Dairy herd numbers expected to decrease in 2023

    The U.S. Department of Agriculture’s latest supply and utilization data shows dairy’s commercial disappearance in 2022 was strong, up 1.6%, according to StoneX broker Dave Kurzawski in the Feb. 20 “Dairy Radio Now” broadcast.
    Total cheese usage was up 2.1%, according to Kurzawski, buoyed by exports, which were up 12% from 2021. American cheese exports were up 38%.
    The story on butter was not as good. Disappearance was down 4.6% for the year. Exports, however, were up 47.6%, indicating domestic demand was lagging, Kurzawski said, down 7%, prompting the question, “Why is butter at $2.40 per pound?”
    The simple answer, according to Kurzawski, is that “the demand for fat is not down. Demand for butter at retail is down and demand for butter at restaurants is down, but demand for fat is probably as strong as it’s been for quite some time.”
    Total nonfat dry milk utilization turned positive in December 2022 following six consecutive months below 2021 levels. Domestic usage rose above a year ago in August, and powder exports saw their biggest volume since December 2019.
    Cheddar block cheese at the Chicago Mercantile Exchange climbed to $1.89 per pound Tuesday but closed Friday at $1.88, up 1.75 cents on the week but 10.75 cents below a year ago.
    The barrels ended the week at $1.5475, 2.75 cents lower, 38.75 cents below a year ago and 33.25 cents below the blocks. Sales totaled six cars of block and 45 of barrel for the week, highest barrel total since the week of May 17, 2021.
    Midwest barrel processors tell Dairy Market News that larger contractual based customers have cut back purchases, which affected production schedules this week and moved milk into other varieties when possible. Some retail cheddar-Italian style cheesemakers said sales were “hearty.” Milk remains notably available, and spot loads at $10 under Class III were reported for the eighth consecutive week but prices varied throughout the region. Some cheesemakers were not seeing offers that low but found milk closer to $4 and $5 under Class. Eyes are still on the large price gap between blocks and barrels. While marketers expect an eventual convergence of the two, there is a bit of instability; however, market tones are not necessarily bearish but viewed more as mixed, DMN said.
    Western cheese demand continues mixed domestically. Both steady and softer sales into retail and food service markets were noted. Contract sales were steady with some reports of inventories being sold out through first quarter and almost sold out for most of second quarter. Export sales saw an uptick. Some cheesemakers are shifting from blocks to barrels. Ample regional milk volumes are available, and cheese production is steady to strong, DMN said. The abundance of barrel cheese is said to be contributing to the large block-barrel price spread at the CME.
    CME butter climbed to $2.4575 per pound Tuesday, highest since Dec. 22, 2022, but closed Friday at $2.3750, down 3.75 cents on the week and 31.50 cents below a year ago, on 10 sales for the week.
    Midwest butter sales are reportedly “meeting expectations,” DMN said; however, “expectations in mid-February represent a somewhat low bar when compared to the spring and late summer/early fall months.” Butter contacts say sales could be worse. Cream continues to flow to butter plants and at favorable pricing for churning. Butter market tones are firmer, according to DMN.
    Cream volumes are also readily available in the West, and cream demand is steady to light. Less than fully staffed production schedules has been a challenge to some operations, but strong butter production continues. “Stakeholders look to assure mid-year demand coverage, but demand is light ahead of the expected increase related to the spring holidays,” DMN said. Retail demand is light, and some report sales are below seasonal forecasts. Spot market demand is mixed as some contacts note light demand, while others note no spot market activity taking place. Second quarter contract sales had a slight uptick from the previous week, but export sales are light, reports DMN, due to “uncompetitive prices compared to the world stage.”
    Grade A nonfat dry milk dropped 3.75 cents Tuesday, following the GDT Pulse, and fell to a Friday finish at $1.22 per pound, 4.50 cents lower on the week and 63 cents per pound below a year ago, with nine sales reported for the week.
    Dry whey gained a penny Monday and closed Friday at 45 cents per pound, up 2.50 cents but 36 cents below a year ago, with only one sale recorded on the week.
    USDA’s monthly Livestock, Dairy and Poultry Outlook, issued Feb. 14, mirrored milk price and production projections in the Feb. 8 World Agricultural Supply and Demand Estimates report.
    The Outlook also warned, “Based on the latest information of lower inventory of heifers for replacement, active dairy cow culling, relatively high forecast for feed costs and weaker expected milk prices, the average number of milk cows is projected lower in 2023 at 9,380 million head, down 25,000 from last month’s estimate. Average milk yield was lowered 25 pounds to 24,345 pounds per cow.”
    While dairy cow culling shot higher in December, it was slightly below December 2021; however, 2023 is looking like increased retirement from the dairy business is in the works, as culling helps stressed cash flows on the farm. Cull prices remain at decent levels.
    The week ending Feb. 4 saw 65,700 dairy cows go to slaughter, down 2,800 from the previous week, but 2,800, or 4.5%, above a year ago. The year-to-date count is at 338,600 head, up 24,100, or 7.7%, from the same period in 2022.
    Dairy farms are also calling it quits. The Daily Dairy Report’s Sarina Sharp wrote in the Feb. 10 Milk Producers Council newsletter, “Livestock auctions have a growing line-up of dairy herds on the docket. … The combination of high slaughter volumes and low heifer supplies could speed contraction in the milk cow herd, but the shift from today’s surplus to tighter milk supplies will take some time. And if markets bounce back prematurely, the painful process will drag on even longer.”
