Benchmark Milk Price to Drop $4
Published: Friday, February 17, 2023
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Agriculture Department lowered its 2023 milk production forecast in the Feb. 8 World Agricultural Supply and Demand Estimates report (WASDE), stating, "Weaker forecast milk prices are expected to result in lower cow inventories." It also referenced The Cattle report's dairy cow inventory and lower heifer numbers, and slightly reduced the forecast milk output per cow for 2023.
2023 production and marketings were estimated at 228.3 and 227.3 billion pounds, respectively, down 900 million pounds on both from a month ago. If realized, 2023 production would be up 1.7 billion pounds, or .75%, from 2022.
Cheese was projected to average $1.86 per pound in 2023, down 7 cents from January's estimate, and compares to $2.1122 in 2022, $1.6755 in 2021 and $1.9236 in 2020.
The 2023 butter price average was estimated at $2.33 per pound, unchanged from a month ago, and compares to $2.8665 in 2022, $1.7325 in 2021 and $1.5808 in 2020.
Nonfat dry milk is expected to average $1.2250 per pound, down 11.50 cents from last month's estimate, and compares to $1.6851 in 2022, $1.2693 in 2021 and $1.0417 in 2020.
Dry whey will average 36.50 cents per pound in 2023, down a nickel from the January estimate, and compares to 60.35 cents in 2022, 57.44 cents in 2021 and 36.21 cents in 2020.
Class III milk will average $17.90 per hundredweight in 2023, according to the WASDE, down 95 cents from last month's estimate, and compares to the $21.96 average in 2022, $17.08 in 2021 and $18.16 in 2020.
The 2023 Class IV average was projected at $18.25, down $1 from last month's estimate, and compares to $24.47 in 2022, $16.09 in 2021 and $13.49 in 2020.
Prices were lowered for cheese as stocks remain relatively large and domestic demand is expected to remain generally soft, according to the WASDE. Butter was unchanged as higher early-year prices are offset by weaker prices later in the year. Nonfat dry milk and whey prices were lowered on expectations of increased export competition and somewhat softer international demand.
Corn used for ethanol production was reduced 25 million bushels in the WASDE. Ending stocks were up 25 million bushels from last month and the season-average corn price was unchanged at $6.70 per bushel.
The soybean crush was forecast at 2.23 billion bushels, down 15 million from last month, and the global crush was reduced 3.4 million tons. Ending stocks were forecast at 225 million bushels, up 15 million. The U.S. season-average soybean price for 2022-23 was forecast at $14.30 per bushel, up a dime from last month. Soybean meal was forecast at $450 per short ton, up $25. The soybean oil price forecast was unchanged at 68 cents per pound.
U.S. dairy exports ended 2022 on a strong note and added much value to U.S. dairy farm incomes. The data shows 18% of total U.S. milk solids left our shores, according to HighGround Dairy President Eric Meyer in the Jan. 13 Dairy Radio Now broadcast, "The third straight year of record exports."
Nonfat-skim milk powder exports totaled 139.7 million pounds, up 8% from December 2021, although down 6.2% on the year from 2021. Gains to Mexico accounted for most of the December increase, according to HGD, but there were notable gains to China, partially offset by declines to Vietnam and Philippines.
Dry whey exports totaled 39.3 million pounds, up 17.9% from December 2021, while down .2% for the year. Exports to China were the highest ever for December.
The U.S. exported 78.9 million pounds of cheese, up 16.4% in December, and up 12.1% for all of 2022. December Cheddar exports, at 14.5 million pounds, were up 40.3% from a year ago, and up 58.2% for the year.
Butter exports, at 7.5 million pounds, were down 2.8% from December 2021, but were up 48.5% for the year.
Unfortunately, prospects for 2023 are not so rosy, Meyer warned, as European prices have fallen considerably, making the U.S. less competitive. He urged listeners to look at risk management options to make sure they're covered for any major downswing. He agreed that China remains the "elephant in the room" as to exports but said "There's not a lot of information out of that country which is now in a post-COVID era like we were and, "While there's rumors that consumer spending is rising, we're not seeing any massive buying interest of, not only dairy commodities but other commodities, so there's still a lot of uncertainty," he said.
You'll recall December U.S. milk production was up just .8% from 2021. The latest Dairy Products report indicates that cheese vats and butter churns saw most of the milk.
