Facing rising costs and scarcity, dairy producers struggle to meet market demands. How will these challenges impact milk production and prices? Discover insights here.

The dairy market faces significant challenges and economic pressures. Milk scarcity is evident due to a limited supply of heifers and diseases like avian influenza. Rising production costs are making it challenging for dairy producers to sustain operations. To provide a comprehensive understanding of these dynamics, including fluctuating milk prices, production trends, and the broader impacts on the global dairy industry, we refer to the highly respected T.C. Jacoby Weekly Market Report.

Mounting Milk Demand Strains Dairy Producers Amidst High Costs and Health Challenges 

The demand for milk and dairy products is surging, but dairy producers face significant hurdles in ramping up milk production. The financial incentive, which refers to the potential for increased profits, is clear, with Class III milk prices near $20 per cwt. However, the scarcity and high cost of replacement heifers are significant obstacles. At the recent Pipestone, Minnesota auction, top-quality springers fetched $2,550 to $2,900 per head, reflecting the hefty investments producers are willing to make. 

Health crises like avian influenza, particularly in Idaho and the Great Lakes states, have had a significant impact on the dairy industry. Producers have had to keep lower-end milk cows in the herd longer to sustain output, even as slaughter volumes have dipped since Class III prices rose above $19 in early May. This situation underscores the severity of the disease outbreak and its implications for the dairy market. 

The USDA’s revisions to March milk production and cow numbers paint a complex picture. While cow numbers briefly rebounded in March, the decline in April highlights ongoing challenges from herd dispersals and animal health issues. The national dairy herd was 9.34 million head in April, down 74,000 from last year, with the Southwest seeing suppressed milk output and modest growth in the Midwest. These factors have contributed to the current state of the dairy market, and understanding them is crucial for dairy producers and industry stakeholders. 

Dairy producers are not just weathering these pressures, but also adapting to fluctuating global market demands, especially from China. Despite the obstacles, they are striving to meet the growing demand for milk and dairy products, demonstrating their resilience in an unpredictable production environment. 

The Scarcity of Heifers: A Formidable Obstacle for Dairy Producers Amid Rising Costs

The scarcity of heifers has become a significant obstacle for dairy producers, driven by dwindling supply and rising acquisition costs. This was evident at last week’s auction in Pipestone, Minnesota, where top springers ranged from $2,550 to $2,900 per head. With Class III milk prices near $20 per cwt., many producers are compelled to pay these high prices to keep their barns full. 

While advantageous, high-Class III milk prices also contribute to the problem. They encourage producers to retain lower-end milk cows longer, potentially impacting national milk yields. Additionally, these prices have led to a further decline in cull rates in early May, underscoring the market’s scarcity and high demand for heifers.

Strategic Herd Adjustments: Balancing Production Levels at the Expense of National Yield Averages 

Dairy producers are not just adjusting their herd management practices, they are doing so strategically amidst surging demand and escalating costs. They are retaining lower-end milk cows longer, a crucial step in maintaining production levels, even though this could potentially suppress national average milk yields. This approach underscores their ability to navigate high heifer costs and disease outbreaks, highlighting their strategic acumen in the face of complex challenges.

Market Dynamics, Health Crises, and Their Impact on Slaughter Volumes and Cull Rates

The current market dynamics, which include factors such as fluctuating milk prices, disease outbreaks, and global trade policies, have significantly influenced slaughter volumes and cull rates, presenting a complex scenario for dairy producers. Slaughter volumes have declined since September, and the trend has intensified in May as Class III milk prices surged past $19 per cwt., leading to even sharper drops in cull rates. 

Avian influenza has further complicated critical milk-producing regions like Idaho and the Great Lakes states. Producers must cull portions of their herds post-infection, boosting cull rates and straining milk production capacity in these critical areas. 

Farmers are retaining lower-end milk cows, which refers to cows that are less productive or have health issues, and deferring culling to maintain herd sizes. This strategy is likely to impact national average milk yields negatively. The economic drive to keep barns full and health challenges reducing herd sizes highlight the delicate balance between market forces and health crises shaping the dairy industry.

Mixed Trends in Milk Production Amidst USDA Revisions and Regional Disparities 

Milk production trends are not straightforward. USDA revisions indicate that while April’s milk output was slightly below last year’s levels at -0.4%, March had a smaller decline than first reported. Cow numbers bounced back in March but dipped again in April, with the herd at 9.34 million head, 74,000 fewer than in April 2023. Regional differences are apparent, with the Southwest facing constraints from dairy dispersals and avian influenza, while the Midwest saw modest growth. Overall, the drop in cow numbers and ongoing health issues are exerting pressure on national milk production, illustrating the intricate nature of the market dynamics.

Wild Swings in Futures Prices Reflect Persistent Market Volatility

Milk and dairy product futures experienced notable volatility this week. By week’s end, nearby Class III futures had declined significantly but remained higher than the past 18 months. The June contract closed at $19.88 per cwt., down $1.58 from last Friday’s peak. Deferred Class III futures showed little change overall. 

In contrast, Class IV futures added 20ȼ to 30ȼ, ranging from $20.57 in May to $22.47 in November, indicating a more stable, upward trend. These price movements reflect the ongoing uncertainty and dynamic conditions in the dairy markets, which include factors such as global trade policies, weather conditions, and disease outbreaks, all of which can significantly impact dairy prices and production.

This Week’s International Market Dynamics Reveal a Mixed Yet Optimistic Scenario for Milk and Dairy Products 

This week’s international market dynamics reveal a mixed yet optimistic scenario for milk and dairy products. The latest Global Dairy Trade (GDT) auction showed surging prices for whole and skim milk powder, with 2.9% and 3.5% increases, respectively. However, China’s absence as a major buyer remains a significant factor. 

China’s reduced dairy imports continue to challenge the global dairy trade. Imports of milk powder and whey are down sharply compared to last year, marking the slowest start to Chinese SMP imports since 2018. This trend impacts the market, which has been hoping for a rebound in China’s import activity to drive up prices. 

Chinese consumers increasingly turn to domestic dairy products, supported by USDA analysts in Beijing, who project a 7% annual growth in Chinese milk production from 2020 through 2023, with 1.3% additional growth expected in 2024. This rise in domestic production has curbed China’s demand for imported milk powder, prompting dairy exporters to seek new markets. 

Nonetheless, other global buyers’ increased activity at the GDT auction kept prices buoyant, reflecting solid demand. This engaged participation could stabilize prices despite China’s lagging imports. These evolving dynamics will be critical as the industry navigates the complexities of international trade and production capacities.

China’s Dairy Market: A Paradigm Shift Towards Domestic Production Amidst Declining Import Volumes

The Chinese dairy market is undergoing notable shifts. Import volumes of milk powder and whey are down, lagging significantly behind last year. Specifically, skim milk powder (SMP) imports through April hit a low not seen since 2018, signaling a drop in demand for foreign dairy products. 

This decline contrasts with a surge in domestic production. USDA analysts in Beijing report that Chinese milk output grew by about 7% annually from 2020 to 2023, with expectations of another 1.3% increase in 2024. This rapid expansion highlights a strategic move by Chinese consumers toward domestically sourced dairy, reshaping local and global dairy markets.

Spot Market Highlights: NDM Climbs Amid Supply Anxieties, Whey Stumbles on Ample Inventories, Butter Soars on Robust Demand

This week, the CME spot market recorded significant price movements for nonfat dry milk (NDM), whey powder, and butter. NDM prices rose by a penny, reaching $1.175 per pound, the highest in nearly three months, driven by concerns over milk supplies for Class III milk volumes expected later in the spring and summer. 

On the other hand, spot whey powder declined by 1.5 cents, settling at 40 cents per pound. This drop reflects high U.S. inventories amid slow export demand, particularly from China. Persistent sluggishness in Chinese whey imports keeps stockpiles ample, exerting downward pressure on prices. 

Butter prices continued their impressive climb, rising by 5.25 cents to a record-setting $3.1225 per pound. This surge is fueled by robust demand and relatively inexpensive cream that keeps churns active. Yet, a recent increase of 44 million pounds in butter inventories from March to April may stabilize prices as buyers gain confidence in ample future supplies. Cold storage held 361 million pounds of butter at the end of last month, a 9% increase from the previous year. 

In summary, while NDM prices rise amidst supply anxieties, whey powder prices fall due to substantial inventories and slow export demand. Butter surges on high demand and plentiful cream, though growing inventories may stabilize prices. These trends highlight the intricate balance of supply, demand, and market sentiment in the dairy sector.

Cheese Markets Experience Notable Price Adjustments Amid Robust Domestic Demand and International Trade Dynamics

The cheese markets saw a sharp decline from last week’s highs. CME spot Cheddar barrels dropped 14.5ȼ to a still elevated $1.98 per pound, while Cheddar blocks fell 7.25ȼ to $1.87 per pound. Despite this, domestic cheese demand is rising, driven by retailers making cheese more affordable. 

On the international front, cheese imported months ago is shipping out, reducing inventory levels. By the end of April, stocks were at 1.46 billion pounds, down 0.6% from last year. This decrease had briefly pushed prices above $2.00 per pound. Still, with falling global orders, the market is finding a better balance between supply and demand.

The Bottom Line

This week’s T.C. Jacoby Market Report unveils a challenging terrain for dairy producers. Strategic herd adjustments are necessary to face surging heifer costs and avian influenza. Market volatility persists, affecting Class III and IV futures. Internationally, China’s shift toward domestic dairy and reduced imports marks a notable change, impacting global markets. Domestically, rising cheese demand and high butter prices offer some respite. Staying attuned to these trends is essential for making informed decisions and navigating the dairy market’s complexities.

Key Takeaways:

• The demand for milk is extremely high, but the expansion of production is hindered by the scarcity and high cost of heifers.
• Slaughter volumes have decreased significantly since September, further dropping in early May when Class III milk prices increased.
• Milk output in April was 0.4% lower than the previous year, with USDA revising March estimates to show a brief rebound in cow numbers before a decline in April.
• Futures prices for both Class III and Class IV milk remain volatile, with notable fluctuations observed throughout the week.
• Internationally, milk and dairy product prices are generally up, but global cheese values remain flat, and China’s buying activity has yet to recover to previous levels.
• On the domestic front, NDM prices are rising amid concerns about milk supply, while whey prices have dipped due to ample inventories.
• Butter prices continue to soar, reaching record highs for this time of year, while cheese prices have adjusted downward after a recent peak.
• A significant rally in wheat futures has influenced corn and soybean markets, reflecting broader agricultural trends.

Summary: The dairy market is grappling with economic challenges, including milk scarcity due to a limited supply of heifers and diseases like avian influenza. Rising production costs are making it difficult for dairy producers to sustain operations. The demand for milk and dairy products is surging, but producers face significant hurdles in ramping up milk production. Financial incentives like increased profits are clear, but the scarcity and high cost of replacement heifers are significant obstacles. Health crises like avian influenza have forced producers to keep lower-end milk cows in the herd longer to sustain output. The USDA’s revisions to March milk production and cow numbers reveal a complex picture, with cow numbers briefly rebounding in March but declining in April. Despite these challenges, dairy producers are adapting to fluctuating global market demands, particularly from China. The scarcity of heifers and high-Class III milk prices encourage producers to retain lower-end milk cows longer, potentially impacting national milk yields. The latest Global Dairy Trade (GDT) auction showed surging prices for whole and skim milk powder, but China’s absence as a major buyer remains a significant factor.

