The Chicago Mercantile Exchange’s milk futures were up Wednesday ahead of a somewhat positive milk production report, but cash markets were divided.
At $14.95, June Class III milks a cent. July is up 41 cents to $15.78. August gained 34 cents to $16.63. September was 25 cents higher, closing at $17.65. Contracts are six to fifteen percent higher from October to December.
Dry whey gains $0.0025 to $0.2275. Nine transactions were made between $0.2675 and $0.2750.
At $1.40, blocks are up $0.0225. Four deals were executed ranging from $1.3750 to $1.3925.
Barrels are constant at $1.51. At that price, one sale was made.
At $2.3475, butter is down $0.0025. At that price, one sale was made.
At $1.15, nonfat dried milk is down $0.0050. At that price, one sale was made.
Whole milk powder prices are projected to tumble overnight on the Global Dairy Trade auction.
The futures market expects the main whole milk powder price to decline at Tuesday’s Global Dairy Trade auction.
The average price for whole milk powder, which has the largest influence on farmer pay, declined 3% at the previous auction a fortnight ago, and the SGX-NZX Dairy Derivatives market was forecasting another 3% reduction at the auction overnight this week.
According to Stuart Davison, global dairy consultant at HighGround Dairy, the market was anticipating another drop in whole milk powder on the GDT after Fonterra changed their offer quantities.
Fonterra has limited the quantity offered at this auction due to “tight seasonal inventory positions.” However, it also moved up the volume for the July and August auctions, claiming that the adjustment will better link GDT offer volumes with milk supply and collection patterns throughout the year.
Davison believes that the lesser volume at the forthcoming auction will not boost pricing.
“Buyers are well aware that there will be greater volumes on offer in less than two months on the GDT platform,” he added.
He predicted that the additional volume would have a negative impact on demand.
Fonterra cut the quantity of whole milk powder offered at auction by 8.4% overnight, to 10,870 metric tonnes. It boosted the quantities of the two July auctions by 4.2% to 12,510 MT each, and the August 1 sale by 24.4% to 17,830 MT, matching the amount offered in the August 15 auction.
STUFF
When purchasing milk from farmers, Fonterra considers the fat and protein levels.
Davison predicted that the entire GDT index would decrease overnight at the auction as prices for other important items remained constant or dropped.
Over the last year, the GDT index has fallen by 25%, while the average price of whole milk powder has fallen by 23%.
Demand for dairy products has slowed as China’s economy has not recovered as quickly as predicted after its exit from tight zero-Covid shutdown regulations.
According to Fonterra CEO Miles Hurrell, he expects Chinese demand to recover to normal by the end of this calendar year.
Hurrell said that Fonterra is “very positive” about the Chinese market in the medium to long term due to favourable demographics, a growing middle class, and higher dairy product consumption.
Davison said buyers were cautious, and demand from China remained “bearish” despite a rise in domestic milk output.
Summer heat waves in China may enhance demand for liquid milk and ice cream in the immediate term, while reduced interest rates and other government stimulus measures may boost consumption over the next six months, he added.
Nonetheless, he stated that this may not result in increased GDT pricing.
“There’s so much milk in China that they have no reason to come to GDT for anything other than necessities,” he remarked.
On Tuesday, China’s central bank slashed interest rates in an effort to help the country’s economy after its exit from tight zero-Covid lockdown policies.
According to Reuters, the one-year loan prime rate was reduced by 10 basis points to 3.55%, while the five-year rate was reduced by the same amount to 4.20%. The decision follows the central bank’s reduction of short- and medium-term interest rates last week.
There is also speculation that the Chinese government may present a stimulus plan, including assistance for the suffering real estate industry and incentives for people to spend.
China is New Zealand’s biggest primary industry export market, accounting for around one-third of total primary industry export value in the year to the end of March.
Weaker commodity prices aren’t helping the currency, with Kiwibank forecasting a drop from US62 cents to US55 cents by the end of the year.
Kiwibank attributed the drop to lower commodity prices, interest rate differentials, and poor economic indicators.
While the Reserve Bank of New Zealand has finished raising interest rates, the Federal Reserve had further rises planned, according to Kiwibank.
Nonetheless, Kiwibank warned that the currency’s drop would be “a bumpy ride lower” and that it might be “a bumpy ride lower.”
Kiwibank advised importers to keep a look out for any upward movements, especially any short-term transactions up towards the US63c level.
On Tuesday, the benchmark S&P/NZX 50 Index rose 0.3%, or 38.625 points, to 11,789.37. With $130 million shares traded, 68 stocks climbed and 52 sank on the wider market.
There is likely to be lower milk production in the EU and the US during 2023 which could “stabilise” global market prices, according to a new report from Rabobank.
There is likely to be lower milk production in the EU and the US during 2023 which could “stabilise” global market prices, according to a new report from Rabobank.
Overall global milk production is still rising but, according to the bank, it is “losing momentum”.
In its latest Global Dairy Quarterly report, Rabobank also warned that there are signs of weakening dairy demand in some markets.
“The cumulative effects of high food-price inflation over the past 24 months, in most cases significantly higher than salary growth, along with slowing economic activity in 2023 have translated into lower dairy demand in developed and emerging markets,” it stated.
As a result it has lowered its 2023 milk production forecast from last quarter’s forecast of 0.7% to 0.5%.
In the report, the bank detailed that slower growth is attributed to “stagnant output in the EU”.
It expects that in quarter three, EU milk production will be flat year-on-year and noted that while some farmers had managed to “sustain production growth” – despite lower farmgate prices – weather volatility in some regions could “slow deliveries further”.
Source: Rabobank
Rabobank also outlined that a contracting dairy herd and lower yields are likely to slow milk production in the US while in New Zealand and Australia the “dairy pool is stabilising”.
“While profitability remains challenging for New Zealand farmers, current estimates suggest that output could be higher next season.
“Meanwhile, Australia’s milk pool is showing signs of stablisation after a nearly 5% year-on-year decline in the 2022/23 season.
“Water and feed availability should support production growth next season,” the report highlighted.
South American milk production also remains under pressure and according to Rabobank Argentina, is likely to “experience a significant contraction” in milk production because of low forage after a very dry summer.
The bank also expects to see milk production in China while imports decline.
“Chinese dairy imports (liquid milk equivalent excluding whey) declined by 36% year-on-year in quarter one 2023, adding pressure to already weaker global prices in the short term,” the report outlined.
According to Andres Padilla, senior analyst dairy at Rabobank, some price deflation in dairy could help “sustain” demand levels in key markets during the second half of 2023.
The U.S. dairy industry grew significantly over the past two years, adding nearly 60,000 new jobs, increasing average wages by 11%, and increasing its total impact on the U.S. economy by $41 billion, according to the latest economic impact report from the International Dairy Foods Association (IDFA).
Dairy processors in Australia have revealed farmgate milk prices that are 6-9% lower than the current season’s anticipated pricing, however WA dairy farmers are not suffering the consequences like their colleagues in the Eastern States.
In reality, the national trend may not be mirrored in the local market, as Cowaramup dairy farmer Bob Biddulph said the 4 per litre hike from Brownes Dairy was “welcome” after WA prices had already been “historically high.”
“We’re not complaining,” Mr Biddulph said.
“While there has been no cost relief with fertiliser and feed, milk prices have been at an all-time high for quite some time.”
Mr Biddulph said that he hoped to average 65/L throughout the course of the year, but that it varied according on the season, particularly during the winter when the price was lowest but production was greatest.
“The price varies according to the time of year — highest in summer, lowest in winter/spring, and with shoulder periods on either side of summer,” he said.
“It will also vary according to individual farmer’s butterfat and protein percentages, as well as milk quality.”
He described the previous two years as “buoyant,” particularly with meat prices high, albeit they had “come back a bit” lately.
Bob Biddulph, a dairy farmer from Cowaramup. Image: Cally Dupe
Bob Biddulph, a dairy farmer from Cowaramup. Image: Cally Dupe
According to Brownes Dairy chief operations officer Marc Anderson, it was almost difficult to determine how WA farmgate prices compared to those paid in the eastern states since, although announced on June 1, they were “already changing upwards due to the severe competition for milk.”
“I believe WA milk prices are at the lower end of the range when compared to Victorian milk prices, but who knows where that will be this week!” Anderson said.
He said that any farmers who are presently on multi-year contracts or who sign new contracts with Brownes Dairy would get a 4 per litre boost.
WAFarmers Dairy Section president Ian Noakes said that although processors were required to declare their planned pricing on June 1 each year, it was a convoluted affair that was not always simple for farmers to figure out.
While he was still trying to get his mind around the latest farmgate pricing being offered by different corporations, he hadn’t gotten any calls from WA growers who were worried about them.
According to the Australian Dairy Products Federation, farmgate milk prices for 2023/24 are mainly lower than anticipated pricing for the current season, “with adjustments to initial offers still being made.”