Cheese output totaled 1.202 billion pounds, up 4.2% from November, and was up 2.2% from December 2021. It's the highest monthly production since March and the 26th consecutive month output topped that of the previous year. Output for all of 2022 totaled 13.95 billion pounds, up 1.8% from 2021.
Wisconsin produced 300.3 million pounds of December's total, up 5.3% from November and 1.4% above a year ago. California added 209 million pounds, up 1.3% from November and 2% more than a year ago. New Mexico supplied 84.1 million pounds, up 3.4% from November but .8% below a year ago. Idaho produced 86.9 million, up 16.6% from November, but 1.5% below a year ago.
Italian cheese totaled 513.8 million pounds, up 5.1% from November and 3% above a year ago. Italian output for the year hit 5.9 billion pounds, up 2.8%.
American-type cheese climbed to 481.9 million pounds, up 4.1% from November, and 2.6% above a year ago. YTD output, at 5.6 billion pounds, was off .1%.
Mozzarella output grew to 404.9 million pounds, up 4.1% from a year ago, with output for 2022 hitting 4.7 billion pounds, up 3.8% from 2021.
Cheddar production shot up to 338.5 million pounds, up 18.2 million pounds, or 5.7%, from November's count, which was revised up 1.3 million pounds, and was up 4.8 million pounds, or 1.4%, from December 2021. Cheddar output totaled 3.9 billion pounds in 2022, down .8% from 2021.
Butter output jumped to 187 million pounds, up 16 million pounds, or 9.4%, from November, and was up 7 million pounds, or 3.9%, from a year ago. Butter output for all of 2022 totaled 2.1 billion pounds, down .7% from 2021.
Yogurt totaled 361 million pounds, down 2.6% from a year ago, with YTD output at 4.6 billion pounds, down 2.7%.
Dry whey production climbed to 76 million pounds, up 4.1 million pounds, or 5.7%, from November's total which was revised down 2.7 million pounds, and was virtually unchanged from a year ago. Whey output for 2022 totaled 948.4 million pounds, up 1.5% from 2021.
Stocks climbed to 78.6 million pounds, up 5.6 million, or 7.7%, from November, and up 21.5 million pounds, or 37.7%, from 2021.
Nonfat dry milk output jumped to 179 million pounds, up 20.8 million pounds, or 13.2%, from November, and up 11.2 million, or 6.7%, above a year ago. Powder output for the year totaled 1.97 billion pounds, down 2.4% from 2021.
Stocks grew to 264 million pounds, up 5 million pounds, or 1.9%, from November, and up 11.3 million pounds, or 4.5%, from a year ago.
Skim milk powder output totaled 48.9 million pounds, up 8.5 million, or 21.1%, from November, and just 300,000 pounds, or .7%, above a year ago. SMP output for all of 2022 amounted to 536.2 million pounds, down 23.2% from 2021.
Last Tuesday's Global Dairy Trade saw its weighted average jump 3.2%, biggest increase since Sept. 6, 2022, and followed the .1% slippage on Jan. 17, and two successive declines prior to that. Traders brought 71.8 million pounds of product to market, up from 70.3 million on Jan. 17, and the average metric ton price climbed to $3,456 U.S, up from $3,393 on Jan. 17.
The gains were led by butter, up 6.6%, after slipping .6% on Jan. 17. Anhydrous milkfat was up was up 4.8%, following a .9% slippage. Whole milk powder was up 3.8%, after inching .1% higher, and skim milk powder was unchanged, after a .3% loss. Cheddar was up 2.3%, after jumping 4%.
StoneX Dairy Group says the GDT 80% butterfat butter price equates to $2.0999 per pound U.S., up 13.1 cents from Jan. 17, and compares to CME butter which closed last Friday at $2.4125. GDT Cheddar, at $2.2591, was up 4.9 cents, and compares to last Friday's CME block Cheddar at $1.8625. GDT skim milk powder averaged $1.2834 per pound, down from $1.2891, and whole milk powder averaged $1.5101 per pound, up from $1.4598. CME Grade A nonfat dry milk closed last Friday at $1.2650 per pound.
Dustin Winston reported that buyers from many regions stepped up their activity. "North Asian purchases, which includes China, were higher than both last event and last year, as the region returned to their normal market share of more than 50%. Purchases by European, African and North American participants were also stronger than last year and last event," according to Winston.
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