Discover the latest insights from Global Dairy Trade Event 355, where the GDT Price Index rose by a significant 1.8%. Curious about what this means for the dairy industry? Dive in to find out.

If you’re keeping an eagle eye on the global dairy trade, we’ve got some fresh figures to share with you straight from Fonterra. Their latest price quotes reveal a mixed bag of increases and decreases across the various dairy indices. Let’s dive right into the creamy details. 

AMF Index saw a moderate increase of 1.2%, bringing the average price to US$7,124/MT (€6,611/MT).

The butter-lovers will be pleased, as the Butter Index went up by 2.1% and has an average price of US$6,593/MT (€6,118/MT).

For those monitoring the BMP Index, there was an increase of 1.7%, with the average price now standing at US$2,545/MT (€2,362/MT).

An exciting climb was seen in the Ched Index, going up by a robust 8.0%, hence pushing the average price to US$4,257/MT (€3,950/MT).

Unfortunately, the LAC Index has seen a slight dip of 1.3%, bringing its average price down to US$739/MT (€686/MT).

Cheese enthusiasts rejoice: the Mozz Index has risen by 2.3%, settling the average price at US$3,840/MT (€3,564/MT).

A marginal rise occurred in the SMP Index by 0.4%, with an average price of US$2,551/MT (€2,367/MT).

Lastly, the WMP Index is up by 2.4%, boasting an average price of US$3,350/MT (€3,109/MT).

Remember, these market shifts represent the pulsating, changing face of the global dairy trade. Keep this information at hand as you navigate your way in this ever-evolving market.

Summary: Fonterra’s latest price quotes show a mixed trend across various dairy indices. The AMF Index saw a moderate increase of 1.2%, bringing the average price to US$7,124/MT (€6,611/MT). The Butter Index increased by 2.1%, reaching an average price of US$6,593/MT (€6,118/MT). The BMP Index saw a 1.7% increase, reaching US$2,545/MT (€2,362/MT). The Ched Index saw an 8.0% increase, reaching US$4,257/MT (€3,950/MT). The LAC Index saw a slight dip of 1.3%, bringing its average price down to US$739/MT (€686/MT). The Mozz Index rose by 2.3%, reaching an average price of US$3,840/MT (€3,564/MT). The SMP Index saw a marginal rise of 0.4%, while the WMP Index rose by 2.4%. These market shifts represent the ever-changing face of the global dairy trade.

Discover how US dairy production fared in March. Did your favorite cheese see a production boost? Uncover the latest stats on cheese, butter, and frozen dairy products.

Here’s some good news for you! March has proven to be a bountiful month for dairy products with most of them witnessing a surge in production. According to the National Ag Statistics Service, total cheese output showed a delightful jump, rising by 7.6% over February and slightly above the production figures from March of 2023 by one-tenth of a percent. 

“Italian style cheese production was up 8.6% from February, putting out an impressive 518 million pounds, which is 4.4% more than a year ago. American style cheese production showed a 10% increase over February, although it was 2.9% below the past year’s March production figures, resulting in 491 million pounds.”

Butter saw a respectable rise of 5.5% from February and a 1.4% increase from a year ago with a whopping 209 million pounds. A special mention goes to the dairy farmers in Wisconsin, who topped the nation in Italian-type cheese production, churning out 145.4 million pounds in March alone. They were closely trailed by their counterparts from California. However, California outperformed in producing the most Mozzarella cheese, with a sizable 134 million pounds. 

 Wisconsin continued to rule the roost in Cheddar cheese production, accounting for more than 60.4 million pounds in March. Compared to last year, dry whey production rose by an encouraging 3.4%, whey protein concentrate production was up 2.6%, and lactose production also notched up slightly. 

 The production of frozen dairy products was predominantly up in March, with hard ice cream production rising 1.4% to deliver 66.1 million gallons. Sherbet production also swelled 1.3%, resulting in 1.88 million gallons while Frozen yogurt rose marginally by a tenth of a percent to reach 3.71 million gallons. However, low-fat ice cream production witnessed a slump, dropping 12.8% to 37.7 million gallons. 

Summary: March saw a significant increase in dairy product production, with total cheese output rising by 7.6% compared to February. Italian-style cheese production increased by 8.6%, while American-style cheese production increased by 10%. Butter production also saw a rise of 5.5% and 1.4% from February. Wisconsin dairy farmers topped the nation in Italian-type cheese production, while California outperformed in Mozzarella cheese production. Wisconsin continued to dominate in Cheddar cheese production, accounting for over 60.4 million pounds. Frozen dairy product production also increased, with hard ice cream production rising 1.4% and frozen yogurt reaching 3.71 million gallons.

Discover how stabilizing supply is driving up European milk prices. Will this trend continue? Dive into our insightful analysis to find out more.

With a fresh spring in their step, nearly all European dairy companies offered a higher payout to their suppliers in March, compared to the colder month of February. The wave of change swept across the continent lifting the average European advance milk prices to an impressive 44.47 Euros per 100 kg in the month of March, offering a gainful increase of 0.39 Euros against the preceding month. This eye-opening detail is illuminated from the international milk price comparison conducted jointly by EDF and ZuivelNL, featuring sixteen heavyweight European dairy companies. 

Compared to 2023, milk prices have taken a dip by 3.63 euros or a substantial 7.5 percent in March

This decrease, however, did not stand in the way of some notable highs! With a robust plus of 1.50 Euros, it was the German dairy giant Hochwald that signed off on the highest milk price increase in March. On the flip side, the French Sodiaal and the British Saputo Dairy UK were the only members of this stellar line up to lower their milk price. Interested in the full milk price comparison for March 2024? If so, click here! 

Now for the nitty-gritty! These prices are applicable to an average supply of 1 million kg of milk boasting 4.2% of fat and 3.4% of protein. Such supply should have a germ count of up to 24,999 and a cell number up to 249,999. It’s also worth noting that these prices are quoted exclusive of VAT. 

On a different note, the European milk supply landscape underwent a noteworthy change in its dynamics. For the first time after a few turbulent months, the European milk supply found its footing and became stable in February, this factoring in the leap year correction. The French dairy market registered a small, yet encouraging increase in its milk supply, while Germany held its ground. Poland, on the other hand, continued to display powerful growth. 

Ireland, however, followed a different track with a 16 percent drop in milk supply in February

The same downward trend was also observed in the Netherlands, where the milk supply struggled to pick up the pace. From the fall period of September, the country’s milk supply has followed a downward trajectory. This trend was maintained in March, as dairy intake dipped by 1.3 percent. Industry insider ZuivelNL attributes this slump to the unfortunate outbreak of the Bluetongue virus and the ongoing grading of the derogation, which in turn led to farmers keeping fewer cows.

Summary: In March, European dairy companies offered higher payouts to their suppliers, with the average European advance milk prices reaching 44.47 Euros per 100 kg. This increase of 0.39 Euros compared to February was revealed in an international milk price comparison conducted by EDF and ZuivelNL. Milk prices have dropped by 7.5% compared to 2023, but some notable highs were recorded, such as the 1.50 Euro increase by German dairy giant Hochwald. French Sodiaal and British Saputo Dairy UK were the only dairy companies to lower their milk prices. The European milk supply landscape experienced a significant change in dynamics, with the French dairy market experiencing a small increase in its milk supply, while Germany held its ground. Poland continued to show growth. However, Ireland experienced a 16% drop in milk supply in February, while the Netherlands experienced a downward trend from September. Industry insider ZuivelNL attributes this slump to the outbreak of the Bluetongue virus and the ongoing grading of derogation, leading to farmers keeping fewer cows. The prices are applicable to an average supply of 1 million kg of milk with 4.2% fat and 3.4% protein, and are quoted exclusive of VAT.

Discover why milk futures and dairy prices are soaring on the Chicago Mercantile Exchange. Uncover the factors driving this trend in our latest analysis.

On a bright and busy Friday, milk futures and cash dairy prices took a welcome climb at the bustling Chicago Mercantile Exchange. June Class III milk responded positively, rallying up $0.31 to reach a solid $19.21. Not to be outdone, July followed suit with a buoyant $0.21 increase, settling at a comfortable $19.26. 

It wasn’t just the heart of summer enjoying this boost. August also benefitted from this positive trend, inching upwards by $0.10 to stand at $19.29. Meanwhile, September milk futures matched August’s rise, increasing by $0.05 to $19.29.

Notably, the contracts set for October through December ranged from rising four cents in October and December to an even higher ten-cent rise in November.

But it wasn’t all about the milk. Dry whey was up $0.0050 at $0.3950. In this bustling market, an impressive ten sales were recorded, ranging from $0.3950 to $0.40. Elsewhere, our ever-popular forty-pound cheese blocks enjoyed a minor uptick of $0.0025 to close at $1.79. Although only one sale was recorded, it was at an enviable $1.7875. 

As for the cheese barrels, they remained stable at $1.88. However, the market came alive as one sale was recorded at that price. Butter, on the other hand, added $0.0175 to its value, closing at an eye-catching $3.0750. Here, an impressive thirteen sales were recorded, the prices ranging from $3.0675 to $2.0950.

Nonfat dry milk, albeit experiencing a slight decline of $0.0050 to touch base at $1.11, still recorded two sales at $1.11 and $1.1150 respectively. 

All in all, it was a day of wins for milk futures and cash dairy prices. Only time will tell how this upward trend will play out in the coming days.

Summary: On Friday, milk futures and cash dairy prices experienced a positive trend at the Chicago Mercantile Exchange. June Class III milk rose $0.31 to $19.21, while July saw a $0.21 increase to $19.26. August also saw a $0.10 increase to $19.29, while September milk futures matched August’s rise. Contracts for October through December ranged from four cents in October and December to an even higher ten-cent rise in November. Dry whey increased $0.0050 to $0.3950, with ten sales recorded. Cheese blocks saw a minor uptick of $0.0025 to close at $1.79, while cheese barrels remained stable at $1.88. Butter added $0.0175 to its value, closing at $3.0750, with thirteen sales recorded. Nonfat dry milk experienced a slight decline of $0.0050 to touch base at $1.11, but still recorded two sales at $1.11 and $1.1150. Overall, it was a day of wins for milk futures and cash dairy prices.

Discover how Rabobank’s forecast of a 20% drop in Northwest Europe’s milk production could impact the dairy industry. Will your morning coffee be affected?

Wake up to the reality of a significant milk supply reduction in Northwest Europe over the next decade. According to a report by Rabobank, the dairy processing industry may need to grapple with a possible 13 to 20 percent reduction in milk supply. This presents an undeniable call for an evident revamp of existing strategies. 

What’s behind this downward shift? There are several contributing factors anticipated. Milk production in Denmark, Germany, Belgium, and the Netherlands is expected to structurally decrease due to stringent margins, environmental regulations, and labour market challenges. Compounded with this, the region is also likely to face the impacts of climate change, leading to weather extremes.

“Puch-boll companies should focus on high-quality products, such as high-quality protein ingredients, consumer branded items, and cheese,” says Richard Scheper, a Dairy Analyst at Rabobank.