Dairy processors in the eastern states were charged between $8.65kgMS and $12.22kgMS, depending on the contract, quality, and production location.
The business said in the inaugural edition of the Elders Dairy Market Update that opening milk prices for 2023/24 “may not be the outcome producers were looking for.”
According to the research, firms were providing opening prices that were 6-9% cheaper than the current season’s pricing.
“Because of supply reductions, competition for milk supply remains very high in Australia, implying that farm gate milk prices are somewhat disconnected from the global market,” Elders stated.
“Despite the drop in 2023/24 opening prices, farm gate milk prices remain above long-term averages.”
“However, producers have faced rising input costs and limited labour availability, which has squeezed profit margins.”
“These factors, combined with rapidly rising land prices, have led to the expectation that milk supply will fall again in 2023/24, further increasing competition for milk supply.”
According to the latest Economic Impact Report from the International Dairy Foods Association (IDFA), the US dairy industry has grown significantly over the last two years, adding nearly 60,000 new jobs, increasing average wages by 11%, and increasing its total impact on the US economy by $41 billion.
On the Chicago Mercantile Exchange, milk futures were down, while cash dairy prices were stable to lower.
June Class III milk was $0.02 lower at $15.09. July’s price went down $0.13 to $15.80. August’s price went down $0.21 to $16.59. September was $0.08 lower at $17.57. Contracts for October through April varied from thirteen cents lower in January to two cents higher in March.
The price of dry whey remained steady at $0.28. Six purchases were reported between $0.28 and $0.29.
Cheese blocks fell $0.0175 to $1.4050. There were sixteen transactions ranging from $1.4050 to $1.4125.
Cheese barrels fell $0.02 to $1.55. There were two transactions at $1.5475 and $1.55.
Butter was trading at $2.3525, down $0.01. At that price, three sales were recorded.
The price of nonfat dry milk remained steady at $1.16. There were no sales registered.
There is simply too much cheese. USDA’s Dairy Market News reports that cheese production schedules are “steady to stronger” and, for some cheesemakers, “limited warehouse space is becoming a concern.” Meanwhile, there is plenty of milk, especially now that bottlers are slowing down intakes for summer break.
There is simply too much cheese. USDA’s Dairy Market News reports that cheese production schedules are “steady to stronger” and, for some cheesemakers, “limited warehouse space is becoming a concern.” Meanwhile, there is plenty of milk, especially now that bottlers are slowing down intakes for summer break. Spot milk prices in the Upper Midwest ticked back down this week, with some sales as low as $12 under Class III. A few cheesemakers offered their workforce a long weekend, but others worked straight through the Memorial Day holiday. And, unlike earlier in the year, there are very few plants taking downtime for maintenance, so today’s steep discounts reflect a milk surplus that cannot be blamed on underutilized production capacity. By all accounts, the vats are full. USDA reports that some cheesemakers are turning away spot milk because they simply can’t hold anymore.
The excess weighed heavily on the cheese markets. CME spot Cheddar blocks plummeted to $1.42 per pound on Wednesday, their lowest value since May 2020, at the height of the pandemic panic. Blocks made a partial recovery and closed today at $1.43, still down 4.75ȼ for the week. Barrels fared a little better. They closed today at $1.5125, up 2.25ȼ since last Friday. Those prices are probably low enough to attract a bit more export business, but demand is clearly not keeping pace with production.
More cheese means more whey, and most of it is being dried. Demand for higher protein whey concentrates is finally starting to perk up, which could shift more of the whey stream into concentrates down the road. But for now, dry whey output is heavy and so are stocks. CME spot whey prices slipped further this week, closing at 25.75ȼ, just a fraction of a cent above last week’s all-time low and down 1.75ȼ from last Friday.
Once again, the Class IV products held within their well-established trading ranges. CME spot nonfat dry milk (NDM) finished right where it started at $1.17. Spot butter regained half of the ground it lost last week, climbing 1.5ȼ to $2.445.
Dairy Market News describes the NDM market as “balanced,” thanks to decent demand from Mexico. Still, driers are running hard to balance milk supplies in the back half of the spring flush. High temperatures have taken a toll on components, but nights are cool and milk yields are still only a little below the recent peak.
Churns are running, but butter output is expected to slow soon as the heat saps cream production and boosts ice cream sales. For now, though, butter production is going strong and manufacturers are putting away product for later this year.
USDA announced the May milk price at a paltry $16.11 per cwt., down $2.41 from April and $9.10 lower than May 2022. At $18.10, May Class IV milk was 15ȼ higher than April but $6.89 lower than the astoundingly high price set last year. The futures promise steady or better prices ahead for Class IV. Unfortunately, Class III milk is projected to be even cheaper in the near term. Most Class III contracts lost about 50ȼ this week, and June Class III slumped to an untenable $15.29. July is a little better at $16.14, but that is still well below the cost of milk production. Deferred prices look a bit better, in the $17s and $18s, but that is still not enough to pay the bills on most operations. Class IV prices were characteristically stable this week, with modest gains in June and July and slight losses down the board. The futures project prices in the low $18s nearby, climbing above $19 in the fourth quarter.
At these values, dairy producers are suffering painful financial losses, and the number of sellouts is on the rise. However, dairy slaughter volumes are not all that high, which suggests that, for now, most cattle are simply moving to a new home. With lofty beef prices and low milk prices, that’s likely to change very soon. But until it does, the dairy markets will remain under pressure.
Heavy rains are helping to relieve the multi-year drought in the Southern Plains, but it’s hot and dry in the Corn Belt and the forecast calls for more of the same, with the hope of showers more than a week away. The U.S. Drought Monitor rates two-thirds of the Corn Belt as abnormally dry or worse, with 15% officially in drought. Young crops are starting to show signs of stress. Prolonged dryness will chip away at yield potential, although the impact is much less severe today than it would be in mid-summer when the crop pollinates. On the other hand, exports remain tepid. The opposing fundamentals pushed prices back and forth, but ultimately, concerns about the weather won out, and a strong Friday rally signaled that the bulls had the upper hand heading into the weekend. July corn closed at $6.09, up a nickel for the week. December corn climbed 6.75ȼ to $5.4125. July soybeans climbed another 15.25ȼ to $13.525. However, soybean meal prices dropped again. The July contract lost $5.40 and settled at $397.80 per ton.
The Chicago Mercantile Exchange’s milk futures rose on Tuesday, boosted by robust cash markets.
At $15.24, June Class III milks a cent. The July contract is 32 cents higher at $16.29. August gained 30 cents to $17.17. September was 13 cents higher, closing at $17.87. Contracts from October to December are five to thirteen cents higher.
Dry whey gains $0.01 to $0.2750.
Blocks are up $0.03 to $1.46. At that price, one sale was made.
Barrels are up $0.0175 to $1.5675 per barrel. Three deals were executed between $1.5650 and $1.5675.
At $2.3775, butter is down $0.0250. Five deals were placed between $2.3775 and $2.40.
Nonfat dried milk is now $1.1650, up $0.0025. Six transactions were completed at $1.1625 and $1.1650.
The Global Dairy Trade index in New Zealand fell 0.9 percent on Tuesday, continuing its downward trend. Whole milk powder fell 3 percent, followed by butter milk powder, which fell 2.4 percent. Cheddar sales increased 7.4%.
The continued milk price rollercoaster, which seems to be heading lower, has required a Dairy Margin Coverage (DMC) payment to be given in 2023. According to the USDA’s Agricultural Prices report, which was issued late Wednesday afternoon, the April Dairy Margin Coverage revenue over feed costs was $5.84/cwt. Producers having coverage at $9.50/cwt will get $2,735.38 in indemnity payments for each million pounds enrolled.
In comparison to March, the all-milk price decreased $0.40/cwt. to $20.70, maize increased $0.03/bu. to $6.70, premium alfalfa hay climbed $1.00/ton to $315, and soybean meal decreased $27.15/ton to $457.25.
To far, the $9.50 coverage has paid $8,926.53 for each million pounds in exchange for a $1,500 premium. Payments for the highest level of coverage are expected to continue until October, according to the Farm Service Agency.
The DMC programme was established by the 2018 farm bill to provide farmers with protection when the gap between the all-milk price and the average feed price falls below the producer-selected margin trigger.
According to Jim Mulhern, CEO of NMPF, DMC’s catastrophic coverage level is at the top of his team’s farm bill wish list.
“The basic DMC’s catastrophic coverage level includes up to 5 million pounds of annual protection, which is equivalent to a 200 to 220 cow herd.” “We’re looking at DMC’s tier 2—anything above basic—adjustments because the collapse of those markets would be more akin to a truly ‘catastrophic’ event,” Mulhern explains.
According to Phil Plourd, president of Ever.ag Insights, periods like these make farmers appreciate programmes like DMC as well as coverage options like Dairy Revenue Protection (DRP).
