There’s more milk coming.
The U.S. Department of Agriculture raised its 2023 U.S. milk production estimate in the April 11 World Agricultural Supply and Demand Estimates report, again citing a “larger expected cow inventory.”
Production and marketing were estimated at 228.7 billion and 227.6 billion pounds, respectively, up 200 million pounds on production from a month ago and 100 million pounds more on marketing. If realized, 2023 production would be up 2.2 billion pounds, or 0.97% from 2022.
“Fat basis imports for 2023 were primarily raised on the strength of a number of dairy products during first quarter,” WASDE said. “Imports of casein and milk protein concentrates are expected to remain firm, supporting higher skim-solids basis imports through the year.
Expectations of increased competition in butter, cheese, nonfat dry milk and whey markets were reflected in lower forecast exports on both a fat- and a skim-solids basis for 2023.”
Cheese and butter price forecasts were raised. Nonfat dry milk was lowered. Whey prices were raised on recent prices and stronger expected demand.
Cheese was projected to average $1.8550 per pound in 2023, up 4.50 cents from last month’s estimate, but compares to $2.1122 in 2022, $1.6755 in 2021 and $1.9236 in 2020.
Butter was projected to average $2.42 per pound, up 8.50 cents from a month ago, and compares to $2.8665 in 2022, $1.7325 in 2021 and $1.5808 in 2020.
Nonfat dry milk will average $1.1650, down 6.50 cents from last month’s estimate and compares to $1.6851 in 2022, $1.2693 in 2021 and $1.0417 in 2020.
Whey was projected at 42.50 cents per pound, up 3.50 cents from the March estimate, and compares to 60.35 cents in 2022, 57.44 cents in 2021 and 36.21 cents in 2020.
The 2023 Class III milk price average is now projected at $18.25 per hundredweight, up 70 cents from last month’s estimate, but compares to the $21.96 average in 2022, $17.08 in 2021 and $18.16 in 2020.
The Class IV was projected lower, at $18.10, down 20 cents from last month’s estimate, and compares to $24.47 in 2022, $16.09 in 2021 and $13.49 in 2020.
This month’s U.S. corn outlook is for reductions to imports and food, seed and industrial use, with unchanged ending stocks. Corn imports were lowered 10 million bushels. Feed and residual use was unchanged at 5.275 billion. FSI was lowered 10 million bushels. Ending stocks were unchanged at 1.342 billion bushels. The season-average farm price was unchanged at $6.60 per bushel. Global production was forecast at 1.44 billion metric tons, down over 7 million.
Soybean supply and use forecasts were also unchanged. The season-average soybean price forecast remained at $14.30 per bushel. Soybean meal was forecast at $465 per short ton, and soybean oil remained at 66 cents per pound. Global production, however, at 369.6 million metric tons, was down 5.5 million.
USDA’s first Crop Progress report of the season shows 3% of the corn crop has been planted, as of the week ending April 9, in the top 18 states that produced 92% of 2022 acreage. That’s 1% ahead of this time a year ago and 1% ahead of the five-year average.
Dairy product demand looked strong in February. The USDA’s latest U.S. Dairy Supply and Utilization report shows cheese utilization totaled 1.13 billion pounds, up 2.8% from February 2022, driven primarily by a 3% increase in domestic use. Exports were off 0.1%, a result of higher other-cheese varieties counteracted by a significant drop in American cheese volume compared to February 2022, according to HighGround Dairy’s assessment.
Butter utilization, at 164.3 million pounds, was up 13.1% from a year ago, thanks to domestic usage being up 16.9%. Exports, however, were down 32.1%.
Nonfat dry milk-skim milk powder totaled 175 million pounds, up 1.5% from a year ago, with domestic use up 10.1%. Exports were off 0.5%, although year-to-date are up 6.5%. HGD cited the weak global economy and tepid demand and “while domestic utilization increased, February 2022’s domestic numbers were the weakest since 2002, making for a very easy comparison in 2023.”
Dry whey utilization amounted to 65.9 million pounds, up 3.3% from a year ago. Domestic usage was down 3.2%, but exports were up 9.5%.