    Tuesday’s Global Dairy Trade Pulse saw the largest number of winning bidders since the Pulse began Aug. 9, 2022, but was the shortest session since then. There was 2.2 million pounds of Fonterra whole milk powder sold, up 30 million pounds from Jan. 31, but at $3,285 per metric ton, down $10 from the Feb. 7 GDT.
    HighGround Dairy warned, “This was a bearish outcome. There were plenty of buyers willing to procure small amounts of whole milk powder at a perceived value, but there was no effort to drive prices higher either or for bidders to push others out with larger quantity bids. Bull markets need fuel to keep momentum going, and this was a lackluster result.”
    HGD also reported, “Widespread power cuts following Cyclone Gabrielle are impacting dairy farmers in some of the hardest hit areas of New Zealand’s North Island, according to the Ministry for Primary Industries.
    “New Zealand’s government has declared a national state of emergency for only the third time in its history, and it has pledged an initial NZ $4 million for recovery efforts in rural communities. The hardest hit areas were Northland, Southern Auckland, parts of the Waikato, Bay of Plenty, Gisborne and Hawke’s Bay. Flooding has ruined orchards, vines, crops and livelihoods in the hardest hit regions, and has also drowned pastures and feed crops for winter.”
    Cooperatives Working Together member co-ops accepted 23 offers of export assistance this week that helped them capture sales contracts for 1.4 million pounds of American-type cheese, 50,000 pounds of butter, 4.9 million pounds of whole milk powder and 333,000 pounds of cream cheese. The product is going to customers in Asia, Central America, the Caribbean, Middle East-North Africa and South America through August.
    CWT’s 2023 exports now total 8.3 million pounds of American-type cheeses, 50,000 pounds of butter, 17.8 million pounds of whole milk powder and 1.2 million pounds of cream cheese. The products are going to 15 countries in five regions and are the equivalent of 216.8 million pounds of milk on a milkfat basis.
    In politics, the Green Bay-based American Dairy Coalitio gave a thumbs up to Sen. Kirsten Gillibrand (D-NY) for “the dairy priorities she has announced ahead of the upcoming 2023 farm bill negotiations, especially her plan to reintroduce the Dairy Pricing Opportunity Act.”
    An ADC press release stated that Gillibrand first introduced the legislation in 2021 with Sens. Leahy (D-VT) and Collins (R-ME).
    “The introduction of this bill was a direct result of Sen. Gillibrand’s 2021 Senate Agriculture Subcommittee hearing on modernizing milk pricing and the FMMO system and has paved the way for critical discussions surrounding FMMO reform in not just Class I pricing, but potentially other areas as well,” the ADC said. “Specifically, the Dairy Pricing Opportunity Act requires the Secretary of Agriculture to initiate the process of holding FMMO hearings within six months on the views and proposals of producers and the dairy industry on Class I skim milk price, including the ‘higher of’ formula … and any other views and proposals on the Class I skim milk price, and such other matters as the Secretary of Agriculture considers appropriate.”
    “We are grateful to Sen. Gillibrand for her leadership on this important bipartisan legislation to open the Federal Milk Marketing Order hearing process which will empower dairy farmers to be at the table. There is consensus among major dairy organizations to see the Class I skim milk price formula returned to the ‘higher of’ instead of the ‘averaging’ formula implemented in May 2019,” said American Dairy Coalition CEO Laurie Fischer.
    The wholesomeness of dairy needs to be defended and the latest salvo is a book, No. 5 on a New York Times list of “10 Nutrition Myths Experts Wish Would Die.” “Plant Milk is healthier than dairy milk.”
    “It’s just not true,” said Kathleen Merrigan, professor of sustainable food systems at Arizona State University and a deputy secretary of agriculture under President Barack Obama, in the article. “Indeed, the myth persists despite how plant-based beverages have much lower protein, numerous additives of dubious value and a lack of uniform quality that should give anyone pause.”
    A press release from the National Milk Producers Federation states, “It’s also not shocking that the misinformation continues. Money talks, and the plant-based sector is well-funded with plenty of media allies and a ready-made base of support in a vegan community that insists a diet that’s impossibly difficult to follow and prone to malnourishment should be adopted by everyone.
    “It also comes down to the names of the products themselves. If (whatever substance of the moment) is put in front of the word ‘milk,’ then a false impression of nutritional equivalence, if not superiority, is easy to create. If that weren’t the intention, the plant-based beverage peddlers wouldn’t be doing it.  
    “The good news is nutrition experts are seeing through it, hence endorsement of integrity in dairy labeling from the American Academy of Pediatrics and others. And consumers are seeing through it, which is why we’re seeing data like this, in which after years of gains, the plant-based tide is starting to recede.”
    Back on the farm, Midwest and Eastern milk output is steady, according to DMN’s weekly update. Areas in the Northeast and Midwest experienced extreme cold temperatures and wind chills, though production was largely unaffected while some hauling obstacles and delays were noted because of ice and precipitation accumulation.
    Milk output in certain locales in the West is steady to higher, but certain areas in northern California are reeling from the effects of recent extreme rainfall and milk output is mixed. Mud has persisted, therefore impeding cow comfort. Overall, Class I sales are steady in all regions as school orders are strong.


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