Wednesday Closing Dairy Market Update - January Class III price is $15.17

MILK

It was a bit surprising that Class IV milk futures were mostly higher while Class III futures were mostly lower. The weakness of butter should have put more pressure on Class IV futures. The January Federal Order class prices were announced showing mixed prices. Class II price was $20.04, up $0.16 from December, but down $1.57 from January 2023. The Class III price was $15.17, down $0.87 from the previous month and down $4.26 from a year ago. The Class IV price was $19.39, up $0.16 from November, but down $0.62 from January 2023. The Bi-annual Cattle Inventory report showed the number of milk cows on January 1 at 9.358 million head. This was down 41,000 head from a year ago. Replacement heifers totaled 4.059 million head, down 15,000 head from a year ago. This puts the percentage of heifers to milk cows at 43.4 percent and the lowest January ratio since January 1998. The Agricultural Prices report showed an average December corn price of $4.80, an increase of $0.16 from November, but $1.58 per bushel below December 2022. The premium/supreme hay price was $275 per ton, up $4 per ton from November, but down $52 per ton from a year ago. The All-milk price was $20.60, down $1.10 from November and down $3.90 per cwt from December 2022. The average soybean meal price will be released tomorrow by the FSA which is needed for the income over feed price for the Dairy Margin Coverage program. Other prices to make note of is the average alfalfa price was $205 per ton down $2 per ton from November and down $63 per ton from a year ago. The average soybean price was $13.10, up $0.10 from November, but down $1.30 per bushel from a year ago.

AVERAGE CLASS III PRICES

3 Month:	$16.74
6 Month:	$17.31
9 Month:	$17.64
12 Month:	$17.75

CHEESE

The availability of milk for cheese production has tightened which has moved spot milk prices at class or as much as $1.00 lower than class. This is a huge difference from where spot milk was a year ago. Retailers report varying levels of demand over the past week. The upcoming Super Bowl should improve demand to some degree, but it will be short-lived. Manufacturers are generally running full production schedules.

BUTTER

Butter production has been active, but supplies are not increasing much if at all. Demand is steady with the expectations for increased demand moving through the first half of the year. Cream is readily available which keeps churns full.

OUTSIDE MARKETS SUMMARY

March corn closed up 0.50 cent per bushel at $4.4825, March soybeans closed up 3.50 cents at $12.2225 and March soybean meal closed up $5.30 per ton at $368.30. March Chicago wheat closed down 10.25 cents at $5.9525. April live cattle closed down $1.05 at $180.70. March crude oil is down $1.97 per barrel at $75.85. The Dow Jones Industrial Average is down 317 points at 38,150 with the NASDAQ down 346 points at 15,154.

Wednesday Midday Dairy Market Summary - Dry Whey Reaches Multi-Year High

OUTSIDE MARKETS SUMMARY:

CORN:	$0.01 Lower
SOYBEANS:	$0.03 Lower
SOYBEAN MEAL:	$3.70 Higher
LIVE CATTLE:	$0.55 Lower
DOW JONES:	3 Points Lower
NASDAQ:	190 Points Lower
CRUDE OIL:	$2.16 Lower

MIDDAY MARKET UPDATE:

Block cheese price closed 0.25 cents higher at $1.65 with three loads traded. Price initially increased by 1.50 cents only to slip back into the close. This added some negativity to the market. Barrel cheese price declined by a penny to $1.52 with four loads traded. Dry whey price increased 1.75 cents, closing at 47 cents with one load traded. This is the highest dry whey price since Sept. 15, 2022. Class III futures are mixed coming back from the earlier pressure during and shortly after spot trading. Futures are 11 cents lower to 12 cents higher. Butter price declined 3.75 cents, closing at $2.7650 with no loads traded with no buyers showing up to do any business. Grade A nonfat dry milk price remained steady at $1.23 with two loads traded. Class IV futures are mixed from 12 cents lower to 19 cents higher. Butter futures are 1.25 cents lower to 2 cents higher. Dry whey futures are 0.50- 1.87 cents higher. The Biannual Cattle Inventory and the December Agricultural Prices reports will be released this afternoon with the January Federal Order prices released later.

Wednesday Morning Dairy Market Update - Three Reports Release Today

OPENING CALLS:

Class III Milk Futures:	4 to 6 Higher
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	3 to 2 Lower
Soybean Futures:	6 to 8 Lower
Soybean Meal Futures:	$1 to $2 Lower
Wheat Futures:	6 to 8 Lower

MILK:

Some milk futures contracts settled lower Tuesday, even though underlying cash did not have an impact on the cash calculation. The main reason for the weakness in Class III futures was the swing in the barrel cheese price during spot cheese trading Tuesday. The price was initially higher before increased selling pressure moved the price lower into the close. It is difficult to guess what will happen Wednesday, but the overall cash market gives the impression prices may remain supported for now. The January Federal Order class prices will be announced Wednesday. The Biannual Cattle Inventory report to be released is expected to show lower heifer numbers and a lower percentage of heifers to cows from a year ago. The Agricultural Prices report is not expected to show much of a change in income-over-feed from the previous month.

CHEESE:

Cheese production is steady with demand steady overall. Buyers have been more active in the cash market, which has increased prices over the past two weeks. Buyers may reach a price threshold soon.

BUTTER:

Price has been able to hold the recent gains, which may indicate the market is supported for the longer term. Churning is active but inventory is below a year ago. That indicates good demand. If exports improve, the butter price might increase as the year progresses.