Rabobank’s researchers have plotted two potential scenarios for the period leading up to 2035. The first anticipates a 13 percent reduction in milk supply, while the second, a drastic 20 percent decline. Whichever comes to pass, both outlooks signal an impending hit to cooperatives that will result in substantial income losses. 

So, what does this mean for the dairy processing factories? They’re staring at a steep slope, because the sharp decline will provoke overcapacity issues. In light of this, Rabobank suggests companies concentrate on high-quality products. Scheper advises firms to be proactive and prepare for any imminent financial challenges. 

One way to navigate through these tough waters? Consolidating milk processing capacity. This strategic shift could help smoothen out the impacts of the changing market landscape and the associated declining milk volumes.

Summary: The dairy processing industry in Northwest Europe is facing a 13 to 20 percent reduction in milk supply over the next ten years, according to a report by Rabobank. The decline is expected to be structurally impacted by tight margins, environmental measures, labor market challenges, and weather extremes. Two scenarios for the period up to 2035 have been calculated, with one scenario involving a 13% reduction and the other a 20% reduction. These scenarios will result in substantial income losses, primarily impacting cooperatives. Overcapacity and consolidation will be a major challenge for processing dairy factories, as overcapacity will arise. Dairy companies need to act proactively to prevent drastic changes and prepare for financial challenges, such as consolidating milk processing capacity.

Discover why milk futures at the Chicago Mercantile Exchange soared. Could a lower dollar and a butter-buying frenzy be the key drivers? Dive in to find out.

Brace yourself for some positively uplifting news from the financial sector. Milk futures on the Chicago Mercantile Exchange mostly ended in positive territory this past Thursday, primarily steered by a lower dollar and an unexpected butter-buying spree in the cash market. This trend was marked across several futures contracts, painting a promising picture for the dairy market. 

Here’s a deeper look into the specifics: 

• May Class III milk was slightly down, losing a penny to settle at $18.34.
• The value of June futures sprung up by 36 cents, ending at $18.90.
• July futures also rose, going up 23 cents to sit at $19.06.
• August saw an increase of 27 cents, finishing at $19.17.
• Futures for the months of September through November were improved as well, with increases ranging from 2 to 15 cents.

“These shifts, while seemingly small, indicate an optimistic trajectory for milk futures amidst fluctuating market conditions. Playing your cards right in this sector could potentially yield promising returns,” explains a seasoned market analyst.

Moreover, there was a notable movement in other dairy-related futures: 

• Dry whey rose by $0.0150 to cap at $0.3750.
• The value of blocks stepped up $0.02, to finish at $1.7875.
• Barrels also experienced growth, going up $0.0250 to land at $1.88. Seven trades were executed in the range of $1.8650 to $1.88 during the day.
• Butter leaped up $0.0525, with its value now being $3.0575. A total of twenty-three trades were completed ranging from $3.02 to $3.07.
• A drop was noticed in nonfat dry milk, however, which slid down $0.0075 to stop at $1.1175. Five sales happened during the day, ranging from $1.1125 to $1.1175.

In conclusion, amidst some small setbacks, it’s overall a hopeful picture for different categories in the dairy market.

Summary: Milk futures on the Chicago Mercantile Exchange ended mostly positive due to a lower dollar and a butter-buying spree on the cash market. Class III milk decreased by a penny, while dry whey increased by $0.0150, blocks by $0.02, barrels by $0.02, and butter by $0.0525. Nonfat dry milk fell by $0.0075.

Explore the paradox of the dairy industry: why does profitability remain elusive despite a dwindling milk supply? Unravel the dairy dilemma with us.

Spring has firmly arrived, and with it, a flurry of fieldwork commences a fresh season, with milk production at its seasonal peak. You, like many farmers, may be looking forward to June — dairy month — and the arrival of summer with a surge of ice cream demand associated with it. It’s the season that often promises higher milk prices fueled by a stronger demand. Yet, especially in the cheese market, prices have been stubborn, causing the Class III value to remain low and delaying any significant margin recovery. The rest of the year does show signs of milk revenues improving, but brace yourself for a slow recovery that will likely span months, not weeks. 

Globally, milk supply growth appears to continue its struggle, with the first quarter of this year reflecting trends seen in the second half of 2023 marked by weaker year-over-year production from the key exporting regions. As per forecasts by Rabobank, this low supply is expected to persist throughout the summer before volume starts ticking positive through the second half of 2024. 

“After two consecutive quarters of weaker supply, typically, a firmly bullish price response would have materialized. It’s what we saw during the output pullback in 2021 which was followed by record high prices in 2022 in some instances. This time, although milk production is lower, it’s counteracted by sluggish global demand, leaving the supply and demand balance relatively neutral.”

This reduced milk supply is shrugged off by global buyers due to their adequate inventories and ongoing macroeconomic concerns. Although demand signs are promising, it will still take time before prices rise. 

Cheese has primarily been dragging the U.S. market down this year. Starting the year in the $1.40s, both block and barrel cheddar ascended to the upper $1.60s at the CME spot market in February, only to retreat to calendar year lows by mid-March. Mid-April saw prices climbing again, but the supply-demand dynamics prevented any significant cheese price growth. Dry whey also hit a low in March and April, further pulling the Class III price down after showing signs of strength earlier this year. Nonfat dry milk has been maintaining rangebound prices, but Class IV has benefited from a notably firm butter price. 

Despite these factors, achieving dairy farm profitability remains misleading— a frustrating continuation of 2023’s challenges. But there’s reason for optimism too. Rabobank projects slow but steady dairy commodity price gains will materialize in the latter half of this year. Paired with lower expected feed costs, an improved margin outlook will eventually stimulate milk production growth in both the U.S. and other key exporting regions. This year might not set any record price highs, but farmers like you would surely welcome the much-awaited return to profitability.

Summary: Milk production is at its peak, with summer and ice cream demand expected to boost prices. However, cheese prices have been stubborn, causing low Class III values and delaying significant margin recovery. Milk revenues are improving, but a slow recovery is expected. Global milk supply growth is struggling, with weaker year-over-year production from key exporting regions in the first quarter of this year. Rabobank forecasts that this low supply will persist throughout the summer before positive volumes start in the second half of 2024. Global buyers shrug off reduced milk supply due to adequate inventories and ongoing macroeconomic concerns. Demand signs are promising, but it will take time for prices to rise. Rabobank projects slow but steady dairy commodity price gains will materialize in the latter half of this year. Milk production growth in the U.S. and other key exporting regions is expected to stimulate growth.

Discover why the USDA reports a significant drop in March 2024 milk production across top dairy states. What’s causing this decline? Find out more.

The US Department of Agriculture (USDA) has recently shed light on a notable decline in milk production across the major dairy states for the month of March in 2024. Data gathered by the USDA indicates that production in the 24 major dairy states landed at just about 18.8 billion pounds last month, drawing a drop of about nine-tenths of a percent compared to the same period in March 2023.

In March, the average production per cow hit the scales at approximately 2,115 pounds, which was down by nearly three pounds from the same period in the preceding year. Additionally, the number of cattle in these states saw a decrease of about 71,000 head, when compared to the previous year, settling at roughly 8.88 million head. This statistic also signifies a decrease of 7,000 cattle from the preceding month of February.

For the first quarter of 2024, milk production saw a marginal increase of one-tenth of a percent from 2023, reaching a total of 56.9 billion pounds. During this period, the US total milking herd stood at 9.33 million head, reflecting a decrease of 16,000 cattle from the fourth quarter of 2023 and 85,000 fewer cattle compared to the first quarter of 2023.

Despite the overall decrease, California maintained its position as the standout producer, with its 1.7 million head of cattle generating an impressive 3.6 billion pounds of milk. This was closely followed by Wisconsin with its 1.2 million head yielding 2.7 billion pounds. Michigan continued to lead the pack in terms of milk production per cow, with an average yield of 2,350 pounds.

Summary: The US Department of Agriculture (USDA) reported a significant decline in milk production across major dairy states in March 2024. The average production per cow was around 2,115 pounds, down by nearly three pounds from the previous year. The number of cattle in these states also decreased by 71,000 head from 8.88 million head to 8.88 million head. In the first quarter of 2024, milk production increased by one-tenth of a percent from 2023, reaching 56.9 billion pounds. However, the US total milking herd decreased by 16,000 cattle from the fourth quarter of 2023 and 85,000 fewer cattle compared to the first quarter of 2023. California remained the top producer, with 1.7 million head of cattle generating 3.6 billion pounds of milk. Wisconsin followed closely with 1.2 million head yielding 2.7 billion pounds. Michigan continued to lead the pack in terms of milk production per cow, with an average yield of 2,350 pounds.

Dive into our analysis of April’s FMMO milk class prices. Understand the mixed trends and the impact of falling protein value. Will this affect your dairy business?

As we roll into May, dairy producers can look forward to changes in the Federal Milk Marketing Order (FMMO) prices, with the April 2023 FMMO pooling estimates, uniform prices, and producer price differentials scheduled for release between May 11-14. However, a heads up for the dairy industry – it seems likely the April milk checks could show a bit of a dent. We’re seeing evidence of this in the FMMO milk class prices and notably in the lowest protein component value, which is hitting a 25-year low. But don’t worry – things are looking up for May. 

Let’s delve a little deeper. The FMMO Class II, III, and IV prices announced on May 1 showed some mixed results compared to a month earlier. A decline in the Class III milk price offset small gains for Class I, II, IV milk prices. Now, for those with an eye on milk pooling, you’ll see that a wider Class III-IV price spread is again supporting substantial Class IV depooling incentives. 

For our forward-looking folks, the April 2024 FMMO pooling estimates, uniform prices and producer price differentials (PPDs) will be released on May 11-14, with a summary to be provided on May 15. Be sure to stay updated with Progressive Dairy’s website for the latest news. Let’s get into those April class prices: 

• At $21.23 per hundredweight (cwt), the April Class II milk price saw an uptick of 11 cents from March and comes out $2.03 more than April 2023. In fact, it’s achieved its highest level since October 2023.
• Not so good news for the Class III milk price, falling 84 cents from March to a three-month low of $15.50 per cwt. That’s $3.02 less than April 2023.
• It’s a small gain for the April 2024 Class IV milk price, with a modest increase of just 2 cents from March, putting it at $20.11 per cwt. This is $2.16 more than April 2023, and it’s also the highest since November 2023.

A key factor potentially affecting FMMO pooling is the April 2024 Class IV milk price. It’s currently $4.61 more than the month’s Class III milk price, marking the widest spread since October 2023. Meanwhile, the April 2024 advanced Class I base price stood at $19.18 per cwt, a rise of 38 cents more than in March 2024 and 33 cents more than April a year ago, marking the first year-over year increase since January 2022-23. 

Contributing to the April milk class price calculations, the value of butterfat was up from the previous month, but the protein value declined to a historical low. The butterfat value increased almost a dime from March to about $3.33 per pound. Milk protein, however, fell 29 cents from March, down to just 83.5 cents per pound – the lowest since the FMMO reform began in 2000.

It’s not just protein facing a dip though; the value of nonfat solids was down about 2.5 cents, landing at 97.3 cents per pound, while the value of other solids took a 5 cent tumble, leaving it at 23.7 cents per pound. 

