Export demand remains strong

The “Mielke” Market Weekly

Last week, I reported that the agriculture department raised its 2025 and 2026 milk production forecasts in the latest World Agricultural Supply and Demand Estimates based on higher cow numbers and increased output per cow.

The 2025 Class III milk price average was projected at $18.50 per hundredweight, down 15 cents from last month’s estimate. The 2026 average was projected at $17.85, up a nickel from a month ago. The Class IV price is expected to average $19.05 in 2025, up 20 cents from last month’s estimate, and the 2026 average was estimated at $18.60, up 40 cents.

This month’s corn outlook is for smaller supplies, domestic use and ending stocks. Beginning stocks were cut 25 million bushels to 1.3 billion, reflecting an increase in exports that is partly offset by lower feed and residual use. Feed and residual use is down 75 million based on indicated disappearance in the June 30 grain stocks report. Exports were raised 100 million bushels to 2.8 billion based on current outstanding sales, and if realized, it would be record high, says the U.S. Department of Agriculture.

Corn production for 2025-26 was estimated at 15.7 billion bushels, down 115 million bushels on lower planted and harvested area. The yield was unchanged at 181 bushels per acre. Total use was cut 50 million bushels with a reduction for feed and residual use based on lower supplies. With supply falling more than use, ending stocks are down 90 million bushels. The season-average farm price was unchanged at $4.20 per bushel.

Soybean production was projected at 4.3 billion bushels, down 5 million from last month on lower harvested acres and an unchanged yield of 52.5 bushels per acre. The crush was raised 50 million bushels to 2.54 billion, supported by higher demand for soybean oil for biofuel. Exports were lowered 70 million bushels to 1.75 billion. The U.S. season-average soybean price was projected at $10.10 per bushel, down 15 cents from last month.

StoneX reported, “Corn exports have been strong to date; however, we export a lot of ethanol to Canada that will be impacted by the new tariffs Trump has put in place. The U.S.-Mexico border has also been closed for cattle trade with New World screwworm reemerging in Mexico. Those cattle are going to still need to be fed, but it will be across the border now, which should help boost exports.”

Meanwhile, the USDA’s latest crop progress report shows 34% of the corn was silking as of the week ending July 13, up from 18% the previous week and 5% behind a year ago but 1% ahead the 5-year average. Seventy-four percent was rated good to excellent, unchanged from the previous week but 6% ahead of a year ago. Forty-seven percent of the soybeans were blooming, up from 32% the previous week, 2% behind a year ago and dead even with the 5-year average. Seventy percent were rated good to excellent, up from 66% the previous week and 2% ahead of a year ago.

The latest slaughter report showed 40,200 dairy cows culled the week ending July 5, down 4,900 from the previous week and even with a year ago. Year to date, 1,328,100 were sent to slaughter, down 100,800 or 7.1% from a year ago.

The USDA’s latest dairy supply and utilization report had encouraging news as May cheese use hit 1.26 billion pounds, up 1.2% from May 2024 and moved into the top five all-time utilization numbers, according to HighGround Dairy. “Other than American cheese, exports set a record, and international usage for the month ranked number three in the data back to 2011 (on a 30-day basis).”

Butter disappearance, at 193.2 million pounds, was down 3.6% after marking a record-high April. Domestic consumption waned past the Easter holiday, explains HGD; however, exports climbed to11.6 million pounds, up 132% as international buyers took advantage of cheap U.S. product along with a weak U.S. dollar.

Nonfat and skim milk powder use totaled 229.7 million pounds, up 10.9% from a year ago, first time to top year-ago numbers since January 2024. HighGround credited elevated domestic and international demand.

Dry whey utilization, at 69.5 million pounds, dropped 10.0% due to the loss of exports to China, which were down 67%. “Tariff troubles began early in the year, and May’s sales were likely booked in February, when the issues were escalating,” says HGD.

Fluid milk sales looked a little better. USDA’s latest data showed May packaged sales at 3.6 billion pounds, down 0.9% from May 2024, but that followed a 1.8% drop in April. Conventional sales totaled 3.3 billion, off 0.7%. Organic sales, at 252 million, were down 4.0% from a year ago. I’ll have more details next week.

