2023 Milk Production Forecast Left Unchanged by USDA
Published: Friday, July 21, 2023
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Agriculture Department left its 2023 milk production forecast unchanged in its latest World Agricultural Supply and Demand Estimate report but lowered the 2024 estimate, citing lower cow inventories and slower growth in milk per cow.
2023 production and marketings were estimated at 228.4 and 227.4 billion pounds, respectively, unchanged on both from a month ago. If realized, both would be up 1.9 billion pounds, or .84%, from 2022.
2024 production and marketings were projected at 230.6 and 229.6 billion pounds, respectively, down 200 million pounds on both. If realized, 2024 production and marketings would be up 2.2 billion pounds, or .96%, from 2023.
Fats basis exports for 2023 were lowered primarily reflecting lower butter and cheese shipments. Skim-solids basis exports, also lowered, reflect lower exports of whey products as well as a number of other dairy products. However, these declines are partially offset by higher nonfat dry milk (NDM) exports.
Fat basis exports for 2024 were reduced as USDA expects weakness in butter sales to carry into the next year. Skim-solids basis export reductions were largely due to lower expected lactose exports, according to the WASDE.
Imports on a fat basis for 2023 were unchanged with largely offsetting changes for a number of products, but skim-solids imports were lowered on lower milk protein concentrates. Imports for 2024 on both a skim-solids basis and a fat basis were lowered slightly.
Projected 2023 cheese, NDM, and whey price averages were lowered from a month ago based on continued ample supplies of cheese and competition in international NDM and whey markets. Butter was unchanged.
The 2023 cheese average was lowered to $1.6750 per pound, down 5.50 cents from a month ago, and compares to $2.1122 in 2022 and $1.6755 in 2021. The 2023 average was lowered to $1.69, down 8.50 cents from last month's estimate.
Butter was projected at $2.4350 for 2023, unchanged from last month's estimate and compares to $2.8665 in 2022 and $1.7325 in 2021. The 2024 average was raised to $2.3450, up a penny from a month ago.
Nonfat dry milk will average $1.17 per pound in 2023, down 20 cents from last month's WASDE, and compares to $1.6851 in 2022 and $1.2693 in 2021. The 2024 average will fall to $1.1250, down 50 cents from last month's estimate.
The Class III milk price forecast was reduced due to weaker cheese and whey prices and the Class IV decline reflects lower NDM prices. The 2023 Class III will average $16.05 per hundredweight, down 65 cents from last month's estimate, and compares to $21.96 in 2022 and $17.08 in 2021. The 2024 average will fall to $15.95, down $1.05 from last month's estimate.
The 2023 Class IV is expected to average $18.20 per hundredweight, down 15 cents from last month's call, and compares to $24.47 in 2022 and $16.09 in 2021. The 2024 Class IV will average $17.45, unchanged from last month's projection.
StoneX broker Dave Kurzawski said there is light at the end of the milk price tunnel. U.S. prices for cheese and powder especially are very competitive on the global stage. We're in the first half of the year which traditionally sees milk output increase and inventories grow, but the second half of the year we make less milk and draw down those inventories. With finances being what they are, milk output could drop quickly, he said. He also expects better demand ahead, all which will strengthen prices but he admits, "It's going to be a tough year for dairy farmers."
The week ending July 1 saw 59,300 dairy cows go to slaughter, up 2,800 head from the previous week and 7,500, or 14.5%, more than a year ago. Year to date, 1,620,700 cows have been culled, up 8,800 head, or 5.8%, from a year ago.
Cheese prices oscillated some the second week of July but moved higher. After gaining 5.75 cents the previous week, the Cheddar blocks climbed to $1.53 per pound last Thursday, highest since May 24 but closed last Friday at $1.48, up 8.75 cents on the week and 51.50 cents below a year ago, when they dropped 11.50 cents to $1.9950.
The barrels climbed to $1.42 last Tuesday, highest since June 26, lost 3 cents last Wednesday, and finished last Friday at $1.3925, 1.25 cents higher on the week, 67.75 cents below a year ago, and 8.75 cents below the blocks. CME sales for the week totaled 22 cars of block and 53 of barrel.
Midwestern cheesemakers report a continuance of hearty demand, says Dairy Market News. Retail Cheddar-American style cheesemakers say customers have ramped up ordering and plants are pushing capacity limits to meet customer needs. Barrel producers report similar notes. Any extra loads are moving, says DMN, and concerns about warehouse space are noted, but some of that is based on cheese that requires more aging time. Milk remains available in the Upper Midwest but the farther south you go the tighter the milk. Spot prices continue at double-digits below Class III but some have been reported at class in the central-southern states. Contacts expect seasonal milk supply limitations to hamper upcoming production and potentially boost market prices, says DMN.
Western food service cheese demand is steady while retail is steady to moderate. Sources note strong cottage cheese and cream cheese sales thus far for the year. Manufacturers of frozen pizzas report less demand for third quarter than a year ago which is negatively impacting Mozzarella sales. Loads are available to meet demand with some reports of higher warehouse capacities. Class III milk is ample for strong for the vat. Export demand is mixed. Interest from Asian and Mexican purchasers is moderate, according to DMN.
Cash butter saw last Friday's finish at $2.55 per pound, up 7 cents on the week, highest since Dec. 20, 2022, but still 38 cents below a year ago, on 45 sales.
Cream has begun its seasonal disappearing act in terms of affordability for churning, says DMN, and some expect limits on spot cream for the remaining summer months. Warmer temperatures are hampering milk output, in general, and southern plants are vying for more Upper Midwestern cream. That said, there are Upper Midwest butter plants reporting cream availability is not as tight. They point out that current cream access this late into summer is unique to 2023.
Cream is tighter in the southern areas of the West with California joining the triple degree temperature club. Cream is available throughout the West and meeting manufacturers' needs. Some relay that cream demand from ice cream makers is below last year levels, but expect warmer weather to change that while others expect Class II draws to decline further. Butter production is steady to lighter. Retail and food service butter demand is strong to steady though some report fourth quarter buying is comparatively lighter than third quarter thus far.
Grade A nonfat dry milk fell to $1.0775 per pound last Monday, lowest CME price since Nov. 9, 2020. It rallied to a Friday close at $1.1050, up 1.75 cents on the week but 55.50 cents below a year ago. Eleven loads exchanged hands.
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