Class III milk price forecast raised

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The U.S. Department of Agriculture lowered its 2023 and 2024 milk production forecasts in the latest World Agricultural Supply and Demand Estimate report, stating, “The cow inventory is lowered for both years based on the July 1 dairy cow inventory and heifer retention data provided in the recent cattle report as well as the average cow inventory data in the latest milk production report. Output per cow was reduced for 2023 but unchanged for 2024.”
2023 production and marketings were estimated at 227.9 and 226.9 billion pounds, respectively, down 500 million pounds on both from a month ago. If realized, production would be up 1.4 billion pounds, or 0.6%, from 2022.
2024 production and marketings were projected at 230.5 and 229.5 billion pounds, respectively, down 100 million pounds on both. If realized, 2024 production and marketings would be up 2.6 billion pounds, or 1.1%, from 2023.
The Class III milk price forecast was raised as expected with higher cheese prices more than offsetting lower whey. The 2023 average was projected at $16.90 per hundredweight, up 85 cents from last month’s estimate, and compares to $21.96 in 2022 and $17.08 in 2021. The 2024 average was projected at $16.55, up 60 cents from last month’s estimate.
The 2023 Class IV price forecast was raised due to higher butter and nonfat dry milk prices. The 2023 average was projected at $18.50, up 30 cents from a month ago, and compares to $24.47 in 2022 and $16.09 in 2021. The 2024 Class IV is expected to average $17.80, up 35 cents from last month’s estimate.
The 2023 cheese price is expected to average $1.7750 per pound, up a dime from last month’s estimate and compares to $2.1122 in 2022 and $1.6755 in 2021. The 2024 average was estimated at $1.7550, up 6.50 cents.
Butter is expected to average $2.4950 in 2023, up 6 cents from last month’s estimate, and compares to $2.8665 in 2022 and $1.7325 in 2021. The 2024 average was pegged at $2.43, up 8.50 cents from a month ago.
Nonfat dry milk is expected to average $1.1750 per pound in 2023, down from $1.6851 in 2022 and $1.2693 in 2021 and will fall to a $1.1250 average in 2024.
Dry whey’s 2023 average was projected at 32.50 cents per pound, down from 60.57 cents in 2022 and 57.44 cents in 2021. The 2024 average was projected at 30.50 cents per pound.
The U.S. corn outlook is for reduced supplies, lower domestic use, smaller exports and tighter ending stocks. Projected beginning stocks were raised 55 million bushels. Corn production was forecast at 15.1 billion bushels, up 10% from 2022 but down 209 million from the July projection and, if realized, would be the second highest on record behind 2016-17.
The season’s first survey-based corn yield forecast, at 175.1 bushels per acre, is up 1.8 bushels from last year but 2.4 bushels lower than last month’s projection. Area harvested, forecast at 86.3 million acres, was unchanged from June but up 9% from a year ago. U.S. corn use was reduced 95 million bushels to 14.4 billion. Exports were cut 50 million bushels to 2.1 billion. Ending stocks were lowered 60 million bushels to 2.2 billion. The season-average corn price was raised 10 cents to $4.90 per bushel.
Higher beginning stocks and lower production and exports was the story on soybeans. Beginning stocks were raised on higher imports. Soybean production was forecast at 4.2 billion bushels, down 2%, or 95 million, on lower yields. Harvested area was forecast at 82.7 million acres, unchanged from July but down 4% from 2022. The survey-based soybean yield forecast of 50.9 bushels per acre is up 1.4 bushels from 2022 but down 1.1 bushels from last month. Soybean supplies are projected at 4.5 billion bushels, down 2% from last year. Soybean exports are down 25 million bushels, and ending stocks were forecast at 245 million bushels, down 55 million from last month. The season-average soybean price was forecast at $12.70 per bushel, up 30 cents from last month. Soybean meal was forecast at $380 per short ton, up $5.
The latest Crop Progress report showed 65% of U.S. corn was in the dough stage, as of the week ending Aug. 13, 5% ahead of a year ago. 59% was rated good to excellent, up 2% from the previous week and down 2% from a year ago.
The report shows 78% of the soybeans were setting pods, up from 66% the previous week, 6% ahead of a year ago and 3% ahead of the average. 59% were rated good to excellent, up 5% from the previous week and 1% ahead of a year ago.