“These are also times when we are reminded that risk management necessitates vigilance and diligence.” I doubt many people expected margins to be this low in 2023. “However, here we are,” he adds. “Producers who take a disciplined approach to market monitoring and action may not come out on top in this environment, but they are almost certainly doing better.” When will it be over? Prices are clearly low enough to inhibit production, which we anticipate in the coming months. However, there are several shifting variables in the market equation, both domestically and abroad.”
On the Chicago Mercantile Exchange, milk futures were down while cash dairy prices were neutral.
June Class III milk was $0.10 lower at $15.19. July’s price went down $0.17 to $15.97. August’s price went down $0.12 to $16.87. September’s price went down $0.02 to $17.74. Contracts from October to April varied from thirteen cents lower in October to ten cents higher in March.
Dry whey was trading at $0.2650, up $0.0075. There were no sales registered.
The price of cheese blocks remained steady at $1.43. Six sales ranged from $1.43 to $1.4450.
Cheese barrels increased $0.0375 to $1.55. Five sales ranged from $1.53 to $1.55.
At $2.4025, butter was down $0.0425. Five transactions were registered, with prices ranging from $2.4025 to $2.44.
Nonfat dried milk fell $0.0075 to $1.1625. Seven transactions were registered, ranging from $1.1625 to $1.1650.
On the Chicago Mercantile Exchange, milk futures were down while cash dairy prices were mixed Wednesday.
June Class III milk was $0.15 lower at $15.41. July’s price went down $0.17 to $16.15. August was $0.19 lower at $17.00. September was $0.18 lower at $17.95. Contracts from October to April were four cents lower in November and fifteen cents lower in April.
Dry whey fell $0.0050 to $0.27. Eleven sales ranged from $0.27 to $0.28.
Cheese blocks were $0.01 lower at $1.42. Fourteen transactions were registered, with prices ranging from $1.4150 to $1.43.
Cheese barrels gained $0.0025 to $1.4975. Eleven transactions from $1.4950 to $1.4975 were reported.
Butter was trading at $2.4550, up $0.0250. At that price, one sale was recorded.
Nonfat dried milk fell $0.0075 to $1.1550. At that price, one sale was recorded.
On the Chicago Mercantile Exchange, milk futures were down, while cash dairy prices were mixed.
June Class III milk was $0.18 lower at $16.37. July’s price went down $0.12 to $16.82. August’s price went down $0.09 to $17.63. September was $0.05 lower at $18.48. Contracts from October to April varied from one cent lower in November to six cents higher in December.
Dry whey was $0.0175 higher at $0.26. There were nine transactions between $0.2725 and $0.2875.
Cheese blocks fell $0.0750 to $1.5775. There were two sales at $1.5775 and $1.63.
The price of cheese barrels stayed steady at $1.5150. At that price, one sale was recorded.
The price of butter remained steady at $2.4375. There were no sales registered.
Nonfat dried milk increased $0.0050 to $1.1575. From $1.15 to $1.1575, four transactions were registered.
Global Dairy Trade: Sharing a New Dairy Price Quote from Fonterra:
AMF index down 4.5%, average price US$4,600/MT
Butter index up 2.2%, average price US$5,068/MT
Ched index down 3.4%, average price US$4,407/MT
SMP index down 1.6%, average price US$2,766/MT
WMP index up 0.3%, average price US$3,244/MT
The USDA predicts lower milk output this year and increased production in 2024. The organisation predicts that cow stocks will be higher this year, with slower milk per cow growth, than dairy cows will enjoy output increase and an extra milking day in 2024.
Because of robust demand, the USDA upped its projection for 2023 butter and nonfat dry milk prices in its May supply and demand report, while lowering its forecast for cheese and whey prices. The USDA predicts a decrease in Class III prices and a rise in Class IV prices.
The agency forecasts Class III prices to fall due to lower whey costs next year, and Class IV prices to fall due to reduced butter and nonfat dry milk prices.
The prediction for total milk prices in 2023 has dropped 15 cents to $20.50 per hundredweight. The USDA projection for next year is $19.90.
On the Chicago Mercantile Exchange, milk futures and cash dairy prices were down on Thursday, with the exception of butter.
May Class III milk was $0.06 lower at $16.46. June’s price went down $0.28 to $16.91. July’s price went down $0.24 to $17.63. August was $0.13 lower at $18.41. Contracts from September to April varied from constant in April to seven cents lower in October.
Dry whey fell $0.0025 to $0.30. Two sales of $0.30 and $0.3025 were reported.
Cheese bricks down $0.0525 to $1.6175. Six sales ranged from $1.61 to $1.63.
Cheese barrels fell $0.0325 to $1.5050. Five sales ranged from $1.50 to $1.5050.
Butter was trading at $2.4075, up $0.0125. Although there were two bids, no sales were reported.
Nonfat dried milk fell $0.01 to $1.17. There were two sales at $1.17 and $1.1750.
Milk futures on the Chicago Mercantile Exchange began the week mainly down, weighed down by a higher dollar and little cash action. Class III milk for May is down 11 cents to $16.46. The June contract was five cents higher at $17.04. July dropped six cents to $17.70. August fell two cents to $18.50. September through November futures are down seven cents to be steady.
To begin the week, the CME spot dairy auction was quite calm. Dry whey is constant at $0.3275. The price of blocks remains steady at $1.6125. Barrels are down $0.0150 to $1.5150 per barrel. At $2.43, butter is down $0.0150. At that price, one sale was made. Nonfat dry milk unchanged at $1.1975.
The T.C. Jacoby Weekly Market Report Week Ending April 28, 2023
The feed markets tumbled once again this week and dairy producers can thank Brazilian farmers for the setback. Brazil lacks the infrastructure to hold this year’s bin-busting production. Brazilian soybeans outprice U.S. soy by such a wide margin, two ships with Brazilian soybeans will hit the U.S. Southeast coast this week.
The feed markets tumbled once again this week. July corn futures notched their lowest price in nearly a year and closed today at $5.85 per bushel, down 30ȼ from last Friday. July soybeans lost just as much ground and settled at $14.1925. July soybean meal lost another $11 and finished at $432.40 per ton.
Dairy producers can thank Brazilian farmers for the setback. The market is growing increasingly confident that Brazil will harvest a massive second – or safrinha – corn crop. Brazil typically sends nearly all safrinha corn for export, but this year’s safrinha harvest comes hot on the heels of a large first corn crop and a record-breaking soybean crop to boot. Brazil lacks the infrastructure to hold this year’s bin-busting production, so farmers and commercial elevators are rushing to get crops out the door. Brazilian soybeans outprice U.S. soy by such a wide margin, two ships with Brazilian soybeans will hit the U.S. Southeast coast this week.
U.S. corn and soy exports were already moving at a languid pace, but now they are practically going backward. China cancelled two orders for U.S. corn this week, and China will presumably switch even more of its business to South America. U.S. corn export commitments to foreign markets other than China stand at their second-lowest level in two decades, behind the 2012-13 crop year. As the Daily Dairy Report notes, “Slow U.S. grain exports could help speed the transition from today’s scarcity to anticipated abundance this fall.” Farmers are expected to plant more corn this year, and stocks are likely to climb. Optimism about this year’s crop prospects weighed heavily on summer and fall corn futures this week.
Dairy producers will surely welcome the big selloff in feed prices. But the transition from lower futures to cheaper rations could be painfully slow as producers work their way through onfarm inventories and contracted feed priced at much higher values. According to the Dairy Margin Coverage program’s formula, feed expenses used up $14.65/cwt. of milk revenue on the typical U.S. dairy operation in March, leaving just $6.45 to cover all other expenses. In Texas, the formula calculates feed costs equal to $16.60/cwt. last month, which is obviously unendurable. Pain on the farm is going to get worse before it gets better, as the recent decline in feed prices has been more than offset by dramatic drops in milk values.
This week, May through August Class III futures scored fresh life-of-contract lows. The May contract is truly in the doldrums. It closed today at a punishingly low $16.81 per cwt., down 51ȼ from last Friday. The June contract dropped 79ȼ this week to $17.22. Deferred contracts also posted double-digit losses. Class IV contracts fared much better, with slight gains nearby and modest losses down the board.
Class III values got no help from the whey market this week. CME spot whey powder slipped a penny to 35.25ȼ. Meanwhile, cheese prices diverged. CME spot Cheddar barrels finally sunk low enough to deter would-be sellers, while buyers continued to snap up cheese in Chicago. After spending two days below $1.50, barrels bounced back to $1.59 per pound, up 3.75ȼ for the week. But blocks fell another 6.25ȼ to $1.6875, a 17-month low.
Despite the abundance of milk in the cheese states, cheese stocks grew at the typical seasonal rate in March. They reached 1.46 billion pounds on March 31, 0.4% below prior-year levels. However, inventories of American-style cheeses grew at a heady pace last month. They stood at 832 million pounds, topping year-ago volumes for the first time since August. Heavy American cheese stocks and the spring flush will likely continue to weigh on Cheddar values in the near term.