Looking ahead based on FMMO advanced prices and current futures prices, we keep our fingers crossed that the outlook for May milk prices should improve. Already announced, the May 2024 advanced Class I base price is $18.46 per cwt, which is lower by 72 cents from April 2024 and $1.11 less than a year ago, landing it at the lowest since February. On a positive note, trading on May 1 suggests uplift with the Chicago Mercantile Exchange (CME) Class III milk futures price closing at $18.35 per cwt for May, up a robust $2.85 from the April price. The Class IV milk futures price for May closed at $20.18 per cwt, up by 7 cents from April. If these Class III-IV futures prices hold, the May Class III-IV milk price gap will shrink to $1.83 per cwt. That’s a seven-month low, potentially reducing some incentives for Class IV depooling. 

Summary: Dairy producers can expect changes in the Federal Milk Marketing Order (FMMO) prices in May, with the April 2023 pooling estimates, uniform prices, and producer price differentials scheduled for release between May 11-14. However, it is likely that the April milk checks will show a dent, with evidence of this in the FMMO milk class prices and notably in the lowest protein component value, which is hitting a 25-year low. The April 2024 FMMO pooling estimates, uniform prices, and producer price differentials will be released on May 11-14, with a summary provided on May 15. The April Class II milk price saw an uptick of 11 cents from March, reaching its highest level since October 2023. However, the Class III milk price fell 84 cents from March to a three-month low of $15.50 per cwt, $3.02 less than April 2023. A small gain for the April 2024 Class IV milk price was just 2 cents from March, putting it at $20.11 per cwt, $2.16 more than April 2023 and the highest since November 2023.

Discover why milk futures on the Chicago Mercantile Exchange plummeted. Could rising feed costs and oversold positions be the culprits? Dive in to find out.

In yesterday’s trading session, milk futures on the Chicago Mercantile Exchange concluded on a down swing, feeling the pinch from rising feed costs and an oversupply of positions. A trend that clearly played out across various classes and products.

For instance, May Class III milk was down 13 cents, closing at $18.25. June didn’t fare any better, 24 cents lower, ending the day at $18.42. July saw a decrease of seven cents to finish at $18.83, while August fell by six cents closing at $18.92. Despite these trends, September through November contracts remained stable or increased marginally, by up to four cents.

However, it wasn’t all doom and gloom across the board. Some products managed to hold their ground or even climb slightly. 

• Dry whey stayed flat at $0.3750.
• Blocks had an increase of $0.02 to settle at $1.7675.
• Barrels stood firm, unchanged at $1.8550.
• Butter rose by $0.04 to cap off at $3.0050 after seven trades made between $3.00 to $3.0050.
• Nonfat dry milk experienced a slight growth of $0.0050 to close at $1.1250, with five sales executed at that same price.

This steady movement among certain dairy products suggests a more complex landscape than the general downtrend might indicate. One where ongoing market factors and individual commodities are interacting in unique ways. So, let’s take a closer look at what’s driving these trends and what they could mean for the future.

Summary: Milk futures on the Chicago Mercantile Exchange experienced a downturn due to rising feed costs and an oversupply of positions. Class III milk closed at $18.25 in May, while June and July saw decreases and increases. August saw a six-cent fall to $18.92. However, contracts from September through November remained stable or slightly increased. Some dairy products managed to hold their ground or climb slightly, such as dry whey at $0.3750, blocks at $1.7675, barrels at $1.8550, butter rising by $0.04 to cap off at $3.0050, and nonfat dry milk experiencing a slight growth of $0.0050 to close at $1.1250. This suggests a more complex landscape, where ongoing market factors and individual commodities interact in unique ways. Understanding the driving factors behind these trends and their implications for the future is crucial.

Discover why milk futures on the Chicago Mercantile Exchange surged on Tuesday amidst mixed cash trade activity. Dive into the details with us.

On Tuesday, there was a notable upturn on the Chicago Mercantile Exchange. Here’s where it gets interesting – milk futures actually continued to climb higher, even while cash trade settled in mixed activity. 

• May Class III Milk: Positioned 2 cents higher at $18.39.
• June: Climbed even more significantly, 45 cents higher at $18.70.
• July: Followed June’s growth trend, up 45 cents at $18.87.
• August: Added 37 cents, reaching $18.94.
• September through November contracts: These ranged between eight to 25 cents higher.

In other interesting news, dry whey remained unchanged at $0.3750, while ‘blocks’ dipped slightly by $0.0025 to $1.7475. It’s worth noting that there was a single transaction made at that price. Conversely, ‘barrels’ rose by $0.0825 to arrive at $1.8550, with one notable sale made at $1.8350. 

Butter managed to hold steady at $2.9650. Perhaps the crowning development, though, was nonfat dry milk, which pushed upwards by $0.01 to close the day at $1.12. 

The fluctuating figures for the different months and products not only highlight the changes in the market but also hint towards future trends. Knowledge of this multifaceted landscape is crucial in grasping the future of commodities trading.

Summary: Milk futures on the Chicago Mercantile Exchange rose on Tuesday, with Class III milk up 2 cents to $18.39. Cash trade settled in mixed activity, with contracts from September through November increasing eight to 25 cents. Dry whey remained unchanged, while blocks and barrels rose. Butter remained unchanged and nonfat dry milk increased $0.01 at $1.12.

In March, feedstuff and milk prices held steady, leading to a Dairy Margin Coverage (DMC) margin of $9.65 per hundredweight. This was a groundbreaking occurrence; it was the first time since December 2022 that these prices did not trigger a payment through the dairy risk management program. 

The United States Department of Agriculture‘s National Agricultural Statistics Service (USDA NASS) released its agricultural prices report on April 30, which included feed costs used to calculate these crucial DMC program margins and indemnity payments. We saw consistent feedstuff prices and a slight uplift in the all-milk price, which brought the average milk income margin to $9.65 per hundredweight. 

March 2024 DMC Margin Factors

Let’s take a quick glance at the March 2024 Dairy Margin Coverage program margin factors, compared to the previous month: 

• Alfalfa Hay: $271 per ton, a decrease of $7 per ton
• Corn: $4.36 per bushel, no change from February’s price
• Soybean Meal: $362.17 per ton, down by $1.46
• Total Feed Costs: $11.05
• Milk Price: $20.70
• Margin Above Feed Cost: $9.65

Source: USDA Farm Service Agency, National Ag Statistics Service and Ag Marketing Service – April 30, 2024 

All-Milk Price: A Minor Increase 

In March 2024, the announced U.S. average all-milk price was $20.70. Even though it was a dime more than the previous month, it was 30 cents lower than March of the previous year. That being said, a majority of the 24 major dairy states experienced a modest increase in milk prices, with several states seeing an improvement of 50 cents or less. Only two states, Georgia and Virginia, recorded increases of $1 or more while Idaho and Pennsylvania were the ones to witness a decrease in their milk checks from the previous month. 

Feed Prices Held Steady 

Notably, the national average costs for major feedstuffs remained relatively unchanged from February in the three categories used to calculate feed costs. These categories include corn, soybean meal, and dairy-quality alfalfa hay. 

Calculated Feed Cost Elements: 

“The DMC feed cost for each month is calculated by summing three numbers: (1) the corn price per bushel times 1.0728; (2) the soybean meal price per ton times 0.00735; (3) the alfalfa hay price per ton times 0.0137.”

2024 Enrollment Closed, Margin Forecasts for Remainder of Year 

As of April 29, enrollment for the 2024 DMC program closed. The past year witnessed the risk management program being used by 17,120 dairy operations. In total, these farms received nearly $1.3 billion in payments, averaging $75,654 per operation. As we look to the remainder of this year, the DMC forecast doesn’t anticipate margins below the $9.50 per hundredweight threshold, although markets do fluctuate. Stay tuned; the actual margin for April will be announced on May 31st. 

Explore our in-depth analysis on the slight rise in revenue and expenditure for US dairy farmers in March. Curious about the factors behind this trend? Dive in now.

Sometimes the details really do matter, and that’s particularly true in the world of dairy farming. Here’s some insight that’s fresh off the farm: U.S. dairy farmers found themselves a little bit better off in March than they were in February. It’s mostly a good news scenario, with just a few hitches thrown in. 

According to the USDA, the index of prices received by farmers was up 1.5%. This was mostly due to some gains across a range of products. Here’s a quick run-down: cattle, hogs, broilers, and lettuce all saw gains, which helped to offset losses in wheat, market eggs, oranges, and strawberries. 

The dairy index for March 2024 was slightly improved too, ending up 0.5% higher than February. Sounds like a win, right? But before we get too excited, it’s worth noting that it was 1.4% lower than in March 2023. The all milk price was at $20.70 per hundredweight, which was an increase of $.10 on the month – but again, it was down $.30 on the year.

Switching gears to what farmers are paying out, the index of prices paid rose 0.6%. This increase was mainly due to higher costs for feeder cattle, feeder pigs, gasoline, and nitrogen. On the bright side, there were some decreases to the costs of hay and forages, complete feeds, LP gas, and concentrates. Every little bit helps, right? 

Overall, it’s a bit of a mixed bag. Year to year, the index of prices received was down 4.8% while the index of prices paid was 1.1% lower. While some farmers continued to see their profits limited by relatively high input prices.

So, as you can see, being a dairy farmer is never simple or straightforward. But in this case, at least it seems that things are slightly on the upswing. Here’s hoping that continues for our hardworking farmers.

Summary: U.S. dairy farmers saw a 1.5% increase in prices in March compared to February, mainly due to gains in cattle, hogs, broilers, and lettuce. However, losses in wheat, market eggs, oranges, and strawberries were offset. The dairy index for March 2024 was slightly higher but 1.4% lower than in March 2023. The all milk price was $20.70 per hundredweight, an increase of $.10 on the month but down $.30 on the year. The index of prices paid rose 0.6% due to higher costs for feeder cattle, feeder pigs, gasoline, and nitrogen. Year-on-year, the index of prices received was down 4.8%, while the index of prices paid was 1.1% lower.

If you’ve been keeping a close eye on the milk markets, you would have noticed that Monday was one of its most tranquil days in the past month. The May 2024 Class III contract managed to settle a nickel higher and June, stepping up its game, closed an admirable 9 cents stronger. The summer heat didn’t seem to affect July adversely as it finished 3 cents stronger too. We saw August through December oscillating anywhere from 7 cents lower to 3 cents stronger. A picture of stability was painted across Class IV markets as they didn’t shift an inch either way. 

The CME spot product markets followed suit, emulating the tranquillity of the day. A range of products including block cheese, barrels, and nonfat dry milk all decided to stay steady, without a twitch or tremble. However, butter softened up a bit, closing half a cent lower at $2.965 per pound, and whey followed by stepping back three quarters of a cent to $0.375 per pound. 

Over on the grain market, results mixed like a farmer’s spring salad. Corn and soybeans chose to follow the stance of their dairy counterparts, remaining largely unchanged and losing just between a half cent and penny on the day. This was not the case for soybean meal though, as it catapulted almost $10 per ton to reach $355. Wheat gave us a see-saw action with the Chicago market down by 13 cents, Kansas dipping 3 cents, whereas Minneapolis positively flipped a couple cents higher. 

In a nutshell, commodity markets displayed considerable steadiness on Monday, with the spotlight shining on dairy and grain commodities. The May 2024 Class III contract, block cheese, barrels, and nonfat dry milk held steady amongst the dairy products, while corn and soybeans remained unchanged on the grain side.