Tuesday Midday Dairy Market Summary - Class III Futures Settle Back

OUTSIDE MARKETS SUMMARY:

CORN:	$0.07 Higher
SOYBEANS:	$0.23 Lower
SOYBEAN MEAL:	$8.20 Higher
LIVE CATTLE:	$0.52 Higher
DOW JONES:	80 Points Higher
NASDAQ:	135 Points Lower
CRUDE OIL:	$1.06 Higher

MIDDAY MARKET UPDATE:

Block cheese price increased 3.75 cents closing at $1.6475 with five loads traded. This is the highest price it has been since Nov. 14, 2023. The barrel cheese price decreased by 2 cents, closing at $1.53 with seven loads traded. The strength of blocks more than offset the weakness of barrels but nearby Class III futures are under pressure with contracts posting double-digit losses. Dry whey increased 0.25 , closing at 45.25 cents with no loads traded. Class III futures are mixed, ranging from 25 cents lower to 15 cents higher. Butter price remained unchanged at $2.8025 with no loads traded. Grade A nonfat dry milk price increased 0.50 cent, closing at $1.23 with one load traded. Class IV futures are 8 cents lower to 2 cents higher. Butter futures are 3.87 cents lower to 0.30 cents higher. Dry whey futures are 0.25 to 1 cent higher. Today is the last day to trade January futures and options.

 

Tuesday Morning Dairy Market Update - Milk Futures Show Further Strength

OPENING CALLS:

Class III Milk Futures:	8 to 12 Higher
Class IV Milk Futures:	5 to 10 Higher
Butter Futures:	1 to 2 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 3 Lower
Soybean Futures:	2 to 3 Lower
Soybean Meal Futures:	$1 to $2 Higher
Wheat Futures:	6 to 8 Lower

MILK:

Milk futures pushed higher overnight with double-digit gains in the February, March, and May Class III contracts. March moved above $17.00 overnight to a level it has not been at since Dec. 14, 2023. Underlying cash has seen strong buying interest, which has taken place since the Milk Production and Cold Storage reports. The Milk Production report was not friendly to the market, showing limited milk production and cow number declines. The Cold Storage report was neutral for cheese and bullish for butter. The Cold Storage report has been the focus of the market. Tuesday is the last day to trade January futures and options. The January Federal Order class prices will be announced on Wednesday.

CHEESE:

The block cheese price is back to the highest level it has been since Dec. 7, 2023, with barrels back to the highest since Dec. 11, 2023. The market has had these sharp price increases in the past, only to fall back after the immediate buying interest has been satisfied. Fundamentals have not changed much over the past few weeks.

BUTTER:

Buyers seem to be leapfrogging over each other in their attempt to purchase supply. Cash trading activity has not been very heavy as sellers have been holding back. The strength in butter seems to be leading the other cash markets higher. Hopefully, there is not a price void developing under the market.

Monday Closing Dairy Market Update - Markets Higher to Start the Week on Positive Note

MILK

Class III Milk futures settled higher, 14-50 cent gain on the day. Class IV futures were higher by 0-14 cents. Nonfat dry milk was more mixed, seeing gains in the February trade of 0.275 but lower in deferred bids 0.60-0.77. Dry Whey traded 1.275 to 1.90 higher. Cash markets continued the from the early morning gains we saw on the futures market, and from late last week's strength.

AVERAGE CLASS III PRICES

3 Month:	$16.25
6 Month:	$16.96
9 Month:	$17.37
12 Month:	$17.56

CHEESE

Cheese saw some action in the cash market today, with blocks trading 0.0725 cents up closing at $1.6100 with five loads traded. Barrels were up 0.0800 with six loads traded at $1.5500. Cheese futures traded 0.03-0.056 cents higher. While cheese production remains strong, we'll keep a lookout for continued demand.

BUTTER

Butter markets did not disappoint today as cash markets were 0.0425 higher at $2.8025 with two loads traded. The futures market had a nice rally in nearby with February up $4.625 and March up $1.00 however deferred months were lower by $1.00.

OUTSIDE MARKETS SUMMARY

Tough day in the grain markets with March corn down 6 cents per bushel at $4.4025, Soybeans down 15 cents at $1194.25 and Chicago Wheat down 6.75 cents at $5.935. March soybean meal closed up $5.30 per ton at $354.3. February live cattle closed down $1.075 at $177.375. March crude oil is off by $1.05 per barrel at $76.97. The Dow Jones Industrial Average is up 204 points at 38,462 with the NASDAQ up 178 points at 17,704.

Monday Midday Dairy Market Summary - Higher Prices Across the Board

OUTSIDE MARKETS SUMMARY:

CORN:	$0.07 Lower
SOYBEANS:	$0.16 Lower
SOYBEAN MEAL:	$4 Higher
LIVE CATTLE:	$0.200 Higher
DOW JONES:	36 Points Lower
NASDAQ:	58 Points Higher
CRUDE OIL:	$1.15 Lower

MIDDAY MARKET UPDATE:

Block cheese gained 0.0725 cents, closing at $1.6100 with five loads traded. Barrel cheese up 0.0800 cents, closing at $1.5500 with six loads traded. Dry whey 0.0075 closed higher at $0.4500 with one load traded. Butter price gained 0.0425 cents at $2.8025 with two loads traded. Grade A nonfat dry milk price 0.0050 higher at $1.2250 with five loads traded. Class III futures are higher, ranging from 29 to 42 cents higher. Class IV futures are 10 cents higher. Cheese is 0.0280 to 0.0500 higher. Butter futures are mixed 1.25 lower to 1.50 higher. Dry whey futures are 0.7750 higher. 