Chicago Mercantile Exchange block Cheddar closed Friday at $1.6425 per pound, down 1.75 cents on the week and 22.25 cents below a year ago. The barrels finished at $1.66, down 1.50 cents, 25.25 cents below a year ago and an inverted 1.75 cents above the blocks. Sales totaled 36 loads of block on the week and one of barrel.

StoneX July 18 Early Morning Update stated, “We’ve had 26 consecutive days of trades for CME blocks. The previous record since 2011 was 31 consecutive days set back in September/October/November of 2019.”

Mild temperatures in the Midwest contributed to a slight uptick in milk output, according to Dairy Market News, but it remains down from June. Downtime at some plants enabled others to obtain spot milk at lower prices. Retail cheese sales were steady, and food service was light, but export demand is strong.

Cheese production is steady in the West, although some plants reported declining milk flows. Export demand is keeping inventories for some varieties tighter. Retail sales are steady, and food service sales are light and down from a year ago.

Cash butter saw the week end at $2.5125 per pound, 7.75 cents lower and 56.25 cents below a year ago, with only seven sales put on the board for the week.

Milk components continue to decline throughout most of the Central region, but mild temperatures in recent weeks were improving cow comfort, leading to an uptick in milk output and components. Ice cream makers are purchasing significant volumes of cream. Retail butter demand is steady, but some say interest is down from last year. Food service butter demand is light. Export demand remains strong due to bargain U.S. prices.

Declining milk output in the West is contributing to reduced cream production. Multiples at mid-week were up slightly. Butter makers were running steady output. Domestic demand is steady. Retail sales are up, but food service sales are down. Strong export demand is keeping inventories from growing, says DMN.

Grade A nonfat dry milk got a little support from the Global Dairy Trade this week as well as some Mexican demand, and closed Friday at $1.29 per pound, up 2.25 cents on the week, the highest since Feb. 13 and 9.25 cents above a year ago, with 28 sales.

StoneX broker Dave Kurzawski said in the July 21 Dairy Radio Now broadcast, “There’s so much in flux right now with tariffs being on again, off again.” He said Mexican buyers may be frontloading purchases until the situation is resolved. He adds that domestic disappearance has been good on powder as well.

New plants are adding cheese, and when asked if exports will keep up with the supply, Kurzawski said, if U.S. prices stay at $1.70 or below, exports will remain strong as U.S. cheese has the lowest price globally. The big question is demand. Domestic demand has been “stable at best.” He concluded, “But we don’t have a huge overhang of stocks. We haven’t had a chance to build those up.”

Speaking of tariffs, President Trump is reportedly sending letters to over 150 countries notifying them that their tariff rates could be 10% or 15%.

Dry whey closed the week at 55.75 cents per pound, down a penny but 4 cents above a year ago. There were five CME sales for the week.

The July 14 Daily Dairy Report says, “The Mexican government announced plans to spend 83.8 billion pesos ($4.1 billion) over the next five years to boost domestic milk production 13% by 2030. Amid uncertain trade relationships and complaints of food inflation, Mexico’s Ministry of Agriculture and Rural Development hopes milk production growth will replace 30% of current milk powder imports.

The ministry will offer subsidies, technical assistance and infrastructure upgrades to the 97% of Mexican producers who run small and medium-sized operations and provide funding to reopen and modernize processing facilities.

Mexico is our No. 1 dairy customer, but it remains to be seen how successful this venture will be. The effort could mean lower exports ahead. The DDR points out Mexico accounted for more than half of U.S. milk powder exports and more than one-third of cheese exports in 2023 and 2024, and says, “The past three years Mexico consumed more U.S. milk powder than the U.S. used domestically.”

“Dairy margins fell in the first half of July as building cheese and milk supplies more than outweighed a fall in feed costs,” according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.

“New cheese processing capacity is drawing heavily on the growing milk supply,” the MW stated. “The latest cash cheese prices have fallen from a high scored in late May and are 12% below a year ago. Cash butter prices continue to steadily climb higher but remain nearly 19% below this point a year ago.”

