May 26, 2023 at 7:58 p.m.
Culling rate 4.5% above last year
The barrels fell to $1.4425 Thursday, lowest since Sept. 7, 2021, but rallied to a Friday finish at $1.47, 2 cents lower on the week, 87.75 cents below a year ago and 6.50 cents below the blocks. Sales totaled 35 cars of block and 54 of barrel.
Cheese demand varies and the type of customer is part in the equation, said Dairy Market News. Cheesemakers who supply regional chain and individually owned restauranteurs say inflation has put pressure on those businesses. Retail cheesemakers are reporting generally steady demand, in some cases year-over-year improvements. Milk availability is a growing concern, particularly for handlers. Spot milk prices remain at previous levels, as low as $11 under Class at mid-week, compared to $2.50 under Class to 75 cents over a year ago.
Retail and food service cheese demand remains strong to steady in the west. Export demand is mixed. Some contacts indicate good demand from Asia, Mexico and South America, while others indicate lighter demand. Plentiful milk is keeping cheese production strong to steady, said DMN.
Cash butter closed Friday at $2.46 per pound, up 6 cents on the week but 39 cents below a year ago, with nine sales put on the board this week.
Butter plants report atypical demand upticks as year-over-year reports are showing improvements in retail. Food service orders are seasonally in line to quieter. Cream is available for churning and multiples are at similar levels to previous weeks. Some are turning cream away, as they are at or near capacity.
Western cream is plentiful but cream multiples moved higher this week. Planned equipment maintenance in June caused a few butter plants to reduce their cream intake. Some report output is limited due to personnel shortages. Retail and food service butter demand is strong to steady and export demand is steady.
Grade A nonfat dry milk fell to $1.1525 per pound Thursday and stayed there Friday, lowest since April 18, 1.75 cents lower on the week, and 64.75 cents below a year ago, with nine sales reported.
Dry whey closed 3.75 cents lower on the week, at 26.50 cents per pound, lowest price since March 13, 2018, the second day that whey started trading at the CME, and is 24.25 cents below a year ago. Seventy-five loads were sold on the week, highest weekly total since the week of Sept. 30, 2019.
The U.S. Department of Agriculture lowered its 2023 milk production estimate in its latest World Agricultural Supply and Demand Estimates report, citing a larger expected cow inventory but slower output per cow. The report also gave a look at 2034.
2023 production and marketings were estimated at 228.6 and 227.6 billion pounds, respectively, down 100 million pounds on production from a month ago, but unchanged on marketings. If realized, 2023 production would be up 2.1 billion pounds, or 0.93%, from 2022.
2024 production and marketings were estimated at 230.8 and 229.8 billion pounds, respectively, up 2.2 billion pounds on both from 2023. If realized, 2024 production would be up 0.96% from 2023 and marketings would be up 0.97%.
Based on expected changes in component prices, 2023 Class III milk prices were lowered while Class IV prices were raised. The Class III average was projected at $17.75 per hundredweight, down 50 cents from last month’s estimate, and compares to $21.96 in 2022 and $17.08 in 2021. The 2024 average was projected at $17.50.
The 2023 Class IV average was estimated at $18.30, up 20 cents from a month ago, and compares to $24.47 in 2022 and $16.09 in 2021. The 2024 average is projected at $17.35.
The 2024 milk estimate was driven by gains in milk per cow and an additional milking day, according to the WASDE. The Class III price was forecast lower on weaker whey prices. The Class IV was forecast lower as well, with prices for butter and nonfat dry milk projected lower.
This month’s corn outlook is for larger production, greater domestic use and exports, and higher ending stocks. The corn crop was projected at a record 15.3 billion bushels, up more than 10% from last year on increases to both area and yield. The yield projection is 181.5 bushels per acre. With beginning stocks up slightly, total corn supplies were forecast at 16.7 billion bushels, the highest since 2017-18, according to the WASDE. Total U.S. corn use was forecast to rise about 5% relative to a year ago on higher domestic use and exports.
Corn exports were forecast to rise 325 million bushels to 2.1 billion, as lower prices support a sharp increase in global trade following the decline seen during 2022-23. The season-average farm price was projected at $4.80 per bushel, down $1.80 from 2022-23.
The soybean outlook is for higher supplies, crush, ending stocks and lower exports. The soybean crop was projected at 4.51 billion bushels, up 5% from last year mainly on higher yields. With lower beginning stocks partly offsetting increased production, soybean supplies were forecast at 4.75 billion bushels, up 4%. The season-average soybean price was forecast at $12.10 per bushel compared with $14.20 in 2022-23. Soybean meal was forecast at $365 per short ton, down $90.
Meanwhile, U.S. corn planting was at 65%, as of the week ending May 14, according to the USDA’s latest Crop Progress report. That’s up from 49% the previous week, 20% ahead of a year ago and 6% ahead of the five-year average. 30% was emerged, up from 12% the previous week, 17% ahead of the previous year and 5% ahead of the five-year average.
Soybeans were at 49% planted, up from 35% the week before, 22% ahead of a year ago and 13% ahead of the five-year average. 20% are emerged, 12% ahead of a year ago and 9% ahead of the five-year average.
The week ending May 6 saw 57,100 dairy cows head to slaughter, down 1,700 from the previous week but 800 head, or 1.4%, more than a year ago. Year-to-date, 1.17 million head have been culled, up 51,300, or 4.5%, above a year ago.
Checking demand, March butter disappearance totaled 219.5 million pounds, up 19.4% from February and 15.2% above March 2022. HighGround Dairy credits “substantial domestic demand, possibly due to an earlier Easter in 2023.” The butter was a “beacon of hope,” said HGD contributing dairy economist Betty Berning in the May 22 Dairy Radio Now broadcast.