Discover why major cheese-producing states might continue to experience low milk prices. Uncover the factors influencing this trend and its potential impact on your table.

As we look towards 2024, it stands to potentially become the third-highest milk price year on record. However, not all is blooming in our dairy landscape. The growth in dairy product sales is experiencing a slowdown due to several colliding factors. Burgeoning international dairy trade and tepid domestic demand, both propelled by unwelcome inflationary trends, are among the primary culprits. Adding to that, the emergence of new cheese production capacities and a concerning slump in dairy replacement inventories risk obstructing growth. In this seemingly paradoxical scenario of high milk prices yet suffocating conditions, we aim to delve deeper to unravel the industry trends and their implications for our dairy stakeholders. 

Navigating the contradictions of high milk prices and slowing dairy industry growth 

So, you might be curious about what’s cooking in our dairylands, right? As it unfolds, the dairy industry is dealing with a cream-and-curd situation. The Class III to Class IV spread, a crucial indicator in dairy economics, has significantly inflated. Why this widening gap, you might ask? There are two main drivers: the surge in new plant capacities and a steadily growing fondness for cheese. 

Fasten your seatbelts, as this tide began to rise in May 2023 and is projected to linger for a considerable duration – we’re talking all the way through 2024 and possibly even into 2025. The ripple effect of this prolonged shift could leave a bitter taste for our farmers, especially those based in high cheese-producing regions like the Upper Midwest. The falling milk prices are the grimacing truth behind this sour reality. 

The decade’s dairy dilemma: Persistent low milk prices in high producing cheese states 

However, let us not paint an entirely gloomy picture. There are rays of light if we shift our focus towards the robust Class IV markets on the West Coast. Here, a segment of the dairy market can hope for higher milk prices, a welcome contrast to the ongoing Class III slump. 

Nonetheless, it’s essential to bear in mind that this Class III-to-Class IV spread has its drawbacks. It can potentially soften Class I prices, thanks to the average pricing formulas. So, even though Class III price projections are on a decline, the dairy market is far from saturated with excess milk. 

Understanding the Class III-to-Class IV price spread and its effects on average dairy pricing 

Take a glance at the Midwest Class III spot milk rates, and you will notice them nearly $2 below the Class III Federal Order minimums. This indicates a trend towards milk selling at prices closer to the Class III Federal Milk Marketing Order minimum this year – quite a fall from the impressive prices of $7 to $8 per hundredweight it fetched last year.

How does the market maintain balance amidst these conditions, you ask? The enforced milk supply caps and the surprising decline in the number of dairy heifers weighing over 500 pounds (compared to the situation six years ago) both contribute to steadying the choppy dairy market despite the impending storm of lower milk prices.

Summary: The dairy industry is facing a paradoxical situation with high milk prices and slowing growth. The Class III to Class IV spread, a crucial indicator in dairy economics, has significantly inflated due to the surge in new plant capacities and a growing fondness for cheese. This trend is projected to persist through 2024 and possibly into 2025, potentially affecting farmers in high cheese-producing regions like the Upper Midwest. However, there are rays of light in the robust Class IV markets on the West Coast, where higher milk prices may be possible. The Midwest Class III spot milk rates are nearly $2 below the Class III Federal Order minimums, suggesting a trend towards selling at prices closer to the Class III Federal Milk Marketing Order minimum. Enforced milk supply caps and a decline in dairy heifers weighing over 500 pounds help maintain balance amidst these conditions.

Ever been curious about why your beloved block of cheddar doesn’t seem to dig a hole in your pocket, or why your daily snack of string cheese isn’t forcing you to neglect your other grocery needs? There’s a good reason for this, which might surprise you. The secret lies in the strength of the American dairy industry and their unwavering commitment to provide affordable, succulent cheese for all cheese lovers. Today, we’re going on a flavorful journey of understanding why US cheese continues to be the most affordable across the globe. So, sit back, grab a slice of your favorite cheese, and get ready to dive into the fascinating world of dairy economics.

Ever Wonder Why the Price of Your Favorite Butter is Rising? 

Getting hit with steeper butter prices when sorting your grocery bill? You’re certainly not alone. Let’s delve into why this might be happening. According to HighGround Dairy’s economist, Betty Berning, the ascending trajectory of butter prices can be linked to a twofold downturn. The export market saw a significant drop of 6.3%, coupled with a decline in domestic usage by 4.9%. This resulted in a cumulative 35.2% fall in overall exports. 

But it’s not the classic demand-and-supply dynamic at play here. February’s inventories provide an intriguing insight, they remain substantial. This suggests that the increase in prices is not a direct result of heightened demand or diminished supplies – factors that traditionally drive prices up. Something more complex may be at play here, and understanding exactly what is happening within the dairy market is vital for both consumers and producers. It seems we’ll have to keep a close eye on this buttery state of affairs.

US Cheese Market: Changes and Trends 

Did you know there’s been a significant downturn in the domestic consumption of cheese according to recent figures? According to Betty Berning, a leading economist with HighGround Dairy, consumption decreased by a worrying 3.5% from February 23 figures, totaling a staggering 1.15 billion pounds now. Particularly hard-hit was the American-style cheese, which saw a sharp plunge of 7.3%.

But don’t lose hope yet, cheese lovers, because the American cheese market is making its presence felt on the global stage! You read that right. Despite the dip in domestic demand, our cheese exports are skyrocketing, with an inspiring ascent of 27.2%. Most notably, the exports of ‘Other-cheese’ varieties have been on an impressive rise, reaching a record high never seen before.

So there you have it—despite the fluctuations and with a shining beacon of ‘Other-cheese’ export success leading the way, there’s still plenty of optimism for the U.S. dairy sector. If these trends continue, this could signal the dawn of an exciting new era for American cheese in the international market!

The US Cheese: Still the Least Expensive in the World 

Keeping things in the perspective of pricing, despite occasional market upheavals, you’ll find that US cheese continues to maintain its position as the most affordable globally. This affordability attribute plays a significant role in making countries like Mexico principal consumers of US cheese. 

The good news doesn’t stop here. Reflecting on data from earlier this year, exports of dairy products reached a record-breaking 501.1 million pounds in February alone. And yes, we have accounted for leap year adjustments. This staggering figure marks a 5.5% increase compared to 2023. Hit the pause button here and let this sink in – For the first time in history, February shipments catapulted beyond the 500 million pounds benchmark! 

Thanks to its global competitiveness and strong export demand, US cheese continues to be a solid performer in the market. It keeps delighting taste buds around the world without making much of a dent in your pocket. Now, isn’t that ‘grate’ news for all cheese lovers out there?

Domestic Demand for US Cheese 

As you relish the mild tang of your US cheddar or the velvety texture of your American mozzarella, perhaps you’d be intrigued to know that, despite the cheese industry’s successes on the international front, the domestic demand for US cheese has hit a bump. This turn of events reflects in the numbers, with a decrease of 2.8% in domestic cheese demand from January 2023. 

This pattern maintained its course into February, showing a decline exceeding 4%, once the factor of leap year adjustment is considered. It might come as a surprise, but these fluctuations aren’t unusual in such dynamic markets, where innumerable factors blend into a complex web of influences. 

Thus, in the ceaselessly shifting realm of the American cheese market, it’s essential to stay alert and informed. Be it producers, suppliers, or the ardent cheese-lovers like you, understanding the ebbs and flows of demand can significantly improve the way you navigate this sphere. Being well-informed means making smarter decisions, whether it’s purchasing decisions or looking for the right time to introduce that new cheese variant to the market.

Dairy Landscape and Future Outlook

Gazing deeper into the dairy landscape, we find something quite delightful. We are in a period known as ‘the spring flush.’ Picture this, peak milk levels spreading across the western reaches of the US, climbing seasonally higher in both eastern and midwestern zones. Could there be a better time to find ourselves residents of the cheese nation? Probably not, as current indicators suggest moderate to steady demand, particularly in the south. 

But, let’s widen our scope here for a moment. Dairy isn’t just about cheese and butter, you know! The production of dairy cows plays a significant role in the industry too. Have you ever wondered how many dairy cows are slaughtered each year? Let’s look at the numbers. The data for the week ending on April 6 show a formidable dairy cow slaughter count of 57,400 heads. Comparing this to the same time last year reveals a significant drop. But, why is this significant?

Well, the culling numbers reflect the shifting tides within the dairy industry. Reduced slaughter rates may point towards a more efficient use of cattle, a focus on quality over quantity, or a myriad of other industry trends. It’s detail like this that helps us piece together a fuller picture. Whether you’re a simple cheese aficionado, an ardent dairy lover, or even a dairy farmer, being aware of these broader industry trends can give you a unique insight into where things might be headed. 

So, as we sit back and enjoy our plate of fine US cheese, let’s spare a thought for the vast and intricate dairy industry that made it all possible. With such a vibrant industry panorama, the future for US dairy seems charged with promise.

Farmers and Cooperatives: Working Together for Success 

You might find it fascinating how these cooperatives, when collaborating, managed to achieve commendable feats amidst the changing market trends and challenges. Their teamwork resulted in the acceptance of six substantive offers of export assistance. Isn’t that amazing? These offers, seamlessly captured, facilitated sales contracts which marked the transition of 1.2 million pounds of quintessential American-style cheese and another 176,000 pounds of whole milk powder. 

Now, picture where all these American dairy products are heading. Would it surprise you to know that buyers spanning across Asia, Central America, the Caribbean, and the Middle-East-North Africa region are now destined to relish the creaminess of American-style cheese and the wholesome richness of whole milk powder?  

As these global transactions come to play, it’s vital for us to recognize how this ripple effect in the market signals promising echoes for American agriculture. More than that, it’s a testament to the enduring affordability of American cheese on the global stage, regardless of fluctuating market forces. The tale of American dairy isn’t just about its net worth; it’s a story of tenacity, resilience, and the ability to offer value to consumers around the globe. 

The Bottom Line

So, there you have it. Despite various changes in the economic landscape and fluctuations in the dairy industry, US cheese continues to be an economically friendly choice for consumers worldwide. Its affordability remains unchallenged as it provides both flavor and value, contributing to its continued popularity. As we navigate the evolving dairy world, let’s remember to savor our cheese, appreciating not just its taste, but also the economic comfort it brings to our tables.

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Summary: The US dairy industry remains committed to providing affordable, delicious cheese, despite rising butter prices. Domestic consumption of cheese has decreased by 3.5%, with American-style cheese experiencing a 7.3% plunge. Despite this, the US cheese market remains the least expensive globally, with exports reaching a record-breaking 501.1 million pounds in February. Countries like Mexico are principal consumers of US cheese due to its affordability. US cheese demand has decreased by 2.8% since January 2023, with a 4% decline in February. The dairy industry is shifting towards quality over quantity, with reduced slaughter rates. Farmers and cooperatives are collaborating to secure export assistance, facilitating sales contracts for American-style cheese and whole milk powder.

February’s milk production took another dip, dropping 1.3% on a leap-year-adjusted basis. This is the eighth consecutive month marking a decline in year-over-year output. The decrease in production remains consistent, with the January volume being revised down to a 1.2% decline, compared to the initially reported 1.1% drop. Citing the root causes – fewer cows and poorer yield – the industry is grappling with the continuous downtrend in overall milk production. At present, there appears to be limited signs of an imminent recovery, as farm-level profitability remains elusive. 