The MW reported highlights from the WASDE and concluded, “From a feed perspective, corn prices fell as the market digests the prospect of a record-large crop. All eyes are on yield updated in next month’s WASDE. Soybean meal continues to fall to new contract lows as increased soybean oil used for biofuel in 2025/2026, resulting from the EPA’s (Environmental Protection Agency’s) significantly increased mandate, and additional policy incentives are expected to keep supply plentiful in the near term.”

Inflation moved higher in June to the highest level in four months. The consumer price index was up 0.3% from May, lifting prices 2.7% above a year ago.

The July 15 DDR says the increase was in line with expectations and, “After stripping out highly volatile food and energy prices, core inflation rose 0.2% compared to May and 2.9% year over year. Rising food prices contributed to the higher CPI, with restaurant prices rising 0.4% in June compared to the prior month.” The DDR pointed out, “The National Restaurant Association reported that both sales and traffic have improved, lifting the current situation index to 100.4 points in May, the strongest reading since January.”

The CPI for food consumed at home advanced 0.3%, and grocery prices were 2.4% more expensive than a year ago, the DDR concluded, although the price of dairy and related products did not appear to contribute to the increase.

Powder took the July 15 GDT weighted average up 1.1%, following a 4.1% drop on July 1. Volume fell to 53.5 million pounds, down from 56.7 million on July 1. The average metric ton price crept to $4,380 U.S., up from $4,274.

Skim milk powder led the advances, up 2.5% after dropping 1.7% on July 1. Whole milk powder was up 1.7% after leading the declines last time and dropping 5.1%. Anhydrous milkfat inched 0.8% higher after dropping 4.2%, while butter was unchanged after dropping 4.3% on July 1. Cheddar led the declines, down 5.6% after losing 2.8% last time, and mozzarella was off 0.7% following a 0.2% slip. Lactose was down 1.5% after advancing 4.2% last time.

StoneX says the GDT 80% butterfat butter price equates to $3.3152 per pound U.S., down 1.4 cents after losing 16.3 cents last time, and it compares to CME butter, which closed Friday at $2.5125. GDT Cheddar equated to $2.0813, down 12.3 cents, after losing 6 cents, and it compares to Friday’s CME block Cheddar at $1.6425. Mozzarella was off 0.7% after slipping 0.2%. GDT skim milk powder averaged $1.2631 per pound, up from $1.2329. Whole milk powder averaged $1.7816, up from $1.7506. CME nonfat powder closed Friday at $1.29 per pound.

North Asia (including China) purchases increased from last year, says StoneX. “This led to a market share being stronger than last year as well. Import demand from China has increased the last several months, which is showing in GDT too. SE (Southeast) Asia purchase volume continues to grow, but was still weaker than last year. The Middle East and European purchase volume was weaker than last event.”

Dairy products are being exonerated. Health and Human Services Secretary Robert Kennedy is advocating for a shift in federal dietary guidelines regarding dairy fat and says saturated fats, including those in full-fat dairy products, have been unfairly demonized by the medical community. He cited growing evidence for a greater role for dairy and its fats in a healthy diet and challenged long-held positions by the Centers for Disease Control and Prevention, American Heart Association, and others which recommend limiting saturated fat intake. The next edition of the federal Dietary Guidelines for Americans will soon be released and could reflect this new position.

Meanwhile, scooping ice cream on the steps of the agriculture department, Agriculture Secretary Brooke Rollins congratulated the International Dairy Foods Association announcement that the dairy industry is committed to eliminating artificial food dyes from its ice creams.

A USDA press release stated, “This is a voluntary, proactive pledge to eliminate the use of Red 3, Red 40, Green 3, Blue 1, Blue 2, Yellow 5 and Yellow 6 from ice cream and other frozen dairy desserts by 2028.”

“I appreciate IDFA members for spearheading this new initiative and finding ways to promote President Trump’s Make America Healthy Again agenda,” Secretary Rollins said. “Each one of these endeavors helps families make better choices and pursue healthier lives.”