Curiously, butter stocks did not grow at all last month. In fact, they fell 2.3 million pounds to 606 million pounds. March 31 stocks were still 3.5% greater than the unusually tight supplies of early 2022, but they were notably smaller than end-of-March inventories in 2020 or 2021. The shrinking stockpile helps to explain why butter prices have remained resilient, but the industry will have to wait for the Dairy Products report and the latest trade data to determine why butter inventories were so modest last month. The spot market hinted that supplies may be growing now. CME spot butter fell 4.75ȼ this week to $2.2325.
Milk powder prices managed to added another half-cent. CME spot nonfat dry milk (NDM) closed at $1.17 per pound. Whole milk powder (WMP) prices also inched upward at Tuesday’s GDT Pulse auction. However, the market remains anxious about Chinese demand. Chinese WMP imports disappointed once again in March, a clear sign that China has enough WMP on hand, and it is not yet hungry for imported product. China is buying WMP at its slowest average rate since 2018. On the other hand, China bought skim milk powder and whey at a gallop and it purchased cheese at a trot.
If China – or any other foreign buyers – step up dairy product purchases to take advantage of today’s lower prices, dairy product supplies could tighten up in a hurry. But for now, there is plenty of milk, cheese, butter, and milk powder to go around, and prices remain low.
Original Report At: https://www.jacoby.com/market-report/feed-markets-tumble/
Green has returned to the dairy markets, with Class IV leading the way upward for the second day in a row. May Class III milk was $0.11 higher at $16.76. June was $0.11 higher at $17.08. July was $0.10 higher at $17.84. August was $0.09 higher at $18.57. Contracts from September through March varied from unchanged in January, February, and March to a fifteen cent increase in November, which concluded at $19.40.
The CME spot trade for all of our items was green. Dry whey was $0.0125 higher at $0.3375. There were eighteen sales ranging from $0.33 to $0.3375. Cheese blocks were $0.0275 higher at $1.69. Three transactions were made ranging from $1.6650 to $1.6825. Cheese barrels increased $0.0275 to $1.5850. There were nine transactions ranging from $1.5675 to $1.5825. Butter was trading at $2.4425, up $0.02. At that price, one sale was recorded. Nonfat dried milk increased $0.0050 to $1.1925. Six sales ranged from $1.19 to $1.1950.
On the Chicago Mercantile Exchange, milk futures were down while cash dairy prices were stable to lower Tuesday.
May Class III milk was $0.29 lower at $16.50. June’s price went down $0.34 to $17.25. July was $0.20 lower at $18.02. August was $0.15 lower at $18.72. Contracts from September through March varied from constant in January and February to seventeen cents lower in September.
The price of dry whey remained steady at $0.3325. There were no sales registered.
Cheese blocks down $0.0175 to $1.6625. At that price, one sale was recorded.
Cheese barrels fell $0.0550 to $1.4750. There were fifteen transactions, with prices ranging from $1.4750 to $1.5175.
The price of butter stayed steady at $2.40. There were no sales registered.
The price of nonfat dry milk remained steady at $1.1650. There were no sales registered.
The consensus at USDEC’s Spring Board of Directors meeting was that U.S. dairy exports would continue to grow in 2023 but may not match last year’s lofty 5% increase.
After three straight years of breaking records, what’s next for U.S. dairy exports?
That was the overarching question at the U.S. Dairy Export Council’s Spring Board of Directors Meeting held March 27-29 in Washington, D.C.
USDEC President and CEO Krysta Harden captured the guarded optimism of the three-day meeting when she told attendees, “The long-term outlook for U.S. dairy exports is extremely bright. We are poised for continued growth.”
Looking ahead to the global dairy market, past performance does not guarantee future results.
U.S. supplier consistency a key to success
A growing reputation for reliability and an ample supply provided by U.S. farmers and dairy processors has helped get more milk and dairy products shipped across U.S. borders than ever before. That fact delivers hope because exports help everyone in the U.S. dairy industry and the local economies where they live.
USDEC member companies have demonstrated that exports are an integral part of their businesses, not an afterthought, overcoming COVID, a supply-chain crisis, a tilted trade policy playing field and other challenges.
“The message to our dairy customers around the world is that we will consistently meet their needs now and as their demand grows in the future,” said Harden in her address.
The long and steady growth of U.S. dairy exports
The trend toward more reliability and consistency is part of a long and steady international expansion of U.S. dairy, facilitated by USDEC, which was founded in 1985 by Dairy Management Inc. with dairy checkoff program funding. DMI remains USDEC’s parent organization, getting most of its budget through the dairy checkoff.
In 2022, the United States set new records for dairy export volume (2.4 million metric tons, milk solids equivalent), value ($9.6 billion) and percentage of U.S. milk production exported (18%)
In a Q&A session with USDEC members, Harden was asked if 2023 would yield another record for the percentage of U.S. milk production exported. Citing headwinds, including the “wild card” of China, Harden remained cautiously upbeat, saying, “We might not grow as much as we have been growing, but we’re hoping for a little bit more.”
Economists at the meeting (read below) expressed a similar outlook that growth will continue but slower.
Where would U.S. dairy be without exports?
What is clear, said Harden, is that the U.S. dairy industry needs exports and sees it as an engine for growth. “Where would we be without that 18% going to exports,” Harden asked rhetorically. “That would be a pretty big drain.”
The United States’ growth as a committed, consistent global dairy supplier delivering a portfolio of products suiting the needs of overseas buyers has driven U.S. dairy exports for decades, with USDEC there every step of the way.
In 2022 alone, USDEC staff traveled a combined 2.6 million air miles—the equivalent of five round-trip visits to the moon—for a broad array of activities aimed at building demand for U.S. exports and facilitating trade flows.
A high-level lineup of speakers delivers insights
While Harden’s remarks set the tone for the meeting, USDEC secured a list of high-level government officials and business executives to offer their expert opinions on dairy trade challenges and opportunities, from prospects for free trade agreements to geographic indications to dairy alternatives.
USDEC President and CEO Krysta Harden, left, with Rep. Dusty Johnson (R-SD) after a session addressing Congress’ outlook on agricultural issues.
The lineup included:
U.S. Representative Dusty Johnson’s assessment of the political landscape for agricultural issues and the need for improved market access for exports.
Scott Gottlieb, former Food and Drug Administration commissioner, on the FDA’s role in facilitating agricultural trade and his experiences leading the agency.
Ambassador Doug McKalip, chief agricultural negotiator at the Office of the United States Trade Representative (USTR), and Alexis Taylor, undersecretary for trade and foreign agricultural affairs at USDA, about the 2023 agricultural trade landscape.
A discussion about strengthening global connections with Michelangelo Margherita, head of trade section of the European Commission; Lloyd Day, deputy director general of the Inter-American Institute for Cooperation on Agriculture, and Ambassador Esteban Moctezuma, Ambassador Extraordinary and Plenipotentiary of Mexico to the United States of America.
Tom Halverson, CEO of CoBank, providing a primer on globalization and deglobalization and ag’s role in feeding the world.
James Caffyn, partner, Lever VC, on the evolution of plant-based and fermentation-derived dairy alternatives and how they relate to dairy.
Challenges: Uncertain China demand, improved EU dairy supply
One session featured USDEC’s Economics team expressing differing opinions on their expectations for U.S. dairy export performance in 2023. One area that generated consensus was that U.S. dairy export volume growth in 2023 is unlikely to match 2022’s lofty 5% increase (milk solids equivalent or MSE).
U.S. dairy exporters face a series of challenges in 2023, including a weaker price environment, improved dairy supply out of the EU, uncertain Chinese demand and major questions about the global economy. That being said, William Loux, USDEC director, Economic Research and Analysis, expects solid demand for U.S. dairy ingredients in key growth markets, like nonfat dry milk/skim milk powder in Mexico and high-value whey in Japan, will still fuel a gain of more than 1.5% MSE.
In real-time audience polling, 58% of attendees sided with Loux, expecting U.S. MSE export growth to top 1.5% in 2023.
That’s the short term. Looking years into the future, the market dynamics that have helped carry U.S. dairy exports to this point remain favorable. A rising global population, growing middle class and the need for sustainable, affordable nutrition are expected to drive world dairy consumption, benefitting U.S. exports.
Fly-in conveys dairy priorities to Washington policymakers
Nine members of the USDEC Operating Committee conducted a Capitol Hill “fly-in” following the membership meeting for a day-and-a-half of meetings with congressional representatives and administration officials.
Participants included USDEC Chairman Larry Hancock; Vice Chair Alex Peterson; Pennsylvania dairy farmer Marilyn Hershey; Patti Smith, DairyAmerica; Jing Hagert, Milk Specialties Global; Greg Rodriguez, MCT Dairies; Sheryl Meshke, AMPI, Jeff Schwager, Sartori; and Alison Rosenblum, Tillamook County Creamery Association.
USDEC staff and members of USDEC’s Operating Committee met with Rep. Michelle Fischbach (center) during their visit to Capitol Hill to talk about dairy trade priorities.
