Milk production forecasts lowered again

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The U.S. Department of Agriculture again lowered its milk production forecasts for 2023 and 2024 in its latest World Agriculture Supply and Demand Estimates based on “an expected decline in cow numbers reflecting the average July 2023 cow number reported in the recent Milk Production report. The reduction in cow numbers is expected to continue through 2023 and into the first half of 2024 as returns remain under pressure,” said the report.

Output-per-cow for 2023 was forecast to increase at a lower rate than previously expected on recent data and the expected impact of high temperatures during the summer. The forecast of milk per cow for 2024 was unchanged.

The 2023 production and marketings were estimated at 227.5 and 226.5 billion pounds, respectively, down 400 million pounds on both from a month ago. If realized, production would still be up 1 billion pounds, or 0.4%, from 2022.

The 2024 production and marketings were projected at 230.4 and 229.4 billion pounds, respectively, down 100 million pounds on both. If realized, 2024 production and marketings would be up 2.9 billion pounds, or 1.3%, from 2023.

Price forecasts for 2023 cheese, butter and whey were raised, based on current price strength, but nonfat dried milk was lowered. Cheese is expected to average $1.81 per pound in 2023, up 3.50 cents from last month’s estimate, and compares to $2.1122 in 2022 and $1.6755 in 2021. It’s expected to average $1.8450 per pound in 2024, up 9 cents from a month ago.

Butter will average $2.54 per pound in 2023, up 4.50 cents from last month’s projection, and compares to $2.8665 in 2022 and $1.7325 in 2021. It is projected to average $2.55 per pound in 2024, up 12 cents from last month’s estimate.

Nonfat dry milk was projected to average $1.16 per pound in 2023 and $1.09 in 2024. Dry whey was projected at 34.5 cents in 2023 and 31.50 cents in 2024.

Class III and Class IV milk price estimates were raised, reflecting changes in their component values. Look for the 2023 Class III to average $17.35 per hundredweight, up 45 cents from last month’s estimate, and compares to $21.96 in 2022 and $17.08 in 2021. The 2024 projection is $17.55, up $1 from last month’s estimate.

The 2023 Class IV price will average $18.60, according to the report, up a dime from a month ago, and compares to $24.47 in 2022 and $16.09 in 2021. The 2024 Class IV will average $18, up 20 cents from last month’s estimate.

The U.S. corn outlook showed projected beginning stocks 5 million bushels lower based on mostly offsetting trade and corn used for ethanol changes. 

Corn production was forecast at 15.1 billion bushels, up less than 1% from the previous forecast and up 10% from 2022. Yields are expected to average 173.8 bushels per acre, down 1.3 bushels from the previous forecast but up 0.5 bushel from last year. Total planted area, at 94.9 million acres, is up 1% from the previous estimate and up 7% from a year ago. Area harvested was forecast at 87.1 million acres, up 1% from the previous forecast and up 10% from a year ago. The season-average corn price was unchanged at $4.90 per bushel.   

Soybean production was forecast at 4.15 billion bushels, down 1% from last month’s estimate and down 3% from 2022. Yields are expected to average 50.1 bushels per acre, down 0.8 bushel from the last forecast but up 0.6 bushel from 2022. Total planted area, at 83.6 million acres, is up less than 1% from the previous estimate but down 4% a year ago. Area harvested was forecast at 82.8 million acres, up less than 1% from last month’s forecast but down 4% from a year ago. The season-average soybean price was forecast at $12.90 per bushel, up 20 cents from last month. Soybean meal was unchanged at $380 a short ton.

Meanwhile, the latest Crop Progress report showed 97% of U.S. corn in the dough stage, as of the week ending Sept. 10, up from 93% the previous week and 2% ahead of a year ago. 82% was dented, up from 67% the previous week and 7% ahead of a year ago. 34% was rated mature, up from 24% a year ago and 6% ahead of the average. 5% has been harvested. 52% was rated good to excellent, down 1% from the previous week and 1% below a year ago.