Monday Morning Dairy Market Update - Overnight Trade Lifts Milk Futures

OPENING CALLS:

Class III Milk Futures:	5 to 10 Higher
Class IV Milk Futures:	10 to 15 Higher
Butter Futures:	1 to 3 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	3 to 5 Lower
Soybean Futures:	7 to 9 Lower
Soybean Meal Futures:	$1 to $2 Lower
Wheat Futures:	8 to 11 Lower

MILK:

It appears the strong week for milk futures last week may carry over to Monday. Overnight futures were higher for both classes with good activity in the February and March Class III contracts. Traders still will maintain some caution as fundamentals have not changed and the underlying cash prices may have limited upside potential. Any weakness in spot prices could trigger aggressive selling. The weather continues to look favorable for cow comfort in much of the country. Milk production should be maintained and may increase slowly with strong components. Both the December Agricultural Prices and the Biannual Cattle Inventory reports will be released Wednesday.

CHEESE:

Buyers have been more aggressive in their spot cheese purchases as they realize prices may be near the lows and they would like to gain more ownership of supply. However, they do not want to increase inventory too much as increased storage rates may not be made up with higher cash prices if milk production remains at current levels and cheese production remains strong.

BUTTER:

All eyes will be on the spot butter trade Monday. The sharp price increase last week was a surprise and may result in further strength as those who have remained complacent may step into the market more aggressively. 

Friday Closing Dairy Market Update - Spot Prices Post Gains for the Week

MILK

Milk futures reversed course during the second half of the week with nearby Class III contracts closing at the highest level since January 10. Class IV futures showed exceptional gains with all contracts through the end of the year pushing to new contract highs. Class IV futures continue to outpace Class III futures widening the spread between the two markets. Underlying fundamentals have not changed with the December Milk Production and Livestock Slaughter reports being bearish. But short covering triggered strong buying interest as traders holding short positions were pushed to get out of the market. This may be temporary unless underlying cash continues to find support. One correlation to keep in mind is that corn prices remain weak which generally has a strong correlation to milk prices.

AVERAGE CLASS III PRICES

3 Month:	$15.93
6 Month:	$16.63
9 Month:	$17.16
12 Month:	$17.41

CHEESE

For the week, blocks increased by 9.25 cents with 19 loads traded. Price closed at the highest level since January 16. Barrels gained 0.25 cent with 12 loads traded. Dry whey gained 1.50 cents with three loads traded. Blocks held steady earlier in the week and then resumed to uptrend. Class III milk futures showed strong gains mostly from short covering. Overall, traders are cautious of the price gains. Fundamentals have not turned bullish with supplies of cheese readily available.

BUTTER

Butter price exploded this week with a gain of 21.50 cents with only two loads traded. This gain has been exceptional and quite a surprise. The bullishness of the December Cold Storage report might have had some influence along with buyers needing to purchase butter while sellers held back. Grade A nonfat dry milk price gained 4.50 cents with 10 loads traded. Spot price broke above the trading range to the highest level since November 9, 2023.

OUTSIDE MARKETS SUMMARY

March corn closed down 5.50 cents per bushel at $4.4625, March soybeans closed down 13.75 cents at $12.0925 and March soybean meal closed down $9.20 per ton at $349.00. March Chicago wheat closed down 12.00 cents at $6.0025. April live cattle closed up $0.98 at $181.68. March crude oil is up $0.83 per barrel at $78.19. The Dow Jones Industrial Average is up 60 points at 38,109 while the NASDAQ is down 55 points at 15,455.

Friday Midday Dairy Market Summary - Another Strong Gain for Butter

OUTSIDE MARKETS SUMMARY:

CORN:	6 Lower
SOYBEANS:	13 Lower
SOYBEAN MEAL:	$9 Lower
LIVE CATTLE:	$0.72 Higher
DOW JONES:	32 Points Higher
NASDAQ:	53 Points Lower
CRUDE OIL:	$0.48 Higher

MIDDAY MARKET UPDATE:

Butter has been the week's star with strong gains over the past three days. Buyers have become more aggressive with sellers holding back. Price broke above the trading range, moving back to the highest levels since Nov. 9, 2023. Price increased 7.25 cents, closing at $2.76 with two loads traded. There were three unfilled bids and one uncovered offer remaining at the close, which was the same number as at Thursday's close.

Grade A nonfat dry milk price increased 1.75 cents, closing at $1.22 with six loads traded. Class IV futures show a good trading volume with prices ranging from 16 cents to 28 cents higher. Block cheese price increased 1.50 cents, closing at $1.5375 with 11 loads traded. Barrel cheese price increased 3 cents, closing at $1.47 with nine loads traded. Dry whey price remained unchanged at 44.25 cents with no loads traded. Class III futures are unchanged to 30 cents higher with March showing the greatest gain.

Friday Morning Dairy Market Update - Early Strength Anticipated

OPENING CALLS:

Class III Milk Futures:	4 to 8 Higher
Class IV Milk Futures:	Mixed
Butter Futures:	1 to 3 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	3 to 4 Lower
Soybean Futures:	3 to 5 Lower
Soybean Meal Futures:	$2 to $3 Lower
Wheat Futures:	6 to 8 Lower

MILK:

Milk futures posted strong gains on Thursday with Class III futures seemingly supported more by the large increase in the butter price rather than cheese prices. The gain of blocks and the decline of barrels offset each other leaving little reason for Class III contracts to rally. The bearish implication of the milk production report did not have much influence on the market. The bearish implications of reduced dairy cattle slaughter in December as reported on the Livestock Slaughter report did not have any impact on overnight trading activity. Class IV futures may see some follow-through buying on the heels of Thursday's strength.

CHEESE:

Block price increasing after two days of price holding steady was certainly a positive sign for traders. However, the choppy pattern of cheese prices may remain with limited upside price potential. Cheese supply is sufficient for demand, leaving buyers complacent.

