The Agriculture Department again lowered its milk production forecasts for 2023 and 2024 in the latest World Agriculture Supply and Demand Estimates report.

The 2023 forecast was reduced from last month due to slower expected growth in milk per cow. Production in 2024 was lowered due to lower milk cow numbers and reduced milk per cow.

2023 production and marketings were estimated at 226.9 billion and 225.9 billion pounds, respectively, down 200 million pounds on both from a month ago. If realized, both would be up 400 million pounds or 0.2% from 2022.

2024 production and marketings were projected at 229.0 billion and 228.0 billion pounds, respectively, down 1 million pounds on production and 1.1 million pounds lower on marketings. If realized, 2024 production would be up 2.1 billion pounds or 0.9% from 2023.

The Class III milk price is expected to average $17.05 per hundredweight in 2023, down a nickel from last month’s estimate, and compares to $21.96 in 2022 and $17.08 in 2021. The 2024 average was estimated at $16.85, down 85 cents from last month’s estimate.

The 2023 Class IV was projected to average $19.10, down a dime from a month ago, and compares to $24.47 in 2022 and $16.09 in 2021. The 2024 average was projected at $18.90, up a nickel from last month’s projection.

Dairy exports disappointing

October U.S. dairy exports totaled 486.4 million pounds, down 7.2% from a year ago. HighGround Dairy points out, however, that October 2022 shipments were the strongest on record for the month and 2023’s data now sits in second place, ahead of 2021. “The 7% loss marked improvement from the past two months,” adds HGD, “which logged double-digit year-over-year losses.”

Nonfat dry milk and skim milk powder exports, at 142.2 million pounds, fell for the second month in a row, down 11.2%. Volumes were the smallest total for the month since 2018, says HGD, which blamed lower shipments to Mexico, Indonesia and China.

Cheese shipments, at 78.7 million pounds, were down 4.0%, despite improved movement across the U.S. borders with Mexico and Canada. HGD says, “China even pitched in, with exports increasing 145% YoY.” Sales to South Korea continued to lag, with year-to-date exports called “abysmal.”

Butter exports fell to the lowest monthly volume since November 2020, according to HGD, “an unsurprising outcome given the exponential rise in butter prices throughout the end of September into October.” Smaller shipments were seen to Canada, Mexico, South Korea, Taiwan, Saudi Arabia and Bahrain.

Stronger Pulse

Tuesday’s GDT Pulse saw 4.9 million pounds or 99.0% of the total 4.96 million pounds of product on offer sold. The same amount of instant whole milk powder and 38,660 pounds less of regular whole milk powder were sold versus the last Pulse; 5.3 million pounds more SMP on offer was sold this auction.

2023 abnormal

StoneX broker Dave Kurzawski said 2023 hasn’t been a normal year from a demand perspective in the Dec. 11 “Dairy Radio Now” broadcast. “Is it the economy slowing?” he asked. “Inflation? Hard to say.” The markets are relatively stable going into year end, but with milk prices close to or below breakeven for most farmers, he doesn’t foresee a surge of milk that typically comes in spring. He foresees “pockets of demand juxtaposed to flat or lower milk production for several more months and, as that happens, you will have pops in price.”

He admitted October dairy exports were not good but “that’s old news.” First quarter 2024 looks promising, he said, particularly for U.S. cheese. And, if China steps up its purchases again, the market could turn around quickly. He concluded by warning of the effect of “taking our foot off the gas in solving inflation, which could result in rapid bull markets in commodities in 2024.”

Butter melting

CME Cheddar block cheese climbed to $1.6350 per pound last Wednesday but finished Friday at $1.58, 6 cents higher on the week but 51.50 cents below a year ago.

The barrels got to $1.61 Wednesday but closed Friday at $1.5550, up 3.50 cents on the week, 39.50 cents below a year ago, and 2.50 cents below the blocks. Sales totaled 16 loads of block on the week and 12 of barrel.

The blocks tacked on 2 cents Monday on a trade but gave them back Tuesday, returning to $1.58, with 3 sales on the morning.

The barrels inched a half-cent lower Monday on 3 trades and dropped 5.75 cents Tuesday, with 6 loads finding new homes, falling to $1.4925, 8.75 cents below the blocks.

StoneX stated in its Nov. 6 “Early Morning Update that “while general conversations point to rather quiet cheese demand and ample availability of fresh cheese out there, spot market sellers have been less aggressive since last week. EU cheese prices are $1.90-$2.00. GDT Cheddar was up 9.7% to $1.80. U.S. cheese is rather cheap in the $1.50s, and likely in the $1.60s as well. We also made less Cheddar in October. Not that it matters much for immediate trading, the October Dairy Products report is old. But again, for a market to continue lower, you need to give it a reason to do that.” 

Export activity has reportedly seen a boost, adds StoneX. “It’s no secret that U.S. cheese prices were some of the least expensive over the past month and there seems to be a bit of an uptick from otherwise sluggish export sales we’ve seen so far in fourth quarter, though October is the only data we have.”

Dairy Market News reports that milk availability for Midwest cheese processors shifted the last week of November and provided a brief rebound following Thanksgiving week pricing lows. While deals as low as $4-under Class were reported the last week of November, there were some $1-over prices. Cheddar and Italian style cheesemakers say demand is holding somewhat steady in relation to this time of year. “The nearing-culmination of football season typically bodes well for both Italian (pizza) cheese and some seasonal Cheddar varieties, reports DMN.

Western retail cheese demand remains steady while food service remains steady to lighter. Cheesemakers relay comfortable inventories the last month of 2023.

Manufacturers indicate milk is readily available and demand for Class III milk is strong to steady. Cheese production is mostly steady.

Butter saw its Friday finish at $2.67 per pound, 1.50 cents higher but 14.25 cents below a year ago, with 5 loads finding new homes on the week.

Monday’s butter was offered 9.50 cents lower, then lost 7.50 cents Tuesday on 4 sales, plunging to $2.50, where it sat on Nov. 27.

Central butter makers say cream remains “somewhat available,” but compared to the previous two weeks, loads are lightening. There’s been an onslaught of cream volumes since the holiday week but churning rates have been kept in check by plant managers, says DMN. They will likely pick up as the end-of-year holidays approach and cream loads are expected to increase.

Cream volumes and spot load availability have improved in the West as average butterfat levels in milk have increased. That contributed to stronger churning. Some reports indicate bulk butter availability is tight. Plants report strong to steady retail production and most manufacturers report comfortable inventory levels. Domestic butter demand is strong to steady. Export demand is moderate, with steady interest remaining from Canadian buyers, according to DMN.

Grade A nonfat dry milk saw a Friday finish at $1.1650 per pound, down 1.50 cents on the week and 20 cents below a year ago, on 16 sales.

The powder was unchanged Monday but inched a quarter-cent lower Tuesday, slipping to $1.1625.

Dry whey finished last week a half-cent lower, at 39.50 cents per pound, 4 cents below a year ago, with 4 loads exchanging hands on the week.

Monday’s whey was down a half-cent with 2 loads traded, then bid back up a half-cent Tuesday, to 39.50 cents per pound.