower. Foodservice orders are strong but are reported to have plateaued. Export demand is stable, but port congestion and related shipping delays persist. Warehouses are congested.
Grade A nonfat dry milk fell to $1.2250 per pound last Thursday, lowest since April 16, but closed Friday at $1.25, 0.75 cents lower on the week but 23.50 cents above a year ago, with 3 sales reported on the week.
Monday’s powder gained a penny, with 4 cars sold on the day, and added 0.75 cents Tuesday, inching to $1.2675, on a sale.
StoneX points out that China has already bought the amount of skim milk powder that it would normally purchase in a year so the drop in powder prices could be a result of buying backing off. Domestic demand is reportedly slow but “concerns around supplies continue to hang over the market like a dark cloud.”
Dry whey fell to 48.75 cents per pound last Thursday, lowest CME price since Jan. 6, but closed Friday at 50.75 cents per pound, 4.25 cents lower on the week but 22 cents above a year ago. There were 4 sales for the short week.
Monday’s whey advanced 1.25 cents on unfilled bids, and added 1.75 cents Tuesday on 3 trades, climbing back to 53.75 cents per pound.
A year ago, the whey dropped below 30 cents per pound but the July 8 Daily Dairy Report points out that “bargain pricing and the world’s growing appetite for protein quickly lifted whey out of the doldrums.”
It set a record 70.25 cents per pound on April 20 but quickly retreated and held in the mid-60-cent range. The DDR suggests domestic demand will likely perk up with the lower prices, but if it doesn’t, “whey values could contribute much less to second-half Class III prices than they did in the first six months of the year.”