Cheese totaled 1.23 billion pounds, down 1.7% from February and down 2.2% from a year ago. Both domestic use and exports were lower, falling 2.4% domestically and 0.4% on exports. American cheese exports plummeted 12% annually, and year-to-date were at a deficit of 4.3% to the same period in 2022.
Nonfat dry milk-skim milk powder utilization totaled 238.5 million pounds, up 25.1% from February and 1.4% ahead of a year ago. HGD credited an uptick in domestic usage, which was up 13.7%, while exports declined 2.7% from 2022.
Dry whey totaled 79.7 million pounds, up 8.1% from February and 11.8% ahead of a year ago. Domestic usage, at 32.8 million pounds, was up 17.1% from a year ago, and exports, at 46.9 million, were up 8.3%.
Fluid milk sales looked a little better in March but were still down from a year ago. The latest data shows packaged fluid sales totaled 3.8 billion pounds, down just 0.7% from March 2022, following a 3.2% drop in February.
Conventional product sales totaled 3.5 billion pounds, down 0.9% from a year ago. Organic products, at 256 million pounds, were up 1.3%, and represented 6.8% of total sales for the month.
Whole milk sales totaled 1.3 billion pounds, up 2.1% from a year ago, up 1.1% year-to-date and represented 34.3% of total milk sales for the three months.
Skim milk sales, at 192 million pounds, were down 6.2% from a year ago and down 6.8% year-to-date.
Total packaged fluid sales for the three months amounted to 10.9 billion pounds, down 1.4% from 2022. Conventional product sales totaled 10.2 billion pounds, down 1.6%. Organic products, at 732 million pounds, were up 1.1%, and represented 6.7% of total milk sales for the period.
The USDA announced the June federal order Class I base milk price at $18.01 per hundredweight, down $1.56 from May, $7.86 below June 2022 and the lowest Class I since November 2021. It equates to $1.55 per gallon, down from $2.22 a year ago. The six-month average stands at $19.77, down from $23.32 a year ago and compares to $16.13 in 2021.
Global Dairy Trade reversed two events of gain this week, as the GDT’s weighted average slipped 0.9%, following gains of 2.5% May 2 and 3.2% April 18. Traders brought 47.5 million pounds of product to market, down from 51.3 million May 2 and the lowest since June 21, 2022. The average metric ton price slipped to $3,488, down from $3,506 May 2.
Anhydrous milk fat led the declines, down 4.5%, after losing 2.4% May 2. Butter, on the other hand, was up 2.2%, following a 2.4% advance. Cheddar showed the second biggest decline, down 3.4%, after rising 4.5% last time. Skim milk powder was down 1.6%, after rising 1.5%, and whole milk powder was up 0.3% following a 5% gain May 2.
StoneX said the GDT 80% butterfat butter price equates to $2.2430 per pound, up 5.4 cents after gaining 5.6 cents May 2, and compares to Friday’s CME butter at $2.46. GDT cheddar, at $1.9991, was down 7 cents, and compares to Friday’s CME block cheddar at $1.5350. GDT skim milk powder averaged $1.2547 per pound, down from $1.2641, and whole milk powder averaged $1.4715 per pound, up from $1.4650. CME powder closed at $1.1525.
Dairy margins deteriorated over the first half of May, particularly in nearby periods, as a sharp decline in milk prices more than offset steady to weaker projected feed costs, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.
“Spot trade in cheese and whey has been at a deep discount to indicative Class III milk futures which have adjusted lower as the cash market has failed to recover,” the MW reported. “Whey prices have dropped from almost 87 cents per pound early last year as increased production is forcing more trade to clear at the CME. Since the beginning of April, 229 loads have traded in the spot market. While exports have held up, weaker hog margins in China are causing a recent slowdown in demand which will force more product to clear domestically.
“Exports of other dairy products during March were impressive as well, with 91.6 million pounds of cheese and curd exports which represented the second-highest March total on record, although total first-quarter cheese exports were record high and first quarter NDM exports were the second highest on record.
“Unfortunately, lower prices may need to be maintained to move additional product through export channels as competition increases, particularly to Asia. Another problem for dairy producers is that ongoing issues with labor, freight and maintenance are reducing the capacity of dairy processors. Cooperatives and milk handlers have been forced to either dump or sell spot milk at deep discounts, with producers receiving pricing of $4 to $12 per cwt below class for milk exceeding contracted volumes.”
Cooperatives Working Together members accepted 11 offers of export assistance this week on sales of 1.3 million pounds of American-type cheese, 44,000 pounds of butter and 154,000 pounds of cream cheese. The product is going to customers in Asia, Central America, the Caribbean, Middle East-North Africa, Oceania and South America through November.
In politics, the International Dairy Foods Association reports that the Wall Street Journal says, “Top officials with the USDA remain fixated on banning chocolate milk from elementary and middle school cafeterias despite widespread opposition from parents, school meal professionals and the federal government’s own Dietary Guidelines for Americans report.”
In April, 37 school milk processors representing more than 90% of the school milk volume in the U.S. jumped ahead of USDA’s proposed guidelines with the Healthy School Milk Commitment, a pledge to offer nutritious school milk options with no more than 10 grams of added sugar per 8-fluid-ounce serving by the 2025-26 school year.
The Journal reports that “the issue has divided parents.” However, neither the Journal article nor USDA’s comments in the Journal feature thoughts from parents of school-aged children. In a Morning Consult poll of more than 500 parents with children in public schools conducted March 17-19, 90% of parents expressed agreement that non-fat or low-fat flavored milk should remain an option in public school meals. In October 2022, a similar poll found support among parents for low-fat flavored milk to be 84%, meaning support among voting parents with children in public schools continues to increase, said IDFA.
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