It’s interesting to note that despite the spread of HPAI throughout a small number of herds, so far there hasn’t been any negative impact on milk output. Speaking of the herd, it grew by 10,000 head in February, in stark contrast to the steep 28,000 head drop reported in January. However, don’t be misled by these figures – cow numbers still hover near the 2019 low, showing a reduction of 89,000 head year-over-year. Intriguingly, the rise in February’s figures is largely attributed to a surge in Texas, where the count increased by 10,000 head within the month.

Yield Statistics 

Milk per cow was down a leap-year adjusted 0.4%, following January’s 0.3% drop. Yeild has been lower year-over-year in six of the past eight months, revealing an uncommon weakness that opposes the long-term average of 1% year-over-year growth.

In other dairy news, February Cheese production suffered a 0.6% decline on a leap-year-adjusted basis, marking the third consecutive year-on-year drop. Although this decline was prominent in both the central and western regions (down by 0.8%), it’s noteworthy that it saw a 1.4% upswing in the Atlantic region. Less American-style volume driven this weakness, which is a trend we’ve already noticed in the January Cheese production report. Cheddar output resulted in the lower American production in February, with its volume down by 7.2% year-over-year. Despite the decline in American-style, Italian-style cheese saw an upswing, recording a 0.8% increase year-over-year, despite a 0.3% drop in Mozzarella output. 

On a brighter note, butter production grew by 1.9% year-over-year in February, marking a third monthly increase. When adjusted to a daily average basis to account for the leap day, this marked the highest February butter output in record, suggesting positive trends despite strong volume and climbing stock bearish leanings. 

The ongoing decline is also evident in the production of combined Nonfat Dry Milk/Skim Milk Powder. With a 19.3% year-over-year dip on a leap-year-adjusted basis, February signified the ninth consecutive month of lower output. Stocks saw a reduction of 2.6 million pounds in February, amounting to a total of 209.6 million pounds but are down by 106.2 million pounds year-over-year. 

Nonetheless, despite these challenges, exports in February charted a comeback, assisting in driving the first year-over-year gain since January 2023. This win is largely credited to the strength in cheese, nonfat dry milk, and whey powder exports. Cheese shipments, in particular, achieved record-high monthly volumes when measured on a daily average basis; a feat aided by competitive US cheese pricing in the first quarter. 

February certainly brought some positive news for nonfat dry milk, with exports improving versus their performance last year, following a 14% decline in January. This increase is largely attributed to the elevated demand from Southeast Asia, offsetting the weakness to Mexico. Meanwhile Dairy Consumer Price Index ticked downward for the seventh straight month in March, indicating relentless dairy product price deflation. 

As we dig deeper into these shifts and trends, it’s clear that the dairy industry is facing a unique combination of challenges and opportunities. We’ll continue monitoring these on-the-ground realities and bring you further updates and insights.

The first few months of 2024 have proven to be a period of notable change within the dairy industry, mostly due to the combination of a smaller milking herd, tight replacement heifer supplies, and modest improvements in milk income margins. According to the latest USDA monthly data released on April 25th, a clear trend towards a reduction in dairy cull cow marketing is evident. 

Take note of the specifics: In March 2024, US slaughter plants marketed an estimated 244,600 dairy cull cows. Yes, this figure is down by 8,100 from February, making it the highest monthly total since August. However, it was also an astounding 61,600 cows fewer than March 2023, marking the lowest March total since 2009. 

Things do not stop there. As of April 13th, the USDA’s AG Marketing Service stated that the number of dairy cowsmarketed for beef has continuously trailed year-ago levels for a whopping 32 consecutive weeks, taking us back to September 9, 2023, and marking a reduction of 215,600 compared to the same period the previous year. 

“It seems to be a clear trend. March 2023 had 27 non-holiday weekdays and Saturdays in comparison to March 2024, which had 26 days, and daily slaughter reduced by an average of 800 head this year. Our estimated number of dairy cows in the U.S in March 2024 is 9.335 million, down 7,000 compared to our revised February estimate.”

Based on these numbers, the March dairy cow culling rate is measured at approximately 2.6% of the herd. 

There’s more. A closer look at the cull cow slaughter numbers for the first quarter paints a narrative of continued decline. Dairy cull cow slaughter for the first three months of 2024 is now at an estimated 747,500 head, which is down by 123,000 from the same period last year and making the number the lowest three-month total start to the year since 2010. 

The heaviest dairy cow culling in March occurred in the Southwest (Arizona, California, Hawaii, and Nevada), with a recorded 58,800 head. This occurrence was closely followed by the Upper Midwest (Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin) at 56,300 head. 

• Other Regional Monthly Totals:
• Arkansas, Louisiana, New Mexico, Oklahoma, and Texas – 33,800 head
• Delaware, Maryland, Pennsylvania, West Virginia, and Virginia – 32,300 head
• Alaska, Idaho, Oregon, and Washington – 32,100 head

All the primary data cited is sourced from the USDA’s Livestock Slaughter Report, capturing reports from about 900 federally inspected plants and close to 1,900 state-inspected or custom-exempt slaughter plants. 

Continue reading for an in-depth analysis and explanations on what these shifting trends mean for the dairy cull cow market in the coming months.

The use of beef sires on dairy cattle is becoming increasingly popular on farms across the country. Today, farmers are receiving top dollar for crossbred calves that are only a few days old. With the industry’s high input costs, this additional income can stretch far and wide. It can help cover seed and fertilizer costs, or assist with bulky feed bills. In essence, those extra dollars are not going to waste. However, it must be noted that fluctuating prices bring their own challenges. 

At the recent i29 Moo University Dairy Beef Short Course, Derrell Peel from Oklahoma State University provided an industry outlook. The beef and dairy sectors are experiencing some of the highest and lowest points in recent memory. Prices for slaughter steers, beef-dairy crosses, cull cows, and heifers have all skyrocketed in the past year or so. 

“Some weather conditions have contributed to these high prices, such as drought in various parts of the country, which has deeply affected hay prices. Recent drought years led some farmers to liquidate their herds. While some areas are on the road to recovery from drought, not all have seen the needed moisture. This year’s drought map outlook does indeed provide some room for concern. Hay availability could be a challenge this year,” declared Peel.

Because feeder cattle inventory is low, farmers are finding it difficult to maintain feedlot capacity. Despite feedlot inventories remaining stable so far, thanks to heavier finishing weights and more days on feed, Peel anticipates that a decrease in heifer retention will reduce these inventories. 

As of January 1, the beef cattle inventory was down 2% from the previous year. The downsizing in 2023 meant farmers entered 2024 with fewer cattle inventories across the board. With record beef cattle inventory lows set in 1961, this year’s inventory is on track to be the smallest U.S. beef cow herd since that date, strengthening the cattle market. The total cattle inventory topped out at 87.15 million head – the U.S. hasn’t seen an inventory this small since 1951. 

Producers have been cautious over the years due to high input costs coupled with rising feed prices. The growing cattle prices in the past year prompted the decision to sell more heifers as a means of securing financial stability. Peel expects farmers to breed more heifers this year as they rebound from previous financial strains. 

Looking ahead to 2024, Peel predicts the trend of high cattle prices and smaller-than-normal inventories to continue. “There will be higher prices yet for a longer period of time,” Peel noted, giving farmers and industry folks alike something to ponder.

Following an entire year of decline, US dairy exports have made an unexpected and impressive comeback. According to the numbers crunched by Italian dairy economic consulting firm CLAL, the recovery was observed in February. The engine that drove this resurgence? Cheese exports – to be specific, an increase of more than 10,000 tons, which indicates a 32.1% year-on-year growth. 

What’s more, the pricing strategy for almost all major dairy products seems to have given a helping hand to this export activity. With average unit prices standing at a budget-friendly $4.56/kg, 15% lower year-on-year, cheese exports couldn’t be more appealing! 

“Our prediction is that we might witness a possible upward push in SMP prices, if demand flies high. This would particularly be feasible given the recent surge in demand from Asian countries. For now, US production of SMP has been intentionally kept at rock-bottom for several consecutive months, leading to February stocks diminishing to over 30% lower than the same time last year,” reported CLAL.

Supporting CLAL’s report, FAS-USDA data revealed a hike in domestic SMP consumption of over 20% in Jan-Feb 2024. 

During the Agricultural Outlook Forum hosted in February by USDA, Agricultural Economist Michael McConnell projected dairy exports to outpace imports. Owed to a tight squeeze on supplies in the global markets, this is likely to hike the competitiveness of US dairy prices. 

“Overall, global dairy trade is expected to feel the pressure of lower milk production in several key exporters – notably the European Union and New Zealand,” McConnell explained. “This reduction would logically lead to decreased exports of several dairy products, particularly butter and non-fat dairy milk. However, it could serve to prop up global dairy prices.”

He saw a silver-lining, predicting, “The reduced production in Europe and Oceania opens doors for other dairy exporters to fulfill global demand. The US, in this scenario, is in an advantageous position to dispatch products to key markets.”

McConnell did add a note of caution though – while skim-solid exports are forecasted to rise by 4% more than in 2023, the domestic use is ready for a showdown to compete with export demand.

On Monday, the Chicago Mercantile Exchange saw rising milk futures and a mixed cash dairy market. April Class III milk went up $0.04 to $15.45. May was up $0.45 to $16.84. June was up $0.45 to $17.22. July was up $0.38 to $17.79. Contracts from August to November varied in price, with October and November being six cents higher and August being twenty-five cents higher. Dry whey remained constant at $0.36. Nine transactions were registered, with prices ranging between $0.3575 and $0.36. 40-pound cheese blocks went up $0325 to $1.5675. Two transactions were reported for $1.5450 and $1.5675. Cheese barrels were constant at $1.5725. There was one sale at that price. Butter remained steady at $2.92. There were no sales registered. Nonfat dried milk was down $0.0075, to $1.1350. There was one sale at that price.

Discover how March saw a surge in dairy product production, with cheese and butter leading the way. Curious about the top cheese-producing states? Find out here.

Got a hankering for a cheesy treat or maybe a scoop of sherbet? You’re in luck! March cheese and frozen dairy product production have seen a rise, according to reports from the National Ag Statistics Service. There’s plenty of dairy delight to go around, though there are a few exceptions to the trend, such as dairy powders. 

Cheese, Butter, and More 

Total cheese output saw an encouraging uplift, with a rise of 7.6% over February and a slim increase of one-tenth of a percent above March of 2023. It boils down to two styles of cheese lighting the way. Italian style cheese production had an 8.6% increase from February and marked a 4.4% uptick in comparison with the numbers a year ago. An impressive 518 million pounds of Italian style cheese were produced. 

As for American style cheese, it saw a 10% surge compared to February BUT it spiraled 2.9% below last year’s March production, finishing at 491 million pounds. On the buttery side of things, production was up 5.5% from February and sat at 1.4% higher than this time last year – all totaling a creamy 209 million pounds. 

“Wisconsin led the nation in Italian-type cheese production during March with 145.4 million pounds followed closely by California. Yet, when it came to Mozzarella cheese, California took the lead with 134 million pounds.”