The week ending Aug. 5 saw 60,500 dairy cows go to slaughter, up 400 head from the previous week and 3,100, or 5.4%, more than a year ago. Year-to-date, 1,912,300 have been culled, up 104,400 head, or 5.8%, from a year ago. Dairy cows surpassed beef cow volume for the first time since April.
StoneX said Aug. 14 that the high culling rate is due to “the impact of margins versus what beef prices offer dairy farmers. We are hearing reports of more farms closing their doors, and a $70 per cwt premium in cull cow prices is no doubt an impact on that decision. Total cattle slaughter in the U.S. continues to be weak with a contracted herd, meaning that dairy cows are a driving factor in lean beef production.”
Meanwhile, the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC said, “Dairy margins traded on either side of unchanged in the first half of August as the complex benefited from a fall in corn and soybean meal futures. Spot milk prices have increased and in the Upper Midwest marked their highest level since October 2020. Weekly milk cow slaughter continues to track at or near 10-year highs, about 7% ahead of year-ago levels.”
The MW reported highlights from the WASDE’s milk production, cow numbers and export data and warned, “High butter prices continue to keep U.S. product off the world market while cheese exports rebounded compared to May. Mexico’s demand for milk powders has held steady. Through the first half of the year, total dairy export volume is 5% lower. Internationally, GDT demand appears to be waning for the largest importer of dairy products is reducing demand as China faces its own flurry of economic uncertainty. This product must find a home elsewhere and will continue to serve as a headwind to dairy product pricing.”
Recent rainfall and lack of exports have taken risk premium out of the feed market after a spike early last month, the MW said. The focus is “monitor forward opportunities to add margin coverage with flexible price strategies and look to higher delta positions to secure feed needs throughout this crop year.”
CME block cheese topped $2 per pound Tuesday and closed Friday at $2.0275, up 3.75 cents on the week, as summer heat takes a toll on milk output and schools gear up to reopen. It was the seventh consecutive week of gain totaling 69.25 cents, highest CME price since March 28 and 20.75 cents above a year ago as traders awaited Monday’s July milk production report.
The barrels climbed to $1.85 per pound Tuesday, then dropped 8.50 cents Thursday, but closed Friday at $1.8075, 1.75 cents lower on the week, 8.75 cents below a year ago and 22 cents below the blocks. There were four cars of each sold on the week.
Milk offers and trading have dwindled, said Dairy Market News. Cheesemakers are running regular schedules on internally sourced milk or spot milk priced at or just above Class III. Cheese demand is generally steady, but cheese availability varies, and contacts say it is on “the snugger side.”
Cheese demand remains steady in the West but favoring blocks. Export demand is on the light end, most of it coming from south of the border. Sentiment is that the lighter export demand is moving more barrel cheese to the CME. Milk and cream volumes are tighter in the West, but cheesemakers have enough milk to run steady production which is keeping ahead of demand for most, DMN said.
CME butter climbed to $2.77 per pound Thursday, highest since Dec. 16, 2022, but closed Friday at $2.70, up a penny on the week, but 24 cents below a year ago, with 98 sales. Wednesday saw 49 loads exchange hands, biggest single-day volume since Nov. 3, 2004, when butter was only trading three times a week.
Central butter producers say cream is hard to find and some are taking loads from Western states. Butter supplies are, and have been, somewhat snug, and producers and traders say availability has been on a downward trajectory. School district and seasonal retail ordering upticks have drained the butter supply.
Grade A nonfat dry milk sunk to $1.0850 per pound Wednesday, lowest since July 12, but closed at $1.1050, down a half-cent on the week and 41.50 cents below a year ago. There were 12 loads traded on the week.
Dry whey closed at 27 cents per pound, unchanged on the week but 18 cents below a year ago, with 16 sales put on the board at the CME.
Looking at dairy demand, the USDA reports that June cheese consumption was down 2% from June 2022, primarily due to exports being down 19%.
Butter disappearance, on the other hand, was up 20.1% from a year ago, thanks to domestic use being up 27.3%, fifth month in a row, according to HighGround Dairy. Butter exports were down 60.5% and less than half of those a year ago.