The cheddar barrels rolled into Chicago big time this week, as 70 loads found new homes at the CME, highest weekly total since June 30, 2018. That took the price down to $1.5125 per pound, down 20.75 cents on the week, lowest CME price since Nov. 22, 2021, 92.75 cents below a year ago and 26.25 cents below the blocks. The barrel lost 45 cents in three weeks.
The blocks closed the second Friday of April at $1.7750, down 5.50 cents on the week, lowest since Sept. 6, 2022, and 59.75 cents below a year ago.
“Central cheesemakers are clearly viewing the bearishly veering market prices with interest,” said Dairy Market News, though demand is reportedly healthy.
Some of the concerns arise from a wait-and-see approach on the buyer side, as prices shift down. Lower prices are expected to entice more buying near-term. Some cheesemakers say orders are beyond what they can produce. Cheddar and Italian style cheesemakers say demand has been robust. Process producers say any extra loads are moving at slight overages to usual formulas, and most recently produced cheese is “spoken for.” Milk availability remains a constant, with spot prices as low as $11 under Class III. Prices have in fact been at $10 below or lower every week in 2023, according to DMN.
Western retail and food service cheese purchases are strong to steady, and some manufacturers have sold out inventories through April. Demand from contract purchasers is reported as strong to steady. Loads are available, and the large CME block-barrel spread is being watched. Export demand was mixed this week. Some report strong Asian demand, while others reported less interest due to lower-priced European offerings. Demand from Mexican, European and Oceanic purchasers is reported as steady to lighter and having more sporadic activity from week to week thus far this year. Cheesemakers are running maximum to strong schedules due to a plentiful to ample milk supply, according to DMN.
Butter climbed to $2.3750 per pound Wednesday but closed Friday at $2.3275, up a penny on the week but 42.75 cents below a year ago, with 11 sales.
Central butter makers say cream remains widely available and near-term availability is not expected to change. Churning is busy, and some plants ran churns throughout the holiday weekend. Bulk butter demand is lackluster, according to some contacts who say April has been somewhat quiet in sales in both retail and food service. Plant managers say they are churning for the potential of stronger demand in late summer-early fall, according to DMN.
Cream volumes are plentiful in the West, with cream demand strong to steady. Some butter manufacturers were taking additional cream, and demand is healthy from ice cream producers preparing for spring season demand. Butter output continues strong to steady, although some processing capacity was lessened due to servicing. Still others report maximum capacity production. Demand is steady for retail and food service. Export demand is steady to lighter, with less competitive prices noted, compared to European and Asian markets.
Grade A nonfat dry milk climbed to $1.16 per pound Thursday but closed Friday at $1.13, a half-cent higher on the week but 69.25 cents below a year ago, with seven sales reported.
StoneX said the powder continues to feel the pressure from the lower GDTs as well as the higher than expected February stocks number which was up 7.5%.
Dry whey saw its Friday finish at 36.25 cents per pound, a quarter-cent lower on the week and 27.25 cents below a year ago. There were a whopping 47 sales reported on the week, highest weekly total since the week of Jan. 6, 2020.
The week ending April 1 saw 66,800 head of dairy cattle go to slaughter, up 600 from the previous week and 5,800 more than a year ago. Year-to-date, 871,500 cows have been culled, up 32,800 head, or 3.9%, from the same period in 2022.
Rising beef prices have incentivized cash strapped dairy producers to cull more or even shutter their operations. The April 12 Daily Dairy Report said, “Front-month cattle futures reached fresh all-time highs. The April contract settled at $174.275 per cwt., eclipsing the previous high set in October 2015.”
The DDR said, “Beef producers are scrambling to find animals to finish, and they are willing to pay higher prices for dairy calves. A growing share of U.S. dairy producers have been crossbreeding with beef genetics and producing fewer pure dairy calves. This has slowly reduced the supply of U.S. dairy heifers ready to enter the milking herd.”