Fly-in participants with FAS and AMS staff, including FAS Administrator Daniel Whitley (center front, left of Krysta Harden).
Accompanied by Harden, COO Martha Scott Poindexter and the USDEC Trade Policy team (Jaime Castaneda, Shawna Morris and Tony Rice), the group emphasized the need for increased funding for key FAS market development programs like the Market Access Program and for a larger U.S. government role in protecting common food names.
The group also touched on the significant role exports play in the health of the entire U.S. dairy supply chain, the U.S. economy and jobs.
On the Chicago Mercantile Exchange, milk futures were mostly higher, while the cash dairy market was stable to lower.
April Class III milk was down $0.04 to $19.46. May was up $0.11 to $18.61. June was up $0.13 to $18.60. July was up $0.08 to $19.01. Contracts for August through February ranged from unchanged in January and February to eleven cents higher in November.
Dry whey was down $0.0025 to $0.44. There were no recorded sales.
Cheese blocks were down $0.01 to $1.9250. At that price, only one sale was recorded.
Cheese barrels were down $0.03 to $1.8750. There were no recorded sales.
Butter remained unchanged at $2.3975 per pound. Five sales were recorded ranging from $2.3975 to $2.4150.
Nonfat dry milk remained unchanged at $1.1475. There were no recorded sales.
The official start of spring is right around the corner and milk volumes are responding accordingly. Output is steady to higher in most parts of the country as the spring flush rolls in.
The official start of spring is right around the corner and milk volumes are responding accordingly. Output is steady to higher in most parts of the country as the spring flush rolls in. Bouts of extreme weather have popped up across the nation and are challenging the production and transportation of milk. Producers in parts of the northeast are digging themselves out from under several feet of snow while those in California slog through seemingly unending rain. Flooding is causing cow comfort and animal health concerns and, in the most severe cases, is forcing producers to evacuate their herds to higher ground. With more rain expected to fall, fears are mounting that critical infrastructure such as levees will fail, further exacerbating the situation. While increased precipitation has helped to refill reservoirs and could provide some relief to California’s water crisis, for the moment attention is focused on dealing with the immediate impacts of the flooding.
As students excitedly look forward to their spring breaks, demand from bottlers has softened. This has freed up even more milk for manufacturing uses, which was already oversubscribed. Balancing operations are stepping up milk intake where possible, but they remain constrained by a variety of factors including labor complications. As a result, spot milk can be obtained at extreme discounts. Dairy Market News once again reported that in the Central region, spot milk can be picked up for as little as $12 under Class III pricing. Meanwhile, milk futures followed the commodity markets upward this week. On Friday, every 2023 Class III contract except MAR23 and MAY23 settled above $19/cwt. Nearby Class IV contracts fell slightly over the course of the week.
The spot market found surprising traction this week as every commodity ended Friday’s trade at a higher price than at the end of Monday’s session. The Cheddar markets, in particular, vaulted higher. Except for a .75¢ decline on Thursday, Cheddar blocks saw the price move upward each day, including a 11.5¢ leap on Tuesday. Ultimately, blocks ended the week at $1.9975/lb., an increase of 21.75¢ compared to last Friday’s close. Not to be left behind, barrels staged their own comeback this week, including a 7.25¢ jump on Friday as 16 loads traded hangs. Barrels ended the week at $1.96/lb., an increase of 19¢ compared to last week and bringing the block-barrel spread to 3.75¢.
With cheap milk readily available, cheese vats have been full across the country. Market participants indicate that inventories have been steady. Even so, demand appears to be strong enough to at least provide some lift to Cheddar prices, as witnessed in the market this week. Demand from both retail and foodservice channels has been perky with demand for barrels especially pronounced. The pull from the export market has been mixed as some traders report keen interest from global buyers while others emphasize that U.S. product has lost competitiveness compared to other international sources.
The spot dry whey market gave up a quarter of a cent on each Monday and Tuesday before more than compensating with a 1.25¢ and 1¢ gain on Wednesday and Thursday, respectively. After remaining unchanged on Friday the market closed out the week at 46¢ per pound, an increase of 1.75¢ compared to last Friday. Heavy cheese production has kept a steady whey stream available for processors. Price signals are pulling the whey stream toward the production of dry whey at the expense of higher protein products. Even so, demand is reportedly mixed. While interest has improved from some international buyers, product from alternative supply regions, especially Europe, is very competitively priced.
Cream availability varies across the country. In the Western states cream supplies remain long while Dairy Market News reports that the market is significantly tighter in the Eastern states. Despite the regional differences, the overarching message is that churns continue to run busy schedules. Butter inventories are healthy and some of the butter being produced today is being immediately frozen for later use. With the spring holidays rapidly approaching, demand for butter and other Class II products has increased considerably which should keep tension in the markets in the coming weeks.
The spot butter market rose in fits and starts this week. After kicking off the week with a 4.75¢ increase on Monday, the spot price remained unchanged on Tuesday and Wednesday. Another two penny increase on Thursday lifted the price to $2.40/lb. where it remained during Friday’s session. A total of six loads of butter traded hands during the week.
On the other side of the Class IV complex, market movements were more mixed. The spot nonfat dry milk (NDM) price kicked off the week with a half penny loss on Monday, followed by another dip on Wednesday. These declines were countered by a 1.5¢ gain on Tuesday and another .75¢ increase on Friday. When the dust settled, the NDM market ended the week at $1.1875/lb., up 1.25¢ compared to last Friday. Ample milk supplies are keeping dryers working hard and supplies are reported to be readily available. Meanwhile, demand is mixed on both the international and domestic fronts. Mexican buyers appear intermittently while some domestic buyers are swapping NDM out for WPC34 as prices in that market fall.
Elevated feed prices seem poised to continue negatively impacting producer profitability. The corn markets rose this week with the MAY23 contract settling on Friday at $6.3450/bu. Concerns about global supplies persist, especially given intensifying heat and drought in Argentina. Meanwhile soybean meal prices slipped with the MAY23 contract settling on Friday at $466/ton. In USDA’s North American Grain and Oilseed Crushing Summary published on Monday, the agency estimated that U.S. soybean crushing was up 2.6% in 2022 to 65.856 million tons.
The Chicago Mercantile Exchange’s milk futures rose Thursday ahead of the cold storage report, while cash markets were mixed.
Class III milk for March is up six cents to $18.10. April is up 40 cents to $19.76. May rose 28 cents to $18.95. The June contract is six cents higher at $18.66. Contracts for July through September are unchanged at 18 cents lower.
Dry whey is now $0.4375, down $0.01.
Blocks are trading at $2.0550, up $0.04. Three trades were completed ranging from $2.03 to $2.0550.
Barrels are up $0.02 to $1.96 per barrel. Seven trades were made between $1.9250 and $1.96.
At $2.3475, butter is down $0.0350. At $2.35, one sale was made.
The price of nonfat dry milk remains unchanged at $1.15.
Global Dairy Trade: Sharing a New Dairy Price Quote from Fonterra:
AMF index down 3.8%, average price US$5,150/MT
Butter index down 3.0%, average price US$4,748/MT
Ched index down 10.2%, average price US$4,052/MT
SMP index down 3.5%, average price US$2,648/MT
WMP index down 1.5%, average price US$3,228/MT
With no trading activity on the Chicago Mercantile Exchange on Tuesday, milk futures and cash dairy prices were lower.
April Class III milk was $18.99, a $0.03 decrease. May was $0.07 lower at $18.44. June was $18.50, a $0.14 decrease. July was $0.08 lower at $18.95. Contracts from August to February ranged from unchanged in December and January to sixteen cents lower in October.
The price of dry whey remained unchanged at $0.4475. There were no sales recorded.
At $1.9850, cheese blocks were down $0.0050. There were no sales recorded.
The price of cheese barrels remained unchanged at $1.9525. There were no sales recorded.
Butter was trading at $2.4050, down $0.0050. There were no sales recorded.
Nonfat dry milk fell $0.0125 to $1.1550. There were no sales recorded.
On the Chicago Mercantile Exchange, milk futures were higher, while cash dairy prices were mixed. Today, the Class III Dairy Complex exploded, with March Class III milk up $0.17 to $17.95. April was $0.75 higher at $18.53. May was $0.66 higher at $18.60. June was $0.54 higher at $18.87. Contracts from July to January ranged from unchanged in December to forty cents higher in July.
Dry whey was down $0.0025 on the spot market, trading at $0.4375. At that price, one sale was recorded. Cheese blocks increased $0.1150 to $1.9250. Two sales were made for $1.85 and $1.90. Cheese barrels increased $0.0450 to $1.84. Seven sales ranged from $1.7950 to $1.84. The price of butter remained unchanged at $2.38. There were no sales recorded. The price of nonfat dry milk remained unchanged at $1.1750. Five sales ranged from $1.1750 to $1.1825.