Looking at soybeans, 31% were dropping leaves, up from 16% the previous week, 11% ahead of a year ago and 6% ahead of the average. 52% were rated good to excellent, down 1% from the previous week and 4% below a year ago.

The week ending Sept. 2 saw 57,600 cows go to slaughter, down 1,600 from the previous week but 2,000, or 3.6%, more than a year ago. Year-to-date, 2,040,600 head have been culled, up 110,600, or 5.4%, from a year ago.

The cheddar blocks alternated some the week of Sept. 11 but fell to a $1.88 per pound close Friday as traders anticipated Monday afternoon’s August Milk Production report. The blocks were down 4.50 cents on the week, lowest CME price since July 27, and 18 cents below that week a year ago when they were trading at $2.06 per pound. Class III futures have fallen as well.

The barrels closed Friday at $1.81, down 1.75 cents on the week, 28 cents below a year ago when they were up almost 16 cents to $2.09, and were 7 cents below the blocks. There were 15 loads of block traded on the week and six of barrel.

StoneX reports that the milk supply is tighter, but there’s a bleak view on demand ahead. The lack of cheese exports makes market direction uncertain.

Midwest cheesemakers said milk was still somewhat snug this week, according to Dairy Market News, but near-term expectations are that availability will grow with improved cow-comfort weather. Spot milk prices were still above Class III but have edged lower. Cheese orders are somewhat steady but varies plant to plant. Some remain concerned about fulfilling incoming orders while others say tighter milk has brought some balance in cheese inventories.

Retail and food service cheese demand in the West remains steady. Demand from international purchasers is moderate but has been consistent from Latin American buyers the first three quarters of 2023. Handlers report that Class III milk demand from cheese manufacturers is strong, and cheesemakers said milk supplies are in comfortable balance with processing capacity, said DMN.

Butter climbed to $2.7725 per pound Wednesday, highest since Dec. 16, 2022, but closed the week at $2.7175, 3.75 cents higher and 41.50 cents below a year ago when it was still above $3. There were 33 sales on the week.

Midwest butter makers say cream tightened this week. Cream multiples have begun to edge nearer to 1.30 for butter processors. Churning is somewhat active with the adequate cream supply, but contacts are less certain near-term, as milk output in the Upper Midwest is expected to grow with cooler temperatures.

Cream is tight in the West, and many believe it will remain so near-term. Slightly lower cream multiples were reported at the top of the range this week, attracting more spot buyers. Some manufacturers are running steady production while others said output is less than anticipated due to current cream volumes. Retail and food service demand is strong to steady, while exports moderate to lighter.

Grade A nonfat dry milk finished Friday at $1.1125 per pound, up 1.25 cents on the week but 45.75 cents below a year ago, with 12 sales reported.

Dry whey closed Friday at 30 cents per pound, down a quarter-cent on the week and 16 cents below a year ago, with 13 sales for the week at the CME.  

StoneX said there are a few more bullish factors supporting the whey market than a couple months ago, such as tightening milk supplies, firming domestic demand and greater strength in whey protein concentrate markets diverting protein out of dry whey. China’s smaller purchases are a drag on the market.

The July U.S. Dairy Supply and Utilization report this week pulled back the curtain a bit. HighGround Dairy economist Betty Berning noted the strong domestic use in the Sept. 18 Dairy Radio Now broadcast. She said the July export data had a lot of red in it, but the DSU showed domestic cheese, butter and powder disappearance was up from a year ago and cited dry whey as an example. Dry whey exports were down nearly 43% in July, she said, while domestic whey disappearance was up 47%, leaving total utilization flat.

Total cheese consumption was up 2.5% from a year ago, thanks to a 2.8% gain in domestic utilization, particularly of American cheese, said HGD, which offset the minor decline in other-cheese domestic use. Total cheese exports were slightly below 2022 volumes.

Butter utilization was up 2.4%, despite a 61.2% decline in exports. Nonfat-skim milk powder disappearance was up 5.3%, mainly due to an 11.1% increase in domestic use, while exports were up a welcome 2.8%.

