The U.S Department of Agriculture lowered its 2023 milk production estimate in the latest World Agricultural Supply and Demand Estimate report, citing slower growth in milk-per-cow than previously expected. Milk output for 2024 was unchanged.
2023 production and marketings were estimated at 228.4 and 227.4 billion pounds, respectively, down 200 million pounds on both from a month ago. If realized, both would be up 1.9 billion pounds, or 0.8%, from 2022.
2024 production and marketings remained at 230.8 and 229.8 billion pounds, respectively. If realized, 2024 production and marketings would be up 2.4 billion pounds, or 1.1%, from 2023.
The 2023 cheese price is expected to average $1.73 per pound, down 9.50 cents from last month’s estimate, and compares to the 2022 average of $2.1122 and $1.6755 in 2021. The 2024 average is estimated at $1.7750, 4.5 cents lower than last month’s projection.
Butter is expected to average $2.4350 per pound in 2023, up 50 cents from a month ago, and compares to $2.8665 in 2022 and $1.7325 in 2021. The 2024 average was estimated at $2.3350.
Nonfat dry milk is projected to average $1.19 per pound, up 50 cents from last month’s estimate, and compares to $1.6851 in 2022 and $1.2693 in 2021. The 2024 average was projected at $1.13, up a penny from a month ago.
The dry whey average was projected at 37 cents per pound, down 2.50 cents from last month’s estimate, and compares to 60.57 cents in 2022 and 57.44 cents in 2021. The 2024 average was put at 36 cents per pound.
The 2023 Class III milk price average estimate was lowered to $16.70 per hundredweight, down $1.05 from last month’s projection and compares to $21.96 in 2022 and $17.08 in 2021. The 2023 average was projected at $17, down 50 cents from a month ago.
The 2023 Class IV average was $18.35, up a nickel from last month’s estimate, and compares to $24.47 in 2022 and $16.09 in 2021. The 2024 Class IV average was projected at $17.45, up a dime from last month’s estimate.
The U.S. corn outlook is little changed from last month with increases to both beginning and ending stocks. Corn area and yield forecasts were unchanged. Beginning stocks were up 35 million bushels, reflecting a forecast decline in exports that is partly offset by lower imports.
Exports were lowered 50 million bushels and ending stocks were raised 35 million bushels. The season-average farm price was unchanged at $4.80 per bushel.
Soybean supply and use projections included higher beginning and ending stocks. Higher beginning stocks reflect reduced exports, down 15 million bushels to 2 billion. With increased supplies and no use changes, soybean ending stocks were projected at 350 million bushels, up 15 million. The soybean price was forecast at $12.10 per bushel, unchanged from last month.
The latest Crop Progress report shows 93% of U.S. corn has emerged as of the week ending June 11, up from 85% the previous week, 6% ahead of a year ago as well as the five-year average. 61% was rated good to excellent, down from 72% a year ago, as dry conditions prevail over a large section of the crop.
Soybeans were 96% planted, up from 91% the week before, 9% ahead of a year ago and 10% ahead of the five-year average. 86% are emerged, up from 74% the previous week, 18% ahead of a year ago and 16% ahead of the five-year average. 59% of the crop was rated good to excellent, up from 62% the previous week but 11% behind a year ago.
The week ending June 3 saw 51,800 dairy cows go to slaughter, down 5,200 head from the previous week but 3,000 head, or 6.1%, more than a year ago. Year to date, 1.325 million have been culled, up 65,100 head, or 4.9%, from a year ago.
The June 15 Daily Dairy Report said lofty cattle prices have “boosted dairy cull cow checks to multi-year highs. The combination of low milk prices and high beef prices may help to accelerate contraction in the dairy herd, speeding the transition to lower milk production and higher dairy product prices.”
StoneX wrote in its June 16 Early Morning Update that if slaughter numbers continue like they are, they could ?nish the year at near record levels: “Data available from the USDA goes back to 2017 and since then the record for slaughter was in 2019 with an average weekly slaughter of 61,760 head. Our current average weekly slaughter is 60,913 with an expectation that volume should increase on a week-to-week basis moving forward.”
Checking dairy demand, April total cheese usage came in at 1.19 billion pounds, up 0.6%, thanks to a 1.6% increase domestically outweighing an 11.7% drop in exports. Those exports were likely booked in late 2022 or early 2023, explained HighGround Dairy, “when U.S. prices carried a premium to the rest of the world.”
Butter utilization hit 187.5 million pounds, up 7.9% and up 4.1% year-to-date. It topped prior-year levels for the third consecutive month, said dairy economist Betty Berning in the June 19 Dairy Radio Now broadcast. She said the gain was driven by higher domestic consumption, up 11.6%. Exports, however, were down 53.1%, the lowest volume since November 2020.
Berning blamed high U.S. butter prices at the end of 2022 for the drop in exports. She also pointed to higher output of American cheese, particularly cheddar, for putting the produce mix “off kilter,” adding to inventory without the export demand for it.
Nonfat and skim milk powder demand, at 238.1 million pounds, was up 3.6%. Domestic usage was up 34.1% while exports were down 9.2% from a year ago. HGD said domestic consumption was the highest since September 2020.
Admittedly, fluid milk sales continue to struggle, but overall demand for dairy continues to grow in the U.S., contrary to what plant-based producers would like consumers to believe. The International Dairy Foods Association said that in September 2022, the USDA reported U.S. per capita dairy consumption jumped 12.4 pounds per person in 2021, continuing a 50-year growth trend that started in 1975 when USDA began tracking annual consumption.
Domestic consumption and exports also generated significant growth in the dairy industry, adding nearly 60,000 new jobs in the past two years, increasing average wages by 11% and increasing its total impact on the U.S. economy by $41 billion, according to IDFA’s latest economic impact report.