U.S. dairy’s positive momentum in the international market continued in 2023 as exports got off to a strong start in January. U.S. shipments climbed 16% year-over-year in volume on a milk solids equivalent (MSE) basis (+25,026 MT MSE) and 21% in value (+$121.4 million) for the month.
The core U.S. product categories – cheese, nonfat dry milk/skim milk powder (NFDM/SMP) and whey – all grew by double digits even as sales of milkfat-heavy products, namely butter, anhydrous milkfat and whole milk powder, struggled.
NFDM/SMP volumes continued to bounce back after being the only major product category to contract in 2022. In January, shipments increased by 15% (+8,805 MT) year-over-year thanks to robust demand from Mexico.
Whey – in all its forms, from permeate and sweet whey to WPC80 and WPI – continued to perform well (+12%, +4,351 MT for low-protein varieties and +14%, +569 MT for WPC80+). U.S. whey success varied by geography: China bought more low-protein varieties, while high-protein varieties found eager buyers in a host of different markets.
Despite rising competition in the cheese space, U.S. exports held strong, increasing 16% (+4,582 MT) thanks to solid growth across the world but particularly in Latin America, Middle East/North Africa and Japan.
Looking ahead, challenges remain with low-priced European cheese on the market, uncertainty from China and economic headwinds. Nonetheless, U.S. dairy exports are off to a running start in 2023.
After establishing a new volume record in Mexico in 2022, U.S. dairy suppliers picked up where they left off in January 2023. Year-over-year U.S. dairy export volume to Mexico rose for the fifth straight month, led by NFDM/SMP and cheese.
U.S. NFDM/SMP exports to Mexico soared 75% (+15,625 MT) to 36,520 MT in January. U.S. cheese shipments jumped 21% (+1,578 MT) to 9,159 MT, buoyed by demand for U.S. gouda. Both the NFDM/SMP and cheese totals were easily January records (in fact, before this year, the U.S. never shipped more than 29,000 MT of NFDM/SMP to Mexico in January).
Many other U.S. dairy export categories (while smaller in volume) fared similarly well: Year-over-year U.S. lactose shipments to Mexico rose 52% (+922 MT), milk protein concentrate increased 54% (+524 MT), whey grew 18% (+451 MT), and butter gained 40% (+48 MT).
The source of the gains can be traced to solid Mexican economic growth, a tight domestic milk supply and favorable U.S. milk powder and cheese prices.
On the economic front, the Mexican economy grew for five straight quarters through the end of 2022, lifting consumer demand. In addition, the peso gained value against the U.S. dollar throughout the year (it reached a nearly six-year high this week), helping to make imports more affordable. And a boom in post-COVID tourism in Mexico helped drive cheese consumption.
It’s a positive start to the year for U.S. exports to Mexico, but some factors bear watching in the months ahead. Tailwinds from Mexico’s post-COVID economic reopening are weakening. Mexican growth slowed in the fourth quarter of 2022, and analysts forecast economic expansion this year will come in under 1% (compared to 3.7% in 2022).
WPC80+ exports start off strong
U.S. exports of high-protein whey products excelled in January, continuing to rebound after stagnating for much of 2022. Year-over-year January shipments increased 14% (+569 MT), marking the fourth straight month of growth.
Despite the Q4 surge, U.S. exports of WPC80+ in 2022 were essentially flat (+0.3%, +222 MT), largely attributed to weaker global demand caused in part by higher prices. Global WPC80+ trade contracted by 9% last year. Prices for high-protein whey in early 2022 were more than double those in early 2021, and they stayed elevated through the first three quarters of the year. It wasn’t until Q4 of 2022 that we started to see some meaningful price declines. That prolonged high-price environment burned off demand globally, but the U.S. was able to weather that pullback better than the EU and New Zealand, which saw declines of 17% (-8,268 MT) and 16% (-4,289 MT), respectively, in 2022.
With easing prices and readily available supplies, global demand has started to pick up with the U.S. capitalizing on the opportunity. U.S. exports to China (-39%, -256 MT) continued to lag in January, but growth to Japan (+27%, +218 MT) and a surprisingly robust trade to Canada (+33%, +182 MT), Europe (+90%, +365 MT) and South America (+100%, +390 MT) was more than enough to offset Chinese declines.
As we move further into 2023, global economic pressures are a key variable pushing back on growth in global demand, but as prices normalize, higher use of WPC80+ will be incentivized, especially as global economic pressure eases as we move through the back half of the year.
On the Chicago Mercantile Exchange, milk futures and cash dairy prices were higher on Thursday.
March Class III milk was $0.08 higher at $17.76. April was $0.24 higher at $17.75. May was $0.24 higher at $17.99. June was $0.17 higher at $18.40. Contracts from July to January ranged from one cent lower in January to seventeen cents higher in July.
The price of dry whey remained unchanged at $0.44. There were no sales recorded.
Cheese blocks increased $0.0275 to $1.8250. There were no sales recorded.
Cheese barrels increased $0.0375 to $1.7350. Eleven sales from $1.6950 to $1.7350 were recorded.
Butter was trading at $2.3325, up $0.0025. There were no sales recorded.
Nonfat dry milk was $0.01 higher at $1.1750. There were four sales ranging from $1.1750 to $1.18.
Dairy products are continuing to fall from their all-time high prices set last year. On the Chicago Mercantile Exchange, milk futures were mostly lower, while cash dairy prices were mixed. Class III milk fell $0.08 to $17.70 in March. The month of April was down $0.01 to $17.61. May was $0.06 lower at $17.84. June was $0.01 higher at $18.32. Contracts from July to January remained unchanged, with the exception of August, which fell $0.04 to $19.31.
Block Cheese fell 7 cents on the CME Spot Trade, finishing at $1.8450. Barrel Cheese increased by 3 cents to $1.6675. Dry whey dropped 34 cents to $0.4375. Class III milk futures averaged $17.93 in the second quarter, down 8 cents. In Class IV markets, butter remained stable at $2.3450, while NFDM fell to $1.1650, losing 1.25 cents along the way.
On the Chicago Mercantile Exchange, milk futures were mostly higher, while cash dairy prices were mixed.
March Class III milk was $0.03 higher at $17.78. April was $0.09 higher at $17.62. May was $0.07 higher at $17.90. June’s price was down $0.02 to $18.31. Contracts from July to January ranged from two cents lower in September to three cents higher in July, with many months recording no price change.
The price of dry whey remained unchanged at $0.4450. There were no sales recorded.
Cheese blocks fell $0.0350 to $1.9150. There were two sales at $1.8850 and $1.9150.
Cheese barrels increased $0.0625 to $1.6375. There were eight sales ranging from $1.5950 to $1.6375.
Butter remained unchanged at $2.3450, and no sales were reported, as on Friday.
The price of nonfat dry milk remained unchanged at $1.1775. There were no sales recorded.
On the Chicago Mercantile Exchange, milk futures were lower and cash dairy prices were mixed Thursday.
Class III milk was down $0.04 to $17.71 in March. At $17.45, April was down $0.14. May was trading at $17.80, down $0.10. June’s price was down $0.13 to $18.32. Contracts from July to January ranged from unchanged in October to ten cents lower in August.
Dry whey fell $0.0125 to $0.4350. At that price, one sale was recorded.
Cheese blocks increased by $0.01 to $1.91. Four sales ranged from $1.89 to $1.91.
Cheese barrels fell $0.0225 to $1.53. Three sales were recorded, with prices ranging from $1.5250 to $1.53.
Butter was trading at $2.3450, down $0.0350. Two sales of $2.3450 and $2.35 were recorded.
Nonfat dry milk fell $0.0025 to $1.18. Three sales were recorded, with prices ranging from $1.1750 to $1.18.
On the Chicago Mercantile Exchange, milk futures and cash dairy prices all closed lower on Wednesday.
Class III milk fell $0.28 to $17.75 in March. April’s price was $17.59, a $0.08 decrease. May was $0.14 lower at $17.90. June’s price was down $0.13 to $18.45. Contracts from July to January ranged from unchanged in January to sixteen cents lower in July.
Dry whey fell $0.01 to $0.4475. One transaction was recorded at $0.45.
Cheese blocks were $0.01 lower at $1.90. At that price, one sale was recorded.
Cheese barrels fell $0.0375 to $1.5525. There were two sales at $1.5525 and $1.59.
Butter was down $0.07 to $2.38 per pound. Two sales were made for $2.38 and $2.39.
Nonfat dry milk fell $0.0025 to $1.1775. At that price, one sale was recorded.
During January and February, cheese prices fluctuated, but the overall trend is downward. In January, a pound of barrel cheddar cheese cost $1,6803 and is now $1.60. In January, forty-pound cheddar blocks cost $2.0024 per pound and are now $1.96. Dry whey, which was in the $0.30s per pound in January, has dropped to $0.415 to $0.46 per pound in February.