Will domestic demand remain strong? Berning said that’s a good question that no one can answer. While U.S. consumers are struggling financially, milk, butter and cheese are “necessities for most families, so demand for those products might remain flat or increase as families eat more meals at home.” Berning warned, however, that dairy may lose on restaurant demand in the way of fancy cheeses and ice creams, “those nice to have, not need to have items.”

She also pointed to consumer data. The August Consumer Price Index was up 0.6% from July on a seasonally adjusted basis, the fastest month-on-month clip since June 2022, according to the Sept. 13 Daily Dairy Report.

“Compared to August 2022, the CPI grew 3.7%, notable because the year-on-year comparison had been decreasing since June 2022,” the DDR said. “Equally noteworthy, last summer the CPI was increasing on a year-over-year basis at rates not seen since the early 1980s. The fact that 2023’s CPI’s figures have grown against 2022’s big numbers indicated consumers’ struggles have continued.”

Tuesday’s GDT Pulse saw 2.1 million pounds of Fonterra whole milk powder sold, down from 2.2 million in the Aug. 29 Pulse, and at $2,655 per metric ton, up $205 from the last Pulse (8.4%) and up $25 from last week’s GDT.

“With 37 participants, this was the largest turnout for the Pulse since August 2022 as the rise in the C2 Regular WMP price drove more buyers to the platform,” HGD said. “However, with only 12 winning bidders and less than 100% sold, it is clear that uncertain macroeconomic influences continue to weigh on market sentiment while overall global demand remains weak.”

Cooperatives Working Together member cooperatives accepted 12 offers of export assistance this week that helped them capture sales of 351,000 pounds of American-type cheese, 7.1 million pounds of whole milk powder and 529,000 pounds of cream cheese. The product is going to customers in Asia, Central America, the Caribbean, Middle East-North Africa and South America through March 2023.

 In politics, the USDA announced this week that it will provide financial assistance to dairy farmers affected by natural disasters. The National Milk Producers Federation praised the action. NMPF said, “The Milk Loss Assistance program will compensate eligible dairy farms and processors for milk dumped due to qualifying disaster events in 2020, 2021 and 2022, including droughts, wildfires, hurricanes, floods, derechos, excessive heat, winter storms and smoke exposure.”

 NMPF president and CEO Jim Mulhern said, “On top of the challenges created by wild price gyrations and the COVID-19 pandemic, dairy farmers since 2020 have also faced an inadequate federal mechanism for addressing unforeseen weather catastrophes, further straining finances at a time when strains have been hard to bear. NMPF never accepted that situation, and we’re very appreciative of USDA’s diligent work over several months to finalize the compensation plan that will address this backlog of disaster assistance.”

Lawmakers in Washington, D.C., were told this week that limiting full-fat dairy is no longer science-based. Roberta Wagner, senior vice president for regulatory and scientific affairs with the International Dairy Foods Association, provided oral testimony to the 2025 Dietary Guidelines Advisory Committee, a panel of 20 nutrition and public health experts tasked with providing a scientific report to inform the federal government’s next update to the Dietary Guidelines for Americans.

In her testimony, Wagner stressed that 90% of Americans do not consume enough dairy to meet dietary recommendations, according to the 2020-25 DGA report. She urged the committee to “maintain nutrient-rich dairy foods as a central part of a healthy diet,” and stressed that “new science shows that limiting dairy based on fat level, as current guidelines recommend, does not lead to better health outcomes.”

She said that “an overwhelming body of scientific evidence demonstrates that dairy should be part of healthy eating patterns for all Americans, at all life stages and with various dietary needs.”

The DGA have long recognized the inherent benefits of dairy products, including milk, yogurt and cheese, as important sources of nutrients and associated with better health outcomes,” Wagner said. “At a time when people are not meeting DGA recommendations for dairy, deterring intake due to fat level is not science-based nor is it in the best interest of public health.”

NMPF’s Regulatory Affairs Director Miquela Hanselman along with an Olympic athlete and dairy farmer Elle St. Pierre also testified at the DGA, stating that dairy is a critical component of diet that should be considered in light of its full range of benefits.

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