USDA Lowers Milk Production Forecast in Annual USDA Report
Published: Friday, January 26, 2024
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Agriculture Department lowered its milk production forecasts for the third time in its latest World Agriculture Supply and Demand Estimates (WASDE) report. The 2023 forecast was reduced from last month based on lower milk cow inventories and lower expected milk per cow. The 2024 forecast was also lower due to a reduced cow inventory and output per cow. The WASDE stated that the Jan. 31 cattle report will give an indication of producer intentions for retaining dairy heifers for addition to the breeding herd.
2023 production and marketings were estimated at 226.6 and 225.6 billion pounds, respectively, down 300 million pounds on both from a month ago. If realized, both would be up 100 million pounds, or .04%, from 2022.
2024 production and marketings were projected at 228.3 and 227.3 billion pounds, respectively, down 700,000 pounds on both. If realized, 2024 production would be up 1.7 billion pounds, or .8%, from 2023.
Prices for 2024 cheese were lowered due to recent price weakness, while butter, non-fat dry milk and whey prices are expected to be higher. The Class III price forecast was lowered, with lower cheese prices outweighing higher whey prices.
The Class III is projected to average $16.10 in 2024, down 75 cents from last month's estimate, and compares to $17.02 in 2023 and $21.96 in 2022.
Class IV prices were raised, due to higher butter and nonfat dry milk price forecasts. Look for the 2024 Class IV average at $19.35, up 45 cents from last month's estimate, and compares to $19.12 in 2023 and $24.47 in 2022.
The corn outlook is for is for greater production, larger food, seed and industrial use, increased feed and residual use, and higher ending stocks. Corn production was estimated at a record 15.3 billion bushels, up 108 million as an increase in yield to a record 177.3 bushels per acre was partly offset by a decline in harvested area. Corn use was raised 75 million bushels to 14.6 billion. Corn for ethanol was raised 50 million to 5.4 billion. Feed and residual use was raised 25 million bushels to 5.7 billion. Stocks are up 31 million bushels. The season-average corn price was lowered a nickel to $4.80 a bushel.
Soybean production was estimated at 4.2 billion bushels, up 35 million. Harvested area was estimated at 82.4 million acres, down 400,000 from the previous report. Yield was estimated at 50.6 bushels per acre, up .7 bushel. With slightly lower beginning stocks, soybean supplies are up 31 million bushels.
The soybean export and crush forecasts were unchanged. With higher supplies and slightly lower residual, ending stocks were projected at 280 million bushels, up 35 million. The U.S. season-average soybean price was projected at $12.75 per bushel, down 15 cents from last month. Soybean meal was projected at $380 per short ton, down $10, according to the WASDE.
The week ending Jan. 6 saw 48,500 dairy cows go to slaughter, up 5,900 head from the previous week, but 15,200, or 23.9%, below a year ago. Culling continues to fall. As of the week ending Dec. 30, the year to year difference was only .9%. The slaughter rate had approached 8% above a year ago in February.
U.S. dairy margins improved to start 2024 over the first half of January as milk prices held relatively steady while projected feed costs dropped on a bearish USDA report, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.
"The January WASDE featured higher yield and production than expected for both corn and soybeans which along with recent rainfall in Brazil pressured those markets," the MW stated. "Recent weakness in cheese has enticed more export demand with the outlook favorable for the first half of the year."
"USDA's semi-annual 'World Markets and Trade' report projected global cheese consumption to reach an all-time high of 47.7 billion pounds this year, up 1.2% from 2023. Global cheese production is rising even faster than demand with the U.S. pacing the increase as production growth outside of the U.S. is not expected to keep pace with the growth in global consumption, favoring U.S. cheese exports which are competitively priced."
"November cheese exports at 85.1 million pounds were a record for the month, up 4.1% year-over-year and the largest volume for any month since June 2022," the MW reported. "Shipments to Mexico were up 42.2% year-over-year to 32.4 million pounds, the largest volume recorded in any month."
"Overall dairy product exports in November of 480.4 million pounds were second to last year's record 520.7 million, but weak whey demand from China due to their struggling pork sector and slowing economy negatively impacted the total dairy export figure. November whey exports totaled 102.3 million pounds, down 13.4% year-over-year with reduced whey exports to China accounting for 97.2% of the decline in the total whey category in absolute terms," the MW concluded.
CME dairy prices were mostly lower in the Martin Luther King holiday-shortened week. The Cheddar blocks, after jumping almost 13 cents the previous week, fell to a Friday close at $1.4450 per pound, down 11.75 cents on the week and 39 cents below a year ago.
The barrels finished at $1.4675, up 2.25 cents, 11.25 cents below a year ago, and an inverted 2.25 cents above the blocks. Sales totaled 21 loads of block and 16 of barrel, down from 42 barrel the previous week.
Milk availability in some areas of the Midwest is holding at what contacts consider holiday-levels, says Dairy Market News. Spot milk prices ranged $7-under to 50 cents under Class III at mid-week. A number of plants have been on lighter schedules but weather further impacted that. Cheese demand is generally steady and contacts say loads continue to move steadily, hopeful for better prices ahead. Some do not expect improvements while milk remains so widely available. Cheese inventories are noted as stable, says DMN.
Western retail cheese demand remains mixed, with some reports that demand has flattened. Food service demand is steady to lighter as weather decreased activity for some establishments. Class III milk is readily available. However, freezing temperatures in northern parts of the region caused some transportation delays and disruptions. Cheese output is stronger to steady as plants bring in spot milk at below class prices. Export demand has strengthened due to domestic prices becoming more competitive internationally, says DMN.
Butter climbed to $2.58 per pound last Wednesday but it closed last Friday at $2.5450, down 2.25 cents on the week and 22.25 cents above a year ago. There were 33 loads that found new homes on the week.
Central butter makers say cream is widely available. There were some weather-related setbacks over the weekend and early in the week, as cream handlers had an uphill battle finding homes for the ample supply. Equipment and hauling hurdles aside, butter makers are churning as much as possible, says DMN.
Cream is readily available in the West. Butter production is steady to stronger, though machine maintenance was taking place to prepare for heavier churning later in the winter season. Butter makers are working to build additional inventory for spring holiday demand.
Grade A nonfat dry milk inched up to $1.1950 per pound last Tuesday, highest since Nov. 16, 2023, but saw its Friday finish at $1.1750, a penny lower on the week and dead even with a year ago. Fifteen loads were sold on the week.
CME dry whey closed last Friday at 42.75 cents per pound, down .25 cents on the week but 10.25 cents above a year ago, with 11 sales logged on the short week.
StoneX broker Dave Kurzawski compared week four of 2024 to that of a year ago in the Jan. 22 "Dairy Radio Now" broadcast. He said block cheese was trading close to $2 per pound a year ago, while today we're hovering around $1.50, down over 20%. Butter is up about 20 cents from a year ago. Nonfat dry milk is up slightly but it's "stable." Dry whey is also up from a year ago, so the markets are "relatively stable, with the exception being cheese."
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