Cheddar cheese production, however, was dominated by Wisconsin, as they churned out over 60.4 million pounds in March. 

Protein Boost 

As compared to last year, dry whey production rose 3.4%, whey protein concentrate production grew by 2.6%. Lactose production saw a modest boost, with a slight rise. 

Frozen Treats 

Switching gears to frozen delights, most frozen dairy product production was up in March. Hard ice cream production climbed by 1.4%, amounting to 66.1 million gallons. Sherbet production also hiked up slightly by 1.3%, reaching 1.88 million gallons. Even fans of frozen yogurt were in for a treat, with a modest increase of a tenth of a percent to 3.71 million gallons. 

However, lovers of low-fat ice cream might have been left a bit out in the cold as its production dipped by 12.8% to 37.7 million gallons. 

Overall, March was a month of growth for the dairy industry, despite a couple of exceptions. So, the next time you reach for your favorite dairy treat, remember, there’s a lot that goes into that delicious bite, scoop, or slice!

Summary: March dairy and frozen dairy product production saw a significant increase, with cheese output rising by 7.6% over February and slightly above March 2023. The rise is attributed to Italian and American cheese styles, with Italian style cheese seeing an 8.6% increase and American style cheese experiencing a 10% surge. Butter production was up 5.5% from February and 1.4% higher than last year, totaling 209 million pounds. Wisconsin led the nation in Italian-type cheese production with 145.4 million pounds, followed closely by California. Wisconsin dominated cheese production, churning out over 60.4 million pounds in March. Protein production also saw a slight increase, with dry whey production rising 3.4% and whey protein concentrate growing 2.6% compared to last year. Frozen treats saw a 1.4% increase in hard ice cream, 1.3% in sherbet, and a modest increase in frozen yogurt.

The Federal Milk Marketing Order (FMMO) advanced Class I base price has declined by 72 cents from April 2024 to $18.46 per hundredweight (cwt), the lowest since February. The Class I base prices averaged $18.58 per cwt through the first five months of 2024, a three-year low for the period. The spread in the monthly advanced Class III skim milk pricing factor ($3.88 per cwt) and advanced Class IV skim milk pricing factor ($8.99 per cwt) jumped for May to $5.11 per cwt, the widest since October 2022. Based on Progressive Dairy calculations, the Class I mover calculated under the “higher of” formula would also have resulted in a Class I base price of $20.21 per cwt, about $1.75 more than the actual price determined using the “average of plus 74 cents” formula.

Dairy producers have until April 29 to complete their enrollment in the Dairy Margin Coverage (DMC) program, administered by the USDA Farm Service Agency (FSA). The revised regulations of this risk management program extend coverage for 2024, retroactive to Jan. 1, and provides an adjustment to the production history of enrolled farms with less than 5 million pounds of production. To evaluate the varying levels of DMC coverage for a specific dairy operation, producers can use the online dairy decision tool.

The price index of dairy product prices sold on the Global Dairy Trade (GDT) platform increased just 0.1% in an auction held April 16. Compared to the previous auction, prices for individual product categories were mostly lower to unchanged. The prices for anhydrous milkfat and whole milk powder increased slightly by 1.7% and 0.4%, respectively. Cheese prices decreased the most with cheddar cheese down 8.5% and mozzarella down 3.8%. Lactose and butter decreased a little over 1%, while there was little to no change in butter milk powder and skim milk powder.

The USDA unveiled a new online Livestock Indemnity Program (LIP) decision tool and farm loan resources available to agricultural producers and cooperators who help producers access USDA disaster assistance, farm loans, and other federal farm programs. The optional decision tool gives producers guidance on what is needed to gather and submit required loss documentation. The FarmRaise educational hub offers several easily navigated farm loan programs how-to videos designed to introduce producers to FSA’s many farm loan programs options and guide them through the application process. More FSA program resources and tools will soon be added to the FarmRaise educational hub.

As the global dairy market treads through various challenges, emerging signs of optimism point towards a potential price upturn. Despite the volatility and uncertainties that have lately characterized the industry, several converging factors create bright spots on the global dairy price horizon. According to a recent Rabobank analysis, while global dairy prices are on the incline, farmers worldwide are grappling with margin concerns. 

Milk supply growth is sluggish, with year-on-year output decreases from major exporting countries during the second half of 2023. A return to production growth will take time, seeing decreased year-on-year productions for this year’s first two quarters until volumes become positive again in 2024’s second half. However, encouraging trends have been observed in China, with retail and food service sales spiking during the Lunar New Year celebrations. 

Dairy commodity price increases are expected in the year. The New Zealand milk price projection for the 2023-2024 season has been slightly revised upward. A Global Dairy Trade Auction on March 19 saw a 2.8% decrease in dairy prices. Whole milk powder and skim milk powder prices dropped by 4.2% and 4.8% respectively. According to Westpac NZ, whole milk prices have declined by 8.6% from their February peak. 

Meanwhile, Australian milk production is witnessing a surge, with significant increases in milk supply across all dairying areas, thanks to favorable seasonal conditions and high farm gate margins. Between July 2023 and January 2024, Australian milk output rose by 2.5% year-on-year, reaching 5.35 billion liters. Summer rainfall dramatically exceeded forecasts across most of Australia’s east coast, making it a boon for cattle farmers. 

Australian dairy producers can anticipate a prosperous 2024, with milk prices staying high, new season pricing commencing on July 1 that supports margins, and an abundance of homegrown feed in storage as well as affordable bought feed. Rabobank predicts that the Australian milk supply will round out the 2023-2024 season at 2.6%, with growth continuing into the subsequent season projected at a range of 3-4% for 2024-2025.

Driving this optimism is a rising demand for dairy products, more so in emerging economies. With improving living standards and increasing disposable income in countries like China, India, and parts of Africa, there is a growing demand for dairy-based products. This rising demand is anticipated to significantly bolster global dairy prices as producers strive to meet the needs of these booming markets. 

Additionally, shifts in consumer preferences towards healthier and diverse diets are playing a pivotal role in driving dairy product demand. The health-conscious consumer base is growing, and so is the consumption of yogurt, cheese, and milk alternatives like almond and soy milk – a trend expected to continue, further bolstering dairy product demand and supporting price hikes. 

In addition to demand-side factors, supply-side dynamics also contribute to the positive outlook for global dairy prices. Dairy producers worldwide are slowly adapting and innovating despite challenges such as adverse weather and input cost pressures. Technological advancements in genetics, herd management, and feed formulations are enabling farmers to optimize their operations, leading to increased milk yields and helping to mitigate supply constraints and stabilize prices. 

The dairy industry is witnessing a rising emphasis on sustainability and ethical practices from both consumers and producers. This shift towards more sustainable production methods, including pasture-based farming and a reduced environmental footprint greatly improves dairy operation resilience and enhances industry reputation and marketability. As consumers become increasingly discerning about their food’s origin and its environmental impact, sustainably produced dairy products are likely to command premium prices, supporting the upward trajectory of global dairy prices. 

Despite these positive developments, challenges persist, including geopolitical uncertainties, trade disruptions, and regulatory changes. The ongoing Covid-19 pandemic continues to introduce volatility and unpredictability into the dairy market, as fluctuating demand patterns and supply chain disruptions impact prices and profitability. 

Yet, the demand is expected to outstrip supply in the coming years, and with ongoing efforts addressing sustainability and efficiency in dairy production, the overall global dairy prices outlook seems promising. While uncertainties loom, the industry’s resilience and adaptability, coupled with evolving consumer trends and market dynamics, imply that the bright spots on the horizon could signal a period of sustained growth and prosperity for the global dairy sector. 

On Monday, the Chicago Mercantile Exchange saw milk futures and cash dairy markets rise. April Class III milk went up $0.04 to $15.61. May was up $0.31 to $16.72. June was up $0.30 to $17.34. July was up $0.20 to $17.81. Contracts from August to February were between five cents lower in February to seventeen cents higher in August. Dry whey was down $0.01 to $0.38. There was one sale at that price. 40-pound cheddar blocks were up $0.0350 to $1.55. Six transactions were reported, with prices ranging from $1.5250 to $1.5550. Cheese barrels were up $0.0375, to $1.5675. Two transactions were reported for $1.5675 and $1.5825. Butter was up $0.03 to $2.97. Three transactions were made at that price. Nonfat dried milk went up $0.0050, to $1.1375. Two transactions were reported for $1.1350 and $1.14.

Friday’s cheese rally continued on Monday, with Class III milk testing being limited for a few minutes. Cheddar blocks rose 3 ½ cents to $1.55/lb, while cheddar barrels rose 3 ¾ cents to $1.56 3/4/lb. Cheese prices have risen by more than ten cents in recent trading sessions. Butter reached new highs for April at $2.97 per pound, up 3 cents. Grade A nonfat dry milk rose half a cent to $1.13 3/4 per pound, while dry whey fell a penny to $0.38 per pound. Class III milk completed the day with April up 10 cents to $15.67 and May up 34 cents to $16.75, but reached a day high of 17.06 for a brief while. June Class III milk increased 35 cents to $17.39, while July future prices were mainly higher, with November down 4 cents and the remainder up 4-26 cents. Class IV milk continues to reach new heights. April – June remained steady at $20.06, $30.24, and $20.50/cwt, respectively, with the remainder of the year above $21/cwt. Grain and feed markets were flat, with corn up 1 ¼ cent to $4.35 1/2, soybeans down 3 ½ cents to $11.81 ½, and soybean meal up $2.90 to $339.10/ton.

Dairy product output fell in February compared to January but remained higher than in February of previous year. The USDA reports that total cheese production was 1.13 billion pounds, up 3% from a year ago but down 5.6% from the prior month. American-style cheese output was down from the previous month and year, totaling 438 million pounds. Italian-type cheeses reached 479 million pounds, a 4.4% increase over last year but a 6.2% decrease from January data. In February, manufacturers produced over 373 million pounds of mozzarella, 304 million pounds of cheddar, and 132 million pounds of other American-style cheeses. Butter output reached 198 million pounds, down 9% from January but 5.6% higher than February 2023. According to the USDA, nonfat dry milk output declined 19.3% from February 2023. Skim milk powder production was down 2.6% from the previous year, totaling 36.2 million pounds. Whey protein concentrate output increased by 4.2% to 38.7 million pounds compared to the previous year. Frozen items, including ice cream, sherbet, and frozen yogurt, all reported lower February output than the previous year, with sherbet production down 32.7%.

The highly pathogenic avian flu (HPAI) has been confirmed in dairy herds in Michigan, Texas, Kansas, and Idaho, with some presumptive positive test results received from a herd in New Mexico. This has raised concerns for the dairy industry and consumers as pasteurization inactivates the bacteria in the commercial milk supply. HPAI has not had an impact on milk futures or the underlying cash prices, but it has put pressure on Class III milk futures sending nearby months to new contract lows.

The milk production report for February showed a decrease in milk production as anticipated, but the increase in cow numbers from January was a surprise. Cow numbers increased by 8,000 head from January for the top 24 states totaling 8.878 million head, down 61,000 head from February 2023. U.S. Cow numbers totaled 9.330 million head, down 89,000 head from a year ago but up 10,000 head from January. It was anticipated that cow numbers would fall as low milk prices continued. However, USDA revised cow numbers 3,000 head lower in to the top 24 states and 5,000 head lower in the U.S. from what was initially recorded last month.