StoneX broker Dave Kurzawski said dairy beef is making up a bigger percentage of the beef supply than a year ago. Speaking in the April 17 Dairy Radio Now broadcast, he reported culling the past 12 weeks was up 3.5% from a year ago.
He said farmers are doing what they can to “cheapen the ration, to cut costs,” as evidenced in components. Both protein and butterfat were down for the past 12 months, he said. “Dairy farmers want to milk cows,” Kurzawski said. “That’s what they do for a living. They don’t want to cull animals unless they’re going out of business. Margins will be tough, and those with a little extra, with beef prices being what they are, will be culling a little extra. But the price of milk has a bigger impact on their margin than that of the beef price.”
Tuesday’s Global Dairy Trade Pulse saw 2 million pounds of Fonterra whole milk powder sold, down 200,000 pounds from the March 28 Pulse, and at just $3,005 per metric ton, down $15 from the April 4 GDT event.
HighGround Dairy said, “Whole milk prices fell further in this event to set a new GDT Pulse auction low as weak demand and a poor global macroeconomic environment keep sentiment bearish.”
In other dairy trade news, Cooperatives Working Together member cooperatives accepted eight offers of export assistance this week that helped them capture sales contracts for 908,000 pounds of American-type cheese, 2,000 pounds of anhydrous milkfat and 132,000 pounds of whole milk powder.
The product is going to customers in Asia, the Caribbean and Oceania through October and raised CWT’s 2023 exports to 13.5 million pounds of American-type cheeses, 550,000 pounds of butter, 2,000 pounds of anhydrous milkfat, 17.9 million pounds of whole milk powder and 2.5 million pounds of cream cheese. The products are going to 18 countries and are the equivalent of 287.7 million pounds of milk on a milkfat basis, according to CWT.
In politics, the International Dairy Foods Association gave a thumbs up to the U.S. Food and Drug Administration’s final order announced Thursday to modify the yogurt standard of identity final rule, published June 9, 2021.
Joseph Scimeca, Ph.D., senior vice president of regulatory and scientific affairs for the IDFA, said, “Following more than four decades of advocacy from IDFA and formal objections filed by IDFA in July 2021, the FDA announced changes to the 2021 Yogurt Standard of Identity final rule on Dec. 14 that largely aligned with IDFA’s requested changes and objections. Today, FDA issued additional clarity on the final rule. IDFA considers the final rule a win for consumers and yogurt makers.” Complete details are posted on the IDFA’s website.
The American Dairy Coalition, in a letter this week to Agriculture Secretary Tom Vilsack, urged him to deny two recent Federal Milk Marketing Order hearing petitions, which ask for increased payments from farmers’ pockets to processors in order to offset higher input costs.
Holding a federal milk pricing hearing on only make allowances without the opportunity to look at additional concerns facing dairy farmers is misaligned, ADC said.
“As a grassroots dairy farmer organization, ADC believes a comprehensive FMMO hearing is needed,” said ADC CEO Laurie Fischer. “We also do not support ‘make allowance’ updates based on processors saving the ability to voluntarily participate in the cost surveys, which undoubtedly would exclude essential relevant data. Farmers need transparency in order to understand how their net payment is calculated, and these ‘make allowances’ are not line items. They are embedded in pricing formulas.”
The ADC said the milk component pricing that is credited with make allowances only captures the value of about 10% of milk sales today. The specific products that are included in the circular end-product pricing formulas are: block and barrel cheddar cheese, salted butter, nonfat dry milk and dry whey.
“This means 90% of total milk sales do not have their end-product prices captured, not even for informational purposes or market transparency,” Fischer said. “USDA only surveys the prices of the specific products that are used in the FMMO formulas.
The ADC said processors have the flexibility to offset costs from additional sales opportunities the non-formula products represent without having the increased value they extract from consumers captured and used in the FMMO formulas that establish the minimum prices paid to farmers.
Lastly, our prayers go out to South Fork Dairy which suffered a huge explosion April 10 in Dimmitt, Texas. Some 18,000 cows were reported to be lost in the resulting fire, and one farm worker was hurt and hospitalized. The cause of the explosion is being investigated.
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