Nonfat-skim milk powder usage was down 4% from a year ago, with domestic use down 14.6%, first time since January, according to HGD, while exports were up 2%, thanks to big shipments to Mexico. HGD said, “Usually, domestic NFDM usage increases from May to June, so the 1.2% month-over-month loss was counter to the five-year mean of plus 84.9%, likely due to manufacturers making big powder sales in June.”
Dry whey disappearance fell for the second time in 2023, driven by abysmal export sales, said HGD, down nearly 34% from June 2022. Domestic use however was up 28.4%.
Abundant powder offerings in Tuesday’s Global Dairy Trade auction resulted in the biggest drop in the weighted average since May 3, 2022. Down 7.4%, the drop follows a 4.3% decline Aug. 1, a 1% decline July 18 and a 3.3% decline July 4. Traders brought 74 million pounds of product to market, up from 71.9 million Aug. 1, and the most since Nov. 17, 2020. The average metric ton price fell to $2,875, down from $3,100 Aug. 1.
Whole milk powder plunged 10.9%, following an 8% drop Aug. 1. Skim milk powder was down 5.2%, after a 1.4% decline. Anhydrous milkfat was down 5.3%, after a 0.5% slip, and GDT butter was down 3%, following a 0.7% loss Aug. 1. GDT cheddar saw the only gain, up 5.8%, after falling 1.4% last time.
StoneX said the GDT 80% butterfat butter price equates to $2.0086 per pound, down 6.2 cents from the Aug. 1 event, and compares to CME butter which closed Friday at $2.70. GDT cheddar, at $1.8721, was up 9.9 cents, and compares to Friday’s CME block cheddar at a pricy $2.0275. GDT skim milk powder averaged $1.0583 per pound, down from $1.1130 (5.5 cents), and whole milk powder averaged $1.1558 per pound, down from $1.2993 (14.4 cents). CME Grade A nonfat dry milk closed Friday at $1.1050 per pound.
Analyst Dustin Winston said market share of North Asia, which includes China, was “back to being the largest purchaser. North Asia recovered this standing in the last auction. Southeast Asia volume once again fell from both last year and the last event. Total WMP sales this year are close to year-ago levels, but North Asia has taken a larger percentage this year indicating poor demand in SE Asia.”
The Aug. 15 Daily Dairy Report said, “Strong increases in Chinese milk production boosted the supply of fresh milk in China and reduced the need for imported milk powders. There were also signs of faltering overall milk powder consumption. Last week, the South China Morning Post reported that Chinese women may give birth to fewer than 8 million babies this year, down from 9.56 million last year and 40% fewer than in 2018.”
Speaking in the Aug. 21 Dairy Radio Now broadcast, StoneX broker Dave Kurzawski blamed sluggish purchases from China for the GDT’s downfall on powder, although its purchases were up a bit. He focused on the differences between the global cheese market and the U.S. market, and said a lot of cheese is being made and consumed on U.S. soil right now, so the loss of exports is not as big a factor. CME fresh cheddar is tight, he explained, and that’s what sets the price for 80%-85% of U.S. cheese. Production hick-ups, both at the farm and processor level, high cull rates, falling milk output and schools reopening resulted in almost a 70-cent rally on the blocks in seven weeks, he said.
Fonterra Cooperative reduced its 2023-24 season forecast farmgate milk price range Thursday from $6.25-$7.75 per kilograms of milk solids with a midpoint of $7 down to $6-$7.50 per kgMS with a midpoint of $6.75. Fonterra CEO Miles Hurrell said GDT prices have continued to fall since the co-op revised its milk price earlier this month, requiring the further reduction.
Back home, the Federal Milk Marketing Order pricing formula hearing took place Aug. 23 in Carmel, Indiana. The hearing considered and gathered evidence on proposed amendments to pricing formulas in U.S. market orders.
Cooperatives Working Together member cooperatives accepted 27 offers of export assistance this week that helped capture sales of 2.7 million pounds of American-type cheese. The product is going to customers in Asia, Middle East-North Africa and Oceania through November. CWT’s 2023 exports now total 31.1 million pounds of American-type cheeses, 809,000 pounds of butter, 24,000 pounds of anhydrous milkfat, 31.4 million pounds of whole milk powder and 5.9 million pounds of cream cheese. The products are going to 24 countries and are the equivalent of 580.8 million pounds of milk on a milkfat basis.

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