BUTTER:

Buyers were aggressive on Thursday and may remain that way today as immediate orders may need to be filled. However, the higher price may increase the interest of manufacturers to move supply. There is no shortage of butter and churning is active.

Thursday Closing Dairy Market Update - Cattle Slaughter Declines Substantially

MILK

It was a strong close for milk futures with Class IV futures showing good gains on the large increase in butter price. The March Class IV contract showed the largest gain of $0.50 with all other contracts through December posting double-digit gains. Class III futures were strong but not to the extent of Class IV. Trading activity in Class IV contracts was unusually high with June showing 98 contracts traded. Good volume was seen in all contracts through the end of the year.

USDA released the December Livestock Slaughter report which was bearish to the dairy market. Dairy cattle slaughter totaled 224,700 head for the month. This was down 5,000 head from November and down 41,600 head from December 2022. This is the lowest monthly slaughter since May 2021. This trend likely will continue for a time, even though milk prices are low.

AVERAGE CLASS III PRICES

3 Month:	$15.74
6 Month:	$16.44
9 Month:	$16
12 Month:	$17.27

CHEESE

Spot milk availability has changed with some spot milk commanding a premium to class this week. Most spot milk is still offered below class. This is different from a year ago when spot milk prices remained $10 below class for nearly the first half of the year.

There is not a huge amount of excess milk available but what is available is sufficient for demand. Cheese production is steady and cheese demand is steady. Prices are expected to remain choppy.

BUTTER

Price has moved to the top end of the price range that has developed since mid-November. It will be interesting to see if underlying cash will push higher after the large increase today. Sellers were not aggressive today. They may stand back to wait and see if buyers will be aggressive again tomorrow.

OUTSIDE MARKETS SUMMARY

March corn closed down .50 cent per bushel at $4.5175, March soybeans closed down 17.25 cents at $12.2300 and March soybean meal closed down $5.10 per ton at $358.20. March Chicago wheat closed up 1.50 cents at $6.1225. April live cattle closed up $2.35 at $180.70. March crude oil is up $2.01 per barrel at $77.10. The Dow Jones Industrial Average is up 243 points at 38,049 with the NASDAQ up 29 points at 15,511.

Thursday Midday Dairy Market Summary - Butter Price Jumps

OUTSIDE MARKETS SUMMARY:

CORN:	2 Lower
SOYBEANS:	18 Lower
SOYBEAN MEAL:	$4.40 Lower
LIVE CATTLE:	$2.27 Higher
DOW JONES:	69 Points Higher
NASDAQ:	52 Points Higher
CRUDE OIL:	$1.60 Higher

MIDDAY MARKET UPDATE:

Block cheese price moved higher after holding steady for the past two days. Price gained 2.25 cents, closing at $1.5225 with four loads traded and an unfilled bid remaining at the close. Barrel cheese price decreased by 1.75 cents, closing at $1.44 with two loads traded. The price initially declined to $1.4250 and then regained some of the loss. There was an unfilled bid and two uncovered offers remaining at the close.

Dry whey price remained unchanged at 44.25 cents with two loads traded. Class III futures are 1 cent to 15 cents higher. Butter price jumped 11 cents, closing at $2.6875 with no loads traded. There were three unfilled bids and one uncovered offer remaining at the close. This moved the price back to the highest level it has been since Nov. 15, 2023. It is the largest one-day gain since Sept. 27, 2023.

Grade A nonfat dry milk price gained a penny closing at $1.2025 with two loads traded. Class IV futures are showing significant trading activity throughout the entire year with prices ranging from 13 cents to 50 cents higher. Butter futures are locked limit-up in March through July contracts. Other contracts are 5.77 cents to 7.12 cents higher. Dry whey futures are 0.40 cent lower to 0.35 cent higher. USDA will release the December Livestock Slaughter report this afternoon.

Fluid Milk and Cream - Western U.S. Report 4

In California, milk production is trending higher. However, handlers note fat and protein component levels in milk output reached their peak last month and currently continue to trend slightly lower. Manufacturers relay milk volumes are in good balance with processing capacities and planned downtime for maintenance. Spot milk load offers are noted as low as $7.00 below Class III. Class I and III demands are strong. Class II and IV demands are steady. According to the California Department of Water Resources, as of January 24, 2024, the estimated total statewide reservoir storage is above the historical average, but cumulative statewide snowpack is below the historical average. 

In Arizona, cow comfort has improved, and farm level milk output is trending higher. Milk volumes are meeting the needs of manufacturers. Demands for all Classes are steady. 

Milk production in New Mexico is steady. Handlers indicate precipitation and snowfall totals are below average levels. Class demands are unchanged. 

In the mountain states of Idaho, Utah, and Colorado, milk production is steady to stronger. Manufacturers relay milk volumes are comfortably meeting production needs, but winter storms in some areas caused load deliveries to be rearranged. Class demands are strong to steady. 

Throughout most of the region cream is readily available. Demand is steady. Multiples are unchanged this week. Stakeholders note mixed demand from spot load buyers and steady demand from contractual buyers for condensed skim milk loads.

Thursday Morning Dairy Market Update - Milk Futures May See Early Pressure

OPENING CALLS:

Class III Milk Futures:	2 to 5 Lower
Class IV Milk Futures:	Mixed
Butter Futures:	Steady to 1 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Mixed
Soybean Futures:	1 to 3 Higher
Soybean Meal Futures:	$2 to $3 Higher
Wheat Futures:	1 to 2 Higher

MILK:

It was surprising milk futures were not under further pressure in overnight trade. However, the bearishness of the December Milk Production report may have a greater negative influence Thursday. On the other hand, Class III milk futures have already had some of it factored in with the decline of prices over the past few days. Milk production will remain sufficient for demand as farmers are not culling cows as had been expected. This may result in lower milk prices longer than expected. The positive inventory level for butter in the December Cold Storage report should support the butter price and support Class IV futures, which will hold a substantial premium over Class III prices. USDA will release the December Livestock Slaughter report Thursday which contains a report on dairy cattle slaughter for the month.