As a result, Class III dropped from $20.50 in December to $19.43 in January. The February Class III will be even cheaper, hovering around $17.90. The Class III price has dropped dramatically since reaching a high of $25.21 in May.
Butter prices fell slightly in January before recovering slightly in February. Butter cost $2.3553 per pound on average in January and is now $2.38. Nonfat dry milk cost $1.2279 per pound in January and is now $1.215 per pound. The December Class IV was $22.12, but lower butter and nonfat dry milk prices in December and January pushed the January Class IV down to $20.01. The February Class IV could fall even further, to around $18.90.
What factors are influencing milk prices?
Milk prices will be determined in the coming months by the level of milk production, domestic sales, and dairy exports. As of now, these factors indicate that milk prices will be much lower in 2022.
In 2023, milk production is expected to rise by less than 1%. The USDA predicts a 0.8% increase, marking the second consecutive year of less than a 1% increase. In 2022, milk production increased by only 0.1%.
Fewer dairy replacements, higher herd culling, relatively high feed prices, and lower milk prices may reduce the average number of cows in 2023. The USDA predicts that the average number of cows will be down 24,000 from 2022, a 0.3% decrease. This is the second consecutive decrease in cow numbers, with a 0.5% or 44,000 decrease in 2022.
High feed prices have hampered the increase in milk per cow. In 2022, milk per cow increased by only 0.6%. The USDA predicts a 1.0% increase in 2023.
Milk production is currently higher than it was a year ago. January milk production was 1.3% higher than the previous year. Since last August, milk production has increased by at least 1%. Milk cows increased by 0.4%, and milk per cow increased by 0.9%.
Milk cow numbers fell by 9,000 in November and December but increased by 16,000 in January. Texas had a 24,000 increase in milk cow numbers, South Dakota had a 17,000 increase, Iowa had a 16,000 increase, and New York had a 10,000 increase.
When compared to a year ago, January milk production in the five leading dairy states was unchanged in California, 1.6% higher in Wisconsin, 2.6% higher in Idaho, 5.2% higher in Texas, and 3.5% higher in New York. South Dakota had a 9.1% increase, Iowa had a 7.4% increase, and Georgia had a 6.3% increase. Florida experienced a 11.4% decrease, while New Mexico experienced a 4.1% decrease.
Domestic dairy product consumption in 2022 was slightly lower than in 2021. While cheese sales nearly equaled those of 2021 butter, nonfat dry milk, dry whey, whey protein concentrate, and lactose decreased. Domestic consumption is expected to rise by about 1% in 2023.
Dairy exports were a major contributor to higher milk prices in 2022. The total number of exports in 2022 was a record. Exports increased by 5% in total volume, 9% for whey products, 12.5% for cheese, a record, and 41.5% for butterfat, but 5.5% lower for nonfat dry milk/skim milk powder.
The USDA predicts that exports will be lower in 2023 than in 2022. As Europe’s milk production increases, the United States will face more competition for exports. Depending on the weather, New Zealand may see increased milk production. Furthermore, there is softness in international demand, which may limit exports. Much is dependent on China. In 2022, exports to China were lower.
Dairy product production has increased over the previous year. Butter production was 3.9% higher in December of last year, and total cheese production was 2.2% higher. From November 30th to December 31st, butter and cheese stocks increased. Butter stocks were 9% higher on December 31st than a year ago, while total cheese stocks remained unchanged. There are more than enough stocks to meet current demand.
Milk prices are expected to rise in the second half of 2023.
Opinions on the level of 2023 milk prices vary greatly, but all predict significantly lower milk prices than in 2022. The USDA has reduced their price forecast. Class III averaged $21.94 in 2022, a $4.86 increase over 2021. The forecast for 2023 is $17.90, which is $4.04 less than the forecast for 2022. Class IV averaged $24.47 in 2022, a $8.38 increase over 2021. The forecast for 2023 is $18.25, which is $6.22 less than the forecast for 2022.
As the year progresses and monthly increases in milk production slow as expected, milk production reaches its normal low this summer, demand strengthens as schools reopen late summer, and butter and cheese sales reach their normal seasonal peak during the holidays, milk prices are likely to improve in the second half of the year compared to the first.
Current futures reflect this, with Class III in the $17-$18 range in the first half of the year and in the $19-$20 range in the second half. Futures prices are higher than the USDA’s forecast. Some forecasters believe the Class III could fall as low as $16 during the first half of the year. The level of milk prices in 2023 is extremely uncertain.
Fonterra has reduced its milk prices as demand has decreased.
Fonterra has reduced its milk prices due to a drop in demand.
The farmer-owned cooperative reduced and narrowed its forecast Farmgate Milk Price range for the 2022/23 season from $8.50 to $9.50 per kilogramme of milk solids (kgMS), with a midpoint of $9, to $8.20 to $8.80, with a midpoint of $8.50.
At the same time, it revised its forecast milk collections for the 2022/23 season to 1465 million kgMS, down from 1480 million kgMS previously.
According to Fonterra CEO Miles Hurrell, the revised forecast Farmgate Milk Price range reflects softened demand at a time of balanced supply.
“Demand for whole milk powder has been soft, particularly from Greater China, with prices down around 5% since the beginning of December.”
While Fonterra was encouraged by recent increased Chinese purchasing behaviour, he said it was too early to tell how this would affect the rest of the season.
It also maintained its cautious stance in light of the global economic growth outlook.
When purchasing milk from farmers, Fonterra considers the fat and protein levels.
“In terms of milk production, while Fonterra’s season collections are up from this time last year, cyclone Gabrielle and dry conditions in the South Island have impacted the co-full op’s season expectations.”
Milk supply from key exporting regions was balanced globally.
Europe and America produced more than last year, but this was partially offset by lower collections in New Zealand, Australia, and Latin America.
“The medium to long-term outlook for dairy, in particular New Zealand dairy, looks positive. “We are evaluating our position for next season and will provide an opening forecast in May,” Hurrell explained.
The CME dairy complex began the week higher after a Global Dairy Trade (GDT) that was mixed but overall lower in Event 326. March Class III milk was $0.19 higher at $17.84. April was $0.24 higher at $18.07. May was $0.17 higher at $18.45. June was $0.11 higher at $18.89. Contracts from July to January ranged from eight cents lower in January to twelve cents higher in November.
On Monday, the CME spot market was closely watched. The price of dry whey remained unchanged at $0.45. There were no sales recorded. Cheese blocks increased $0.08 to $1.96. Four sales ranged from $1.90 to $1.96. Cheese barrels increased $0.0350 to $1.5825. There were nine sales ranging from $1.5525 to $1.5825. Butter was trading at $2.38, up $0.0050. At #2.36, one sale was recorded. The price of nonfat dry milk remained unchanged at $1.22. One transaction was recorded at $1.2225.
Despite favourable milk prices over the last year, Texas dairy farmers continue to confront problems, according to a Texas A&M AgriLife Extension Service specialist.
According to Jennifer Spencer, Ph.D., AgriLife Extension dairy expert in Stephenville, milk prices remain historically favourable for farmers, and demand for milk and milk products ranging from cheese to ice cream is robust. Nonetheless, she claims that increased input costs are reducing profitability.
Spencer said that Texas is still doing well and adding dairy capacity and cows. Texas surpassed Idaho to take third place in milk output during the first six months of 2022. Nevertheless, the summer heat limited output, and Texas finished fourth for the year.
Texas dairies produced 15.1 billion pounds of milk as of December 1, a 6% increase over the same period previous year. According to the US Department of Agriculture, Spencer estimated the 2022 total to be approaching 16 billion pounds by the end of the year, up from 15.6 billion pounds in 2021.
Prices stayed over $23 per hundredweight in 2022, after oscillating between $23 and $25 per hundredweight. The price per hundredweight averaged $23.67.
But, dairy farmers faced additional hurdles this year as increasing expenses reduced prospective revenues, according to Spencer.
Feed costs account for almost 60% of dairy farmers’ expenditures on average, she claims. Drought and high fertiliser costs hampered forage supplies this year, and prices for cereals and supplementary feed like cotton seed rose considerably.
Fuel prices and labour shortages also hampered dairy operations more than in a usual year, according to Spencer.
“Dairy farmers had greater possibility to be successful in 2021 because they didn’t have to battle to keep up with growing feed and other expenditures,” she added. “Despite the favourable pricing, it was a difficult year.”
Texas dairies are continuing to follow industry trends in which dairy size and total output are increasing but the number of operations is decreasing.
Texas dairy output is expected to grow.
Texas’ dairy output might increase significantly in the coming years as processing infrastructure improves to handle milk. Several soft cheese production facilities, such as cottage cheese, cream cheese, and other spreadable cheeses, are set to expand or launch in the next two years to fulfil rising demand.
The cheese industry was the primary destination for the 226 billion pounds of milk produced in the United States in 2021. 1 pound of cheese requires 10 pounds of milk.
Amarillo’s facility will open later this autumn, and Stephenville’s facilities will likely grow. Another plant in Lubbock is set to open in 2024, while a new facility in western Kansas will receive milk from the Texas Panhandle.