IDFA’s 2023 Economic Impact Study showed the U.S. dairy industry’s economic impact totaled $793.75 billion. The report, released at the beginning of National Dairy Month, is conducted every two years.
Newly released figures indicate the U.S. dairy industry supports 3.2 million total jobs, including 1.078 million in dairy product manufacturing, up from 1.018 million in 2021, plus $49 billion in direct wages for workers, up from $42 billion in 2021. The report shows $72 billion in federal, state and local taxes (not including sales taxes paid by consumers), up from $67.1 million in 2021, 3% of U.S. GDP.
“The dairy industry is growing to keep pace with intense global demand, and that means more jobs, higher wages, more tax benefits and more economic growth for communities across the U.S.,” said Michael Dykes, IDFA president and CEO.
Unfortunately, that good news hasn’t been so good for farmers. The June 12 Daily Dairy Report said dairies “continue to struggle as margins remain tight. In 2021, 6% or 1,794 farms called it quits, and last year, another 7% or 1,910 operations sold out, leaving just 27,932 farms to meet growing demand, according to USDA.”
Dairy futures offer little hope for a turnaround any time soon.
CME block cheddar fell to a $1.3750 per pound Friday finish, the lowest CME price since May 8, 2020, down 4.75 cents on the week and 77 cents below a year ago. With the exception of a half-cent increase the week of May 15, the blocks dropped 11 weeks in a row, losing 72.50 cents in that timeframe.
The barrels closed at $1.5250, 4.50 cents lower, 63.25 cents below a year ago and 15 cents above the blocks. Thirty cars of block sold on the week and three of barrel.
Midwest weather is prolonging the flush, and milk is being dumped though Dairy Market News reports that some cheese plants say spot milk offers were not as numerous this week. There are continued expectations that milk availability will slacken as late spring weather begins, but spot prices got as low as $12 under Class this week, compared to $5 to $1 under a year ago. Cheese processing is busy. Cheese demand is active, according to a number of Upper Midwestern processors, and “customers are clearly less hesitant to purchase for near-to mid-term needs when prices are at current levels,” said DMN.
Cheese demand remains steady for Western retail and food service channels. Export demand is mixed for the remainder of second quarter, ranging from steady obligations to softened while third quarter interest is reportedly quieter. Cheese vats are running strong production with plenty of milk, said DMN.
Cash butter fell to $2.3525 per pound Tuesday, the lowest since April 14. It rallied Wednesday, slipped some Thursday and closed Friday at $2.3650, up 0.25 cents on the week but 57.50 cents below a year ago with 10 sales on the week.
Central butter makers reported similar demand interest as the past two weeks. Retail sales are increasing but nothing out of the norm for late spring. Cream availability remains somewhat steady. Multiples are holding firm in the low to mid 1.20s from cream sources regionally although some Midwestern plants are still taking cream from Western states, said DMN.
Western cream multiples stayed firm, and plenty of volume is available. A few butter manufacturers reported that scheduled equipment maintenance is set to start, but butter making is strong to steady. In some parts of the region, more cream is shifting to ice cream production. Butter demand is moderate to lighter from commercial bulk buyers while food service and retail demand is strong to steady. A few reports indicate inventories are slightly on the heavy side. Export activity is moderate to lighter, said DMN.
Grade A nonfat dry milk slipped to $1.1550 per pound Thursday but closed Friday at $1.1575, down 0.25 cents on the week and 64.25 cents below a year ago with four sales reported for the week.
Dry whey gained a half-cent Monday, then gave back 0.75 cents Wednesday and closed Friday at 27.50 cents per pound, unchanged on the week but 23.25 cents below a year ago with 31 sales reported on the week at the CME.
Tuesday’s GDT Pulse saw 2 million pounds of Fonterra whole milk powder sold out of 2.2 million pounds offered and at $3,080 per metric ton, down $20 from the last Pulse and down $70 from the June 6 GDT.
HighGround Dairy said, “After trending above $3,100 per metric ton for the last seven weeks, C2 Regular WMP dropped to the lowest price since April 18 due to persistent weak global demand. Lasting only five bidding rounds, this matched the shortest Pulse Auction on record, which occurred Feb. 14.”
DMN said milk production varies across the country as seasonally warmer temperatures come into play. The Northeast is seeing steady milk output. Midwest production tightened in the southern portion of the region while warmer temperatures moving toward the Upper Midwest are expected to impact cow comfort levels there as well. Farm level milk production in the west is mostly steady. Cooler temperatures in portions of the mountainous states have led to stronger milk output.
Looking globally, a number of observers believe the European milk production peak has passed, said DMN, while others suggest it may linger and be slow to decline. In either case, milk volumes are significant. Manufacturing of most dairy commodities is heavy, and inventories are significant. Industry contacts report demand is lukewarm for most commodities with the exception of cheese.
Less favorable weather may slow milk production from northeast Germany into Poland and the Baltic States. The European Union Commission extended the trade measures that allow Ukrainian agricultural products to enter the EU without tariffs. The waiver was extended for one year. The governing body also extended the ability of five neighbors to Ukraine (Bulgaria, Hungary, Poland, Romania and Slovakia) to restrict the domestic sales of selected crops while allowing those crops to enter the country for export into other countries.
Looking down under, May is typically defined as one of the most active months for New Zealand exports; however, the pace of China’s recovery has disrupted those volumes, said DMN, as well as the global economies. Dairy commodity processors point to China’s lack of demand with impacting short-term price movement, relative to the New Zealand farm gate milk price.
Australian milk-production trends remain below levels from a year ago in most regions. However, due to weak dairy product demand, dairy farmers stand to lose as processors released their farm gate milk price offerings for the upcoming season. DMN said farm gate price offerings are set to decline as much as 10% from last season.