CHEESE:

Overall cheese inventory closed the year near the same level as a year ago. Manufacturers did a good job of limiting the growth of cheese supplies. Cheese demand has been good but not good enough to reduce inventory and tighten supply. This may keep prices in a range for a period.

BUTTER:

Price is not expected to trend higher due to December butter inventory ending the year 8% below a year ago. However, it may keep the price in the current range or somewhat higher through the first half of the year.

Wednesday Closing Dairy Market Update - December Milk Production Declined 0.3%

MILK

Class III milk futures just cannot seem to find strength even with limited underlying support. Though buying interest should surface, fundamentals do not support upward price movement. First, any underlying price increases are short-lived. Second, milk production continues to hold stronger than anticipated and cow numbers are not declining as expected.

The December Milk Production report showed production in the top 24 states was down only 0.1%. Milk production per cow totaled 2,030 pounds, 1 pound above December 2022. Dairy cow numbers were 17,000 head less than a year ago but remained unchanged from November. Milk production in the U.S. was down 0.3% from December 2022. Milk production per cow was 2 pounds higher than a year ago at 2,014 pounds. Cow numbers were down 39,000 head from a year ago and down 1,000 head from November.

This was a bearish report as milk production continues to hold well despite being slightly lower than a year ago. The first half of the year showed milk production at 0.7% above a year ago while the second half of the year showed production down 0.6%. This leaves milk production virtually unchanged from 2022. Lower milk prices have not resulted in increased culling and a decrease in milk production. This may keep milk prices low for an extended period. It seems as if it will be up to demand to support milk prices and not a decline in milk production.

AVERAGE CLASS III PRICES

3 Month:	$15.54
6 Month:	$16.29
9 Month:	$16.87
12 Month:	$17.18

CHEESE

Cheese prices have not been moving much, which has kept Class III milk futures on the defensive. The December Cold Storage report showed that American cheese inventory closed the year 2% above 2022. American cheese inventory increased by 9.4 million pounds, totaling 837.8 million pounds. Swiss cheese inventory increased 125,000 pounds, totaling 21.1 million pounds, down 13% from December 2022.

Other cheese inventory declined 3.6 million pounds from November and 2% below a year ago. This put the total cheese inventory at 1.443 billion pounds, up 5.9 million pounds and virtually unchanged from December 2022.

BUTTER

The surprise in the cold storage report was the inventory of butter. It declined by 13.1 million pounds, totaling 199.5 million pounds. This closed the year 8% below a year ago. The November report showed butter inventory up 8% from a year earlier with the December report down 8%. That is a huge swing and should keep butter price supported at current levels.

OUTSIDE MARKETS SUMMARY

March corn closed up 5.75 cents per bushel at $4.5225, March soybeans closed up .75 cent at $12.4025 and March soybean meal closed up $2.20 per ton at $363.30. March Chicago wheat closed up 14.25 cents at $6.1075. April live cattle closed up $0.53 at $178.35. March crude oil is up $0.72 per barrel at $75.09. The Dow Jones Industrial Average is down 99 points at 37,806 while the NASDAQ is up 56 points at 15,482.

12-month dairy profitability outlook suggests slightly unprofitable returns

Milk production is declining due to a shrinking herd and prices will likely increase in 2024, so long as demand remains consistent. Dairies face headwinds from inflation and a slowing global economy, requiring careful cash flow management and risk mitigation strategies.

12-Month Profitability Outlook

Milk production declines

November milk production dipped 0.6% nationwide, marking the fifth consecutive month of decline. The West saw the biggest slump, with production down in every state except Idaho and Arizona. Since March of 2023, the milk cow herd is down 84,000 head. California, the top dairy state, lost 11,000 cows in a year and saw milk production drop 1.7%. Idaho's production dipped for the first time this year in October despite a stable herd, suggesting lower output per cow, which was unexpected given the mild temperatures (warmer weather means cows expend less energy keeping themselves warm and can produce more milk). Despite the production drop, dairy products and prices faced another difficult month. While some analysts speculate that less milk production could support higher milk prices, prices are often slow to respond to production changes.

Prices are a mixed bag for 2024

Milk prices are uncertain as conflicting bullish and bearish signals play out in the dairy markets. Trade opportunities and a smaller global milk supply support higher prices in 2024. In the short term, Class III milk prices should benefit as U.S. cheese prices are less expensive than European cheese prices, and markets will adjust to close this gap. U.S. cheese futures prices were nearly $0.20 below the global cheese prices. The futures market expects to see this gap closed by April 2024, with U.S. cheese prices increasing to the $1.80 range (up from the low-$1.50 range during early January 2024). Cheese prices largely influence Class III prices and dairy producers can expect a short-term boost to Class III milk prices. Additionally, a smaller national herd and less global competition from New Zealand (whose pasture-based dairy system is forecasted to be stunted by El Niño drought conditions) would also support higher prices in 2024. However, global dairy demand declined in 2023. Dairy exports decreased from 18% of total dairy sales in 2022 to 16% of dairy sales in 2023. The greatest threat to seeing higher forecasted dairy prices in 2024 would be a global recession, which could further dampen consumer demand for dairy products. While there are factors supporting both higher and lower prices, the Dairy Futures Forward Curve predicts moderately higher Class III and Class IV prices. Even with higher prices, many producers will still be approaching breakeven margins.