Dairies in the Texas Plains generate around 80% of Texas milk.
“Texas dairies increased their output capacity by around 25,000 cows this year, and the processing expansion will enable farmers contribute to that growth,” she said. “One of the limiting elements impeding manufacturing is processing capacity.”
Liquid milk consumption is down, while dairy products for lactose intolerant customers are increasing, according to Spencer. Summer ice cream demand often leads in seasonally increased milk costs.
Whey, which is used in goods such as muscle recovery powders and infant formula, is an increasing part of dairy demand, according to Spencer. It is a byproduct of cheese manufacturing that was deemed trash until a purpose for its 99% amino acid protein was discovered.
Spencer said that continually growing dairy alternatives for customers is driving total production growth in the United States.
“Texas producers are highly progressive, so they are responding to the problems in order to preserve output and profitability,” she added. “The demand is there, and I believe there is room for Texas dairy production to go further.”
The following summaries were produced by AgriLife Extension district reporters:
A map of the 12 Texas A&M AgriLife Extension districts.
CENTRAL
The majority of the district got 0.5 to 1.5 inches of rain. While recent rains restored soil moisture, pastures remained in poor condition owing to the harsh frost and drought. Higher temperatures are expected to boost pasture conditions. Cattle were being fed a lot of extra food. Hay supplies were critically low. Conditions for wheat and oats were improving. The future corn plants could benefit from the precipitation.
THE ROLLING PLAINS
More rain fell in several regions, with some counties reporting up to 1.5 inches. Wheat has continued to improve as a result of the recent rain, but more precipitation is required to maintain the gains. Rangeland and pasture conditions were improving, and warmer weather was expected. Wheat conditions improved considerably in several regions, particularly in fields that had been treated before to the rains. Winter supplemental feeding for livestock continued, but some producers grazed wheat. Pasture grasses were also greening up as a result of the increased rain. There was a scarcity of hay. Cattle physical conditions were good, but large feed rations were required to keep them in good shape. Cows nursing calves were losing physical condition.
COASTAL TURN
The majority of the district experienced rain, ranging from drizzle to heavy showers. The weather remained mild. Soils remained wet due to enough subsoil moisture. Grain growers readied planting equipment, while others completed fertiliser. Several fields were flooded, so farmers delayed planting maize until they dried out. Winter pastures were thriving. Several oat fields were almost ready for grazing. Pastures remained essentially dormant, and livestock farmers supplemented their feed with hay and protein. While hay was still in scarce supply, further supplementary feeding was still required. Cattle were in excellent condition, and prices were consistent.
EAST
Soggy conditions prevailed in the fields and pastures. Numerous counties reported that pastures and fields were too flooded to operate on, and equipment became stuck. The subsoil and topsoil conditions were satisfactory. Stock ponds and streams were overflowing. The pasture and rangeland conditions were satisfactory. Supplementation was being administered to the livestock, which were in fair to excellent condition. Because of low hay supplies, several farmers began to give more cubes. Flooded bottoms have driven wild pigs into more visible areas, increasing their activities.
THE SOUTH PLAINS
Cotton totals were quite low by the end. High winter moisture was observed, including snow, sleet, and rain. While livestock were in fair health, the weather was hampering wheat output.
PANHANDLE
Snow flakes fell across the Panhandle, but no significant accumulation was observed. The area remained very dry. Soil moisture levels were extremely low to very low. Winter wheat was suffering from a lack of moisture. Pasture and rangeland conditions ranged from bad to extremely poor. Livestock supplementation was maintained.
NORTH
Soil moisture levels were insufficient. Although most locations were dry, growers in other areas were coping with exceptionally wet circumstances. A brief halt happened. Other regions were still trying to recover from the deep cold that occurred earlier this winter. Rainfall flooded the majority of the ponds. Conditions for wheat and oats were improving. In certain locations, hay was still scarce. The pollen count of cedar trees was high. The livestock situation was favourable. There were no reports of insect or disease outbreaks.
FAR OUT WEST
The days were chilly and damp at first, then warm and dry. Temperatures throughout the day varied from the mid-50s to the lower 60s, with lows in the mid-20s. Growers started discing or tossing up beds in preparation for corn or cotton planting, which increased fieldwork across the area. Orchard floor cleaning and trimming for pecan activities proceeded. Other farmers were targeting orchards and residual alfalfa fields where irrigation from the water district was still accessible. In the next weeks, irrigation was projected to increase. The pastures were still barren, with just a few weeds sprouting. The livestock were in poor to good condition and were given extra hay and feed.
CENTRAL WEST
After rain showers and an ice storm, topsoil moisture was enough. Prior to the most recent rains, some field cultivation took place. Several small grain fields were top-dressed with fertiliser prior to the rain and should fare well. Warmer, brighter days were predicted. Pastures were still lacking in grazing, so farmers were providing hay and vitamins to animals.
SOUTHEAST
The weather was nicer. The soil moisture levels were sufficient to excess. After heavy rains, water was still standing in several areas. The ground was muddy. Warmer weather and better pastures resulted in a higher calf market. Wheat sowing was delayed due to rain and muddy areas. The grades for rangeland and pasture ranged from extremely low to outstanding. Planting conditions for wheat, ryegrass, and other forages were excellent. Greening of pastures, including broadleaf weeds, was observed. Corn planting should begin shortly, although damp fields may cause a delay. Rains filled stock ponds.
SOUTHWEST
Moisture levels rose, however other places remained dry. Ice damaged trees, and orchard managers pruned trees and removed debris. Corn planting was set to start shortly. Wheat and oats seemed to be doing well under irrigation, with very few winter weeds appearing. Additional feeding for cattle was maintained but reduced.
SOUTH
Most regions had extremely short to short soil moisture levels, with some southern areas reporting acceptable soil moisture. Temperatures were colder, with windy winds and sporadic rain recorded. The daytime high temperature hovered around 80 degrees. Farmers were getting ready to sow and checking soil moisture levels. Corn planting should begin when the soil moisture is sufficient for germination. Corn, sunflowers, and sorghum were sown in the district’s southern sections with appropriate moisture, although a rain would benefit those crops. Irrigation was used on certain planted areas. Cool-season crops were harvested by vegetable farmers. Onion yields seemed to be satisfactory. Citrus and sugarcane were also in season. Pasture and rangeland conditions were poor, and grazing was restricted in most locations, however some good grazing was noted in the district’s south. Hay and feed costs continued to rise as farmers supplemented animal meals. Producers were culling bulls and cows, and market prices remained strong to stable. The livestock were in good condition. Mesquite trees were leafing out, and black brush was flowering. Wheat and oat fields were in fair shape, while other areas were experiencing dry conditions and frigid temperatures.
Midweek trade in milk futures on the Chicago Mercantile Exchange was lower, owing in part to reduced and inactive cash trade. The price of February Class III milk remains unchanged at $17.93. March is down eight cents to $17.66. April is down 9 cents to $17.85. May is a penny lower at $18.35. Contracts are five to eleven cents lower from June to August. As Butter fell lower on Wednesday, Class IV milk suffered. Class IV milk came after butter but remained unchanged nearby. February was $18.97, March was $18.93, but April was 26 cents lower at $18.92, and May was 29 cents lower at $19.30/cwt.
After a few quiet days on the CME, butter fell 34 cents to $2.42/lb, reversing the slow gains it had been making. The price of nonfat dry milk remained unchanged at $1.22 3/4/lb. Cheese fell a penny in blocks to $1.88, and barrels fell a quarter cent to $1.53./4. Dry Whey remained stable at $0.43 1/2/lb.
Thursday’s markets were dormant, with little action in feed and milk. Class III milk was uneven, with February falling a penny to $17.92, March falling two cents to $17.64, and April rising four cents to $17.89/cwt. The balance of 2023 remained basically identical, although 8 cents lower. Class IV milk fell 2 cents to $18.95 in February, 6 cents to $18.87 in March, and 12 cents to $18.80 in April.
The CME spot market had Dry whey gains $0.0050 to $0.44. Blocks are stable at $1.88. Barrels are up $0.01 to $1.5475 per barrel. The price of butter remains steady at $2.42. At $1.22, nonfat dried milk is down $0.0075.
The Chicago Mercantile Exchange’s milk futures concluded the week mainly higher, with mixed cash activity.
February Class III milk is $17.94, down two cents. The March contract is 13 cents higher at $18.06. April is up a penny to $18.39. May is up a cent to $18.77. Contracts are six to ten cents higher from June to August.
Dry whey is constant at $0.4250.
Blocks are $0.01 lower at $1.8625. At that price, one deal was completed.
Barrels are trading at $1.5750, up $0.0050. There were four transactions ranging from $1.5750 to $1.5775.
Butter up for $0.0050 $2.4725.
Nonfat dried milk increased $0.0225 to $1.2650. There were two deals at $1.25 and $1.2650.
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