The continued tightening of replacement heifers will also impact cow numbers and the ability of farms to keep stalls full or expand operations. There seem to be some positive things taking place in the market that may eventually provide support to prices, but it does not seem that prices are ready to move higher. They may not move higher over the next few months unless there is better international and domestic demand or a further tightening of the milk supply. In the near term, prices may remain choppy as buyers of dairy products see no reason to become concerned over supply.

Despite signs of continued contraction, the dairy markets have been experiencing a decline, with CME spot Cheddar blocks leading the retreat. Cheddar output has fallen below year-ago volumes since October, and overall cheese production was lower than prior-year output in December and January. The industry remains concerned about the capacity to make more, with domestic demand described as “lackluster,” but they hope it will perk up for Easter. Cheap cheese has attracted a few export contracts, but most foreign buyers are deterred by the shape of the futures curve, which persistently offers pricier product later this year.

CME spot whey dropped a nickel this week to 39.5ȼ, within a penny of the year-to-date low. Demand for high-protein whey products remains strong, but with cheese vats full, there is more than enough whey leftover for the drier. Chinese demand for U.S. whey is in decline, with Chinese whey imports falling 24% from last year in January and February. The U.S. accounted for an unusually small share of the shrinking pie, and U.S. whey shipments to China in February plummeted to a four-year low.

Chinese milk powder imports also disappointed, with Chinaimporting more whole milk powder (WMP) in January and February than it did last year, but that was a very low bar to clear. Chinese imports of skim milk powder (SMP) fell short of 2023 volumes in February. Comparisons to previous years are skewed by changes to tariff policy, as before 2023, tariff structures incentivized Chinese milk powder buyers to stock up early in the year before low-tariff quotas ran out. Now that tariffs on Kiwi milk powder are no longer in play, there is no new year’s rush.

Even butter lost ground this week, although the setback in the butter market was modest and felt much different from the significant lows notched in the rest of the dairy complex. CME spot butter fell 1.5ȼ to a still lofty $2.8075. USDA reports that cream is “readily available” but “not overwhelming.” When combined with a healthy dose of demand and a dash of anxiety about butter supplies later this year, that’s a recipe for stubbornly strong butter prices.

Class IV futures didn’t go anywhere at all this week, with nearby contracts settled on either side of last Friday’s close, and deferred futures settled a penny or two higher than last week. Class III futures are low and falling, with the April contract plunged 27ȼ this week to a devastating $15.74. The market promises better prices later this year, but it’s going to be a rough spring flush for many dairy producers with low Class III prices and steep discounts besides.

Financial pain is sure to translate to an uptick in sellouts and a decline in cow numbers. Milk output is inching lower in the Southwest as dairy producers there combat a mysterious illness. Regional milk production declines so far have been incremental, and milk powder plants in the Southwest are still running at nearly typical volumes. Dairy producers are restricting cattle movement and adopting stricter biosecurity measures.

Original Report At: https://www.jacoby.com/market-report/dairy-markets-continue-to-drop/

Rabobank estimates that dairy producers in the Big 7 nations, which include the EU, the United States, China, Brazil, Argentina, New Zealand, and Australia, would return to profitability in 2024 and early 2025. Milk supply is expected to increase in the second half of 2024, with higher margins, rising consumer demand for dairy, and reduced production costs. However, manufacturing growth will take time.

There are hints of optimism in South America, where dairy producers have battled years of abnormally dry and warm weather, as well as tight production margins. In Brazil, Rabobank anticipates improving margins as the year develops, increased consumer demand for dairy, and reduced production costs due to decreasing feed prices. Production is expected to increase 0.5% over 2023 levels.

Argentina’s farmgate milk prices are already catching up with inflation, and better weather may help milk production rebound beginning in the second quarter of 2024. Farmgate milk prices are expected to rise, with Class IV prices remaining higher than Class III throughout the year. Australia is expected to have a high milk supply in 2024/25, with growth rates ranging from 3-4%. Production will benefit from favorable weather conditions, including record rainfall in the autumn and early January 2024, as well as more regular weather patterns through May 2024.

New Zealand’s output has exceeded expectations, with milk solids collections up 0.8%. Production is predicted to fall by 0.7% by the conclusion of the season, but the following season is likely to begin stronger. China’s dismal economic outlook may stymie dairy consumption growth, but Rabobank anticipates further improvement in the supply-demand balance. Rabobank anticipates 2% year-on-year rise in milk output, followed by a slowdown in H1 2025 due to poor to negative margins.

The EU’s demand forecast is encouraging as consumers recover confidence and inflation falls. According to the EU-27 dairy consumer price index, milk, cheese, and butter prices have all fallen, but butter and cheese sales volumes in Germany have increased in the last months of 2023. The bank anticipates a 0.4% year-on-year increase in demand.

Weak farmgate margins will improve in the first half of 2024, thanks to rising milk prices. Milk output in the bloc is expected to stay negative until Q4 2024, when it is expected to improve by 0.9% year on year.

The dairy market has experienced disappointments in recent weeks, with the strength of the market two weeks ago suggesting a potential bottom and higher prices over time. The recent price rally of milk futures was influenced by the bullishness of the January Milk Production report, which led to an increase in underlying cash prices. However, the market must prove itself before a long-term trend develops.

The January Milk Production report showed a significant decrease in cow numbers from December, which traders anticipated. Traders were ready to buy into the market, anticipating a repeat of the previous year’s record high milk prices. However, cow numbers dropped by 23,000 head and milk production declined by 1.1%, with production per cow declining 7 pounds from the previous year. This should be considered bullish, but it seems too early to generate shortage concerns. Lower milk production at a time of lower demand does not result in a tightening supply.

Underlying cash prices have not moved in tandem with milk futures, as trader perception is moving the market. Both block and barrel cheese prices are higher than they were a week ago, but this would have provided support under Class III futures if not for the weakness of dry whey. Dry whey is currently the anchor on the market, and Class IV futures have fared better.

Spot milk prices are vastly different from a year ago, with extra milk supplies tighter than a year ago. Manufacturers have sufficient milk to maintain production schedules and satisfy their obligations. If the pattern of declining cow numbers and milk production continues with spot milk supplies tight and at higher prices, it could result in stronger milk prices during the second half of the year. The extent of price strength will depend on both domestic and international demand levels.

Dairy experts anticipate a gradual but sluggish recovery in major global dairy markets in 2024, with Europe projected to be down in the first half of the year, New Zealand flat after four to five years of loss, and the US weak in the first quarter. Weather, tight business margins, and sustainability and regulatory challenges that affect production all contribute to a decrease in milk supply. The United States has had seven straight months of decreasing output, with milk cow numbers at their lowest since 2019.

Despite the low supply, dairy researcher Lucas Fuess does not anticipate the market to move bullishly. The theme for 2024 is gradual but consistent price rises as demand strengthens and tightness persists. The positive is the promise of increased profit margins if milk prices rise while feed costs fall. Class IV milk (used for dairy products such as butter, dry goods, and evaporated or sweetened condensed milk) is predicted to be more expensive than Class III milk until 2024 owing to increased cheese output.

Despite reduced milk availability, milk is predicted to flow freely to cheese processors owing to the industry’s rapid expansion, with new cheese facilities coming this year and in 2025. However, large supplies of cream from cows producing a lot of milk were unable to keep global butter prices down, which have hit record highs many times in recent years and are expected to reach new highs in 2024. Nonfat dry milk prices have remained rangebound for many months, despite stockpiles reaching their lowest levels since 2015.

• The dairy industry experienced a rough week due to mediocre demand and a short-lived rebound for Class III dairy markets.
• Cheese inventories grew seasonably in January, reaching 1.45 billion pounds, up 0.5% from January 2023.
• Cheese prices must remain low enough to keep product moving abroad, suggesting continued volatility in the range between $1.45 and $1.70 per pound.
• CME spot Cheddar blocks finished at $1.55, while Barrels climbed 3.5ȼ to $1.65.
• Whey prices tumbled, with CME spot whey powder falling 9.75ȼ to 42.5ȼ, erasing six weeks of hard-won gains and slashing nearly 60ȼ from nearby Class III values.
• The butter market retreated, with spot butter falling 9.25ȼ to $2.7575.
• The milk powder market took a small step back, with CME spot nonfat dry milk (NDM) slipping a quarter-cent to $1.1975.
• USDA announced the February Class III price at $16.08 per cwt, up 91ȼ from January’s painful lows, but still inadequate for producers who continue to suffer steep discounts despite a tighter milk market.
• The steep setback in whey prices took a big bite out of Class III values this week, with the March contract losing 53ȼ and the April Class III falling $1.10 to $16.75.
• Class IV prices are much better, with the February contract going off the board at $19.85, up 46ȼ from January.
• The dairy herd is in decline, and milk-cow head counts are likely to keep dropping.
• Feed prices bounced back from last week’s steep selloff, with May corn settled at $4.2475 per bushel, and May soybean futures closed at $11.5125, up 10.75ȼ.

The dairy business had a hard week on LaSalle Street, with decreased milk production and a smaller herd driving markets higher. However, lackluster demand continues to plague the dairy industry, rapidly suffocating any major rallies. Class III’s rebound has been short-lived, since unrelenting rise in cheese output calls into question the idea that decreased milk production is sufficient to reduce supply. Cheese inventories increased seasonally in January, reaching 1.45 billion pounds at the end of the month, up 0.5% from January 2023. Cheap cheese helped boost export sales, but the industry dried up after prices rose. Cheese prices must remain low enough to maintain goods going overseas, implying continuous volatility in the well-trodden band of $1.45 to $1.70 per pound.

Whey prices plummeted, with CME spot whey powder sliding 9.75̼ to 42.5̼, wiping six weeks of hard-won gains and chopping roughly 60ɼ off neighboring Class III values. Domestic demand for high protein whey concentrates continues to lower the proportion of the whey stream intended for the dryer, but increased cheese manufacturing means more whey output. The rising currency has significantly harmed US whey export prospects. Currency linkages have resulted in dairy goods priced in euros being 2% less costly than the identical product sold in dollars since the turn of the year, before accounting for any decreases in European whey prices.

This week, spot butter fell 9.25˼ to $2.7575. On January 31, there were 249 million pounds of butter in refrigerated warehouses, a 5.8% decrease from the previous year but much higher than in January 2022. Butter purchasers expect that less costly cream would increase production and allow them to avoid the exorbitant pricing of recent holiday seasons. Despite this week’s setback, butter prices are historically high and are expected to stay so.

The milk powder market took a modest step back, with CME spot nonfat dry milk (NDM) down a quarter cent to $1.1975. The February Class III price of $16.08 per cwt is up 91% from January’s lows, but it is still insufficient for farmers who continue to face substantial discounts despite a tighter milk market. The February Class IV contract sold for $19.85, a 46 percent increase over January.

Feed prices have rebounded following last week’s severe selloff, with Central Brazil trending drier, which may lower production predictions for the safrinah or second-corn crop. The trade is also afraid that farmers would plant fewer acres than usual since prices are just too low to cover input expenses.

Original Report At: https://www.jacoby.com/market-report/a-rough-week-on-lasalle-street-as-markets-propel-upward-and-downward/