Dairy demand

U.S. per capita dairy consumption declined 1.2% year-over-year due to higher prices for many dairy products, which led to lower consumption of butter (-6.3%), yogurt (-2.8%), and fluid milk (-3.0%). Cheese and ice cream, however, had modest increases in demand. Inflation and higher prices were the largest factor impacting dairy demand. Due to grocery budgets being squeezed, 76% of consumers changed their grocery shopping habits reducing the amount of goods they purchased. While the latest consumption data is from 2022, the same trend appears to have held for 2023. Domestic and export dairy demand will continue to face headwinds from inflation and higher food prices throughout the grocery store.

Dairy exports hindered by slowing Chinese economy

China's economic slowdown has weighed down U.S. exports. China is the world's largest dairy importer and its imports of U.S. whole milk powder, skim milk powder, butter, and fluid milk have all declined year over year. China’s economy is facing headwinds from weakness in the property sector and government debt issues, which have constrained public spending and investment. The only bright spots for the dairy industry were cheese and whey exports to China, which increased year over year. However, this was not enough to offset the overall impact of China's slowing economy on the dairy sector. China's real GDP growth has fallen from 6%-10% during 2010-2019 to a forecasted 5.4% in 2023, and the International Monetary Fund expects it to continue to decelerate until 2028. Slower Chinese dairy demand could create headwinds for global dairy prices and the U.S. dairy industry will have to cope with lower export demand for the foreseeable future.

Profitability 

Dairy producers are stressed and margins will take time to recover. Production costs are forecasted to remain a mixed bag. In the Northwest, the average breakeven price for producing milk shot up from $17 per cwt on average in 2021 to over $21 per cwt in 2023. While forecasted declines in feed, fuel and fertilizer expenses will benefit dairies in 2024, an expected 2%-3% decrease in expenses will not be enough to offset the run up in production costs over the past 18 months. As margins remain under pressure, dairies are likely to cull more cows through the first six months of 2024. Fewer cows could lower national milk production supporting higher prices which will be vital to improving dairy margins. However, milk price increases tend to lag several months behind production declines. Even if Class III prices increase, it will likely not be enough to fully offset greater production expenses. Managing costs, capital expenditures and risk management options are paramount.

December Milk Production down 0.1 Percent

December Milk Production down 0.1 Percent        

Milk production in the 24 major States during December totaled 18.1 billion pounds, down 0.1 percent from December 2022. November revised production, at 17.3 billion pounds, was down 0.6 percent from November 2022. The November revision represented a decrease of 14 million pounds or less than 0.1 percent from last month's preliminary production estimate.  Production per cow in the 24 major States averaged 2,030 pounds for December, 1 pound above December 2022.   The number of milk cows on farms in the 24 major States was 8.90 million head, 17,000 head less than December 2022, but unchanged from November 2023.   

October-December Milk Production down 0.6 Percent  

Milk production in the United States during the October - December quarter totaled 55.6 billion pounds, down 0.6 percent from the October - December quarter last year.  The average number of milk cows in the United States during the quarter was 9.36 million head, 16,000 head less than the July - September quarter, and 44,000 head less than the same period last year.

Wednesday Midday Dairy Market Summary - Class III Futures Remain Under Pressure

OUTSIDE MARKETS SUMMARY:

CORN:	5 Higher
SOYBEANS:	2 Higher
SOYBEAN MEAL:	$2.40 Higher
LIVE CATTLE:	$0.70 Higher
DOW JONES:	24 Points Higher
NASDAQ:	135 Points Higher
CRUDE OIL:	$0.63 Higher

MIDDAY MARKET UPDATE:

Block cheese price remained unchanged for the second day at $1.50 with no loads traded. No buyers or sellers showed up during spot trading. Barrel cheese price slipped 0.25 cent, closing at $1.4575 with no loads traded. There were two uncovered offers at the close. No buyers showed up to do any business. Dry whey gained 0.75 cent, closing at 44.25 cents with one load traded. The gain of dry whey more than offset the loss of barrels but traders did not care. They are bearish in the market with Class III contracts steady to 21 cents lower. Butter price increased 3.25 cents, closing at $2.5775 with no loads traded and only buyers showing up during spot trading. Grade A nonfat dry milk price increased 0.25 cent with one load traded. Class IV futures are 1 cent lower to 23 cents higher. Butter futures are 1.00 to 2.67 cents higher. Dry whey futures are 0.25 cent lower to 0.92 cent higher. USDA will release the December Milk Production and the Cold Storage reports Wednesday afternoon. I estimate milk production to be down 0.4% from a year earlier with cow numbers down 3,000 head from November.

Wednesday Morning Dairy Market Update - Two Major Reports Today

OPENING CALLS:

Class III Milk Futures:	3 to 6 Lower
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Higher
Soybean Futures:	Mixed
Soybean Meal Futures:	$3 to $4 Higher
Wheat Futures:	5 to 7 Higher

MILK:

The weakness of Class III futures was a concern on Tuesday as underlying cash did not suggest there should be any price movement. Traders turned negative in expectation of limited upside potential. Supply remains sufficient for demand, leaving buyers complacent at present. Milder weather will improve milk production moving it back to where it had been before the adverse weather. USDA will release the December milk production report today. I estimate milk production to be down 0.4% from December 2022. I estimate cow numbers to be down 3,000 head from November. The trade will watch cow numbers closely to see whether culling is increasing.

CHEESE:

Cheese buyers remain complacent and are purchasing as needed for demand and to replenish their aging program. However, they are not interested in building inventory and paying for storage when it is not necessary. Sellers are not holding back, and buyers are not aggressive as they feel there is limited upside price potential for now.

BUTTER:

USDA will release the December Cold Storage report today. It is expected to show butter inventory closing the year higher than the previous year. Domestic demand has been good, but production has been strong due to the plentiful cream supply. Export demand has been substantially lower than a year ago. Price is expected to remain range-bound.

Tuesday Closing Dairy Market Update - Class III Futures Post Double-Digit Losses

MILK

There was an overall bearishness in Class III futures today. The decline of barrels offset the increase in dry whey and kept the daily calculation about unchanged, yet traders were more aggressive in selling futures contracts through the end of the year. It was a day that they decided to eliminate some of the premium later contacts currently held.

On the other hand, Class IV futures were steady to higher. Higher prices were generally confined to the second half of the year. Closer months should have been supported due to the increase in nonfat dry milk, but that is the market and it does not make sense some days.

USDA will release the December Milk production report on Wednesday. I estimate milk production to be down 0.4% from a year ago with cow numbers down 3,000 head from November. If cow numbers are down significantly more, lower milk prices might have had a greater impact and eventually tighten milk supply. However, the impact of a tighter milk supply may not be felt until later in the year when demand generally increases.

AVERAGE CLASS III PRICES

3 Month:	$15.62
6 Month:	$16.42
9 Month:	$16.98
12 Month:	$17.28

CHEESE

Block price's ability to hold the gains of yesterday was positive but not enough to trigger more aggressive buying from traders. The minor decline in barrels should not have put pressure on futures as it did but selling spilled over into later contracts, eliminating more of the premium that the market had been carrying.

USDA will release the December Cold Storage report Wednesday, which is not expected to show a growth in cheese inventory. Cheese stocks should finish the year similar to where they had been a year ago.

BUTTER

It appears the butter price is not going anywhere anytime soon. Buyers and sellers seem to be comfortable at the current level and take care of business when needed without much fanfare. Manufacturers want to keep inventory from building too much and will keep moving supply to the market. This will limit upside potential.

The December Cold Storage report is expected to show butter stocks closing the year higher than the previous year.

OUTSIDE MARKETS SUMMARY

March corn closed up 0.75 cent per bushel at $4.4650, March soybeans closed up 15.25 cents at $12.3950 and March soybean meal closed up $5.30 per ton at $361.10. March Chicago wheat closed steady at $5.9650 and April live cattle closed up $0.93 at $177.83. March crude oil is down $0.39 per barrel at $74.37. The Dow Jones Industrial Average is down 96 points at 37,905 with the NASDAQ is up 66 points at 15,426.

Tuesday Midday Dairy Market Summary - Class III Contracts Under Pressure

OUTSIDE MARKETS SUMMARY:

CORN:	Unchanged
SOYBEANS:	7 Higher
SOYBEAN MEAL:	$4.70 Higher
LIVE CATTLE:	$0.97 Higher
DOW JONES:	134 Points Lower
NASDAQ:	8 Points Higher
CRUDE OIL:	$0.69 Lower

MIDDAY MARKET UPDATE:

Block cheese price remained steady at $1.50 with two loads traded. Barrel cheese price declined 0.75 cent, closing at $1.46 with no loads traded. Buyers and sellers of blocks went home satisfied with no unfilled bids or uncovered offers remaining. There were two uncovered offers remaining in barrels with no buyers showing up to the market. Traders did not like what they saw and put further pressure on the market. Class III futures contracts were under pressure throughout the year with prices ranging from 2 to 20 cents lower. Butter price remained steady at $2.5450 with no loads traded. Grade A nonfat dry milk price gained 1.50 cents, closing at $1.19 with one load traded. Class IV futures are 3 cents lower to 20 cents higher. The higher price will not hold due to the current offer being quite a bit lower. There has been quite a bit of trading activity in the May and June contracts. Butter futures are 0.42 cent lower to 1.92 cents higher. Dry whey futures are steady to 0.75 cent higher.

Tuesday Morning Dairy Market Update - Light Trading Activity Expected

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Higher
Soybean Futures:	2 to 4 Higher
Soybean Meal Futures:	$1 to $3 Higher
Wheat Futures:	2 to 3 Higher

MILK:

There was little to provide price direction for traders Monday. The same is likely true Tuesday. Market fundamentals are rather benign, leaving the market floating. The strength of block cheese on Monday did little to generate any volatility. Price strength has been limited and there may be no exception to that any time soon. Cattle continue to move around from farms going out of business to ones that are expanding. Some milk plants are not allowing expansions while others want to keep a steady supply of milk and are willing to move quota from farm to farm or have increased capacity and can accept more milk. It seems the low milk prices would reduce this desire, but farms continue to move forward. This will keep the milk supply available for needs.

CHEESE:

The jump in block cheese price Monday was a bit of a surprise but was viewed with skepticism by the trade. The strength is not likely to hold if the pattern over the past months remains intact. Cheese demand is about as expected for this time of year with cheddar varieties being more in demand.

BUTTER:

Price is expected to remain in a sideways range. The question is whether the range will be where the price currently is or whether the price will decline and trade at a level like a year ago. Inventory is larger than a year ago, which may limit upside potential, but it is not a concern for the industry right now.

Monday Closing Dairy Market Update - Markets Mixed to Higher

MILK

Class III milk futures settled mixed with front months up 2-7 cents and deferred month off 6-7 cents. Class IV futures were flat to lower by 1-3 cents. Nonfat dry milk anywhere from down 60 cents to up 50 cents by late afternoon trade. Dry whey traded one contract up 50 cents. Cash markets were nothing to get excited about with no loads traded today.

AVERAGE CLASS III PRICES

3 Month:	$17.07
6 Month:	$17.70
9 Month:	$17.90
12 Month:	$18.03

CHEESE

Block cheese saw some relief, trading at 0.0550 cents and closing at $1.5000 after last week's losses with only two loads traded. Barrels were flat with one load traded at $1.4675. Cheese futures traded slightly higher in front months from 0.1 cent higher to 1.3 cents higher. Deferred months were slightly lower.

BUTTER

Butter was unchanged from yesterday at $2.5450 as no loads traded. Butter futures saw later-day gains in the February and March contracts, up 0.25 to 0.575 cent. We are keeping a cautious eye on current production and inventory levels.

OUTSIDE MARKETS SUMMARY

March corn closed up 0.25 cents per bushel at $4.4575, March soybeans closed up 11 cents at $12.2425 and March soybean meal closed down $1 per ton at $359.30. March Chicago wheat closed up 3.25 cents at $5.9650. February live cattle closed down $0.45 at $173.925. March crude oil is $1.32 per barrel at $74.56. The Dow Jones Industrial Average is up 141 points at 38,185 with the NASDAQ is up 13 points at 17,451.

Monday Midday Dairy Market Summary - Low Volume

OUTSIDE MARKETS SUMMARY:

CORN:	unchanged
SOYBEANS:	$0.08 Higher
SOYBEAN MEAL:	$1.60 Lower
LIVE CATTLE:	$0.550 Lower
DOW JONES:	130 Points Higher
NASDAQ:	36 Points Higher
CRUDE OIL:	$2.13 Higher

MIDDAY MARKET UPDATE:

Block cheese gained 0.0550 cents, closing at $1.5000 with two loads traded. Barrel cheese price unchanged, closing at $1.4675 with one load traded. Dry whey price unchanged at 42.75 with no loads traded. Butter price unchanged at $2.5450 with no loads traded. Grade A nonfat dry milk price unchanged at $1.1750 with no loads traded. Class III futures are mixed, ranging from 7 cents higher to 3 cents lower. Class IV futures are 3 cents lower with only five contracts trading so far Monday. Butter futures are 0.50 cent lower to 0.90 cent lower. Dry whey futures have not traded yet Monday. 

Monday Morning Dairy Market Update - Limited Trade Ahead of Cash

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Steady to 1 Lower
Soybean Futures:	1 to 3 Lower
Soybean Meal Futures:	$2 to $4 Lower
Wheat Futures:	3 to 5 Lower

MILK:

Milk futures are expected to drift this morning as traders will wait for direction from underlying cash. However, whichever direction cash moves, it may have limited impact as traders anticipate a continued choppy market. Milder winter weather will allow for milk production to improve again and potentially slowly trend higher. Milk futures are expected to roll down in nearby months if underlying cash remains in a sideways pattern. The January contract is priced by the trade and will see limited price movement until the Federal Order prices are released on January 31.

CHEESE:

Prices are expected to remain choppy with limited upside potential for the foreseeable future. Cheese production is sufficient for demand, leaving buyers less aggressive in the cash market. Manufacturers have been moving cheese to the market to limit inventory build which could keep supply in line with a year ago.

BUTTER:

Butter price has been holding at a higher level on in a wider price range than a year ago. However, with strong churning activity and plentiful cream supply, price may eventually drop back to the levels of a year ago.

Friday Closing Dairy Market Update - GDT Gains 2.3%

MILK

Traders had nothing to get excited about today, which left trade volatility subdued and prices mixed. The strength in nearby Class III futures was not a matter of traders thinking underlying spot prices will increase, but more short covering into the weekend. The strength of barrels was mostly offset by the weakness of blocks. The Global Dairy Trade auction took place earlier in the week and showed an increase of 2.3 percent for the trade weighted average from the previous event. Anhydrous milk fat increased 4.3 percent to $5,842 per metric ton or $2.65 per pound. Butter increased 5.8 percent to $5,906 per metric ton or $2.68 per pound. Cheddar cheese increased 1.0 percent to $4,217 per metric ton or $1.91 per pound. Mozzarella cheese decreased 3.3 percent to $3,830 per metric ton or $1.74 per pound. Lactose increased 1.3 percent to $760 per pound. Skim milk powder gained 1.2 percent to $2,638 per metric ton or $1.20 per pound. Whole milk powder increased 1.7 percent to $3,352 per metric ton, or $1.52 per pound.

AVERAGE CLASS III PRICES

3 Month:	$15.61
6 Month:	$16.51
9 Month:	$17.10
12 Month:	$17.42

CHEESE

For the week, block cheese was hit the hardest with the price declining 11.50 cents with 21 loads traded. Barrels gained 2.25 cents with 16 loads traded. Dry whey slipped 0.25 cent with 11 loads traded. With the decline of blocks this week, it is surprising Class III milk futures did not fall much more than they had. The choppy market leaves futures in a narrow range providing traders with little movement to try and take profits.

BUTTER

For the week, butter declined 2.25 cents with 33 loads traded. Grade A nonfat dry milk declined a penny with 15 loads traded. Price is about in the middle of the price range it has been in since early November. Price remains higher than it was a year ago and hopefully will remain that way. However, with inventory higher to the end of the year and butter production currently strong, Price could move back into the range of last year over time.

OUTSIDE MARKETS SUMMARY

March corn closed up 1.50 cents per bushel at $4.4550, March soybeans closed down .25 cent at $12.1325 and March soybean meal closed down $4.80 per ton at $356.50. March Chicago wheat closed up 7.75 cents at $5.9325. February live cattle closed down $0.45 at $174.38. March crude oil is down $.42 per barrel at $73.53. The Dow Jones Industrial Average is up 395 points at 37,864 with the NASDAQ is up 255 points at 15,311.