Federal order prices rebound in first quarter

The U.S. Department of Agriculture announced the final Federal Order Class III milk price of 2024 at $18.62 per hundredweight, down $1.33 from November, but $2.58 above December 2023. It’s the lowest Class III price since May and put the 2024 average at $18.89, up from $17.02 in 2023, and compares to $21.96 in 2022.

Late Friday morning Class III futures showed the January contract trading at $20.41; February at $20.56; and March at $20.25.

The Class IV price is $20.74, down 38 cents from November, but $1.51 above a year ago. It’s the lowest Class IV price since May and the 2024 Class IV average stands at $20.75, up from $19.12 in 2023, and compares to $24.47 in 2022.

“As we embark on a brand-new year, our attention will generally be on tighter milk and cheese supplies and wonky demand,” said StoneX broker Dave Kurzawski in our first “Dairy Radio Now” broadcast of 2025.

“We saw periods of really strong demand in 2024 and then periods of very quiet demand,” he said. “And we saw nearly a $1 swing on the price of block cheese, for example, between March and September. The March low was $1.39 per pound, and the September high was just over $2.30 per pound. I don’t think that goes away as we enter 2025.”

When asked about the effect of bird flu, Kurzawski said he had no crystal ball, but here at the end of 2024, it had a huge impact on California, worse than other states, and the big question is how quickly will California get back on its feet?

Another question he raised was, “Will we see a resurgence of bird flu in Texas, Kansas, Colorado or Idaho, or does it move into other areas entirely?” 

China also remains a big unknown for 2025. Will it be in the dairy market in a big way or not? And what will the relationship be between China and the U.S. with President Trump in the White House?

StoneX believes Trump will not want to be super punitive to Mexico or Canada, but be more isolated on China Kurzawski said. “Looking back on the Trump tariffs in 2018, a lot depended on the type of product involved, so it’s pretty hard to make any blanket statement on this, but I suspect that our relationship with Mexico and with Canada will remain on solid footing in 2025.” 

Cash dairy prices start 2025 above a year ago except on butter. The Cheddar blocks closed the shortened holiday week at $1.92 per pound, up 4.75 cents on the week and 48.50 cents above a year ago. The block’s Friday closings averaged $1.79 in 2024 and saw a low of $1.3925 per pound to a high of $2.2750. They averaged $1.73 in 2023 and ranged from $1.3350 to $2.10 per pound.

The Cheddar barrels finished Friday at $1.83, 6.25 cents higher on the week, 42 cents above a year ago, and 9 cents below the blocks.

Chicago Mercantile Exchange sales totaled seven loads of block on the week and 47 for the month of December, up from 38 in November. Barrel sales totaled five for the week and 49 for the month, up from 27 in November.

Cheese prices were pushing higher in the final trading days of 2024, according to Dairy Market News, and some Midwest contacts suggested that cheese markets may have reached their near-term basement and are steadying. Demand has been variable over the holiday weeks, as some processors reported continued strong demand while others noted a slowdown. Milk availability has grown in the region, as was expected during the holiday weeks. Milk handlers said the midweek holiday(s) gave them less capacity to work with, as spot milk prices in Christmas week were as low as $7 under Class III. New Year’s Eve saw spot milk loads from $4 under Class to 50 cents under Class, according to DMN.

Cheese production in the West is mixed. Milk production has been strengthening in recent weeks leaving plenty for cheese making. Some plants ran lighter schedules for New Year’s week to accommodate the midweek holiday. Spot loads of some varieties were tight, while others were more widely available, said DMN. Domestic cheese demand is strong, though export interest is lighter.

Cash butter fell to $2.5450 per pound Thursday, but finished Friday at $2.5525, down 2.25 cents on the week, ending two weeks of gain, and was 2.25 cents below a year ago. There were 16 sales on the week and 94 for the month, up from 58 in November.

Butter’s Friday closings averaged $2.86 per pound in 2024, ranging from a low of $2.4650 to a high of $3.1750. It topped $3 per pound for 19 weeks. It averaged $2.59 per pound in 2023, ranging from $2.2725 per pound to its record high $3.5025 and stayed above $3 per pound for six weeks in 2023.

Central butter plant activity steadied following Christmas week, but some plant managers said churning would return to normalcy after New Year’s Day. Cream remains more than sufficient and is expected to remain so in the early weeks of 2025. Contracts for 2025 are reportedly favorable for processors, and spot cream demand may be slower, at least early in the new year. Butter sales have steadied as markets have found stable ground in the middle- to upper-$2.50s per pound.

Cream is plentiful in the West and loads were reportedly trading at lower multiples, compared to mid-month levels. Butter production has been lighter in recent weeks due to the holidays and plant operators modifying shifts to accommodate the mid-week closures. Spot loads of butter were available. Demand has been mixed in recent weeks, though some contacts reported the end of year holidays put a slight damper on sales this week, according to DMN.

Grade A nonfat dry milk closed Friday at $1.3675 per pound, down 2 cents on the week but 19.50 cents above a year ago. Sales totaled 15 loads for the week and 81 for the month, up from 77 in November.

Dry whey saw its Friday finish at 75 cents per pound, unchanged on the short week, but 33.75 cents above a year ago, with only one sale put on the board for the week. There were 29 CME sales for December, compared to 30 in November.

Another drop in the all-milk price and higher corn prices pulled the November milk feed price ratio lower for the second month in a row, but it was above the 5-year average for the ninth month in a row. The latest ag prices report shows the ratio at 2.88, down from 2.96 in October, and compares to 2.10 in November 2023.

The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. One pound of milk would purchase 2.88 pounds of dairy feed of that blend.

The all-milk price averaged $24.20 per cwt., with a 4.39% butterfat test, down $1 from October, which had a 4.26 test, but was $2.60 above November 2023, which had a 4.31% test.

California’s average, at $23.70 per cwt., was down 20 cents from October but was $2.60 above a year ago. Wisconsin’s, at $22.90, was down $2.50 from October, but $2.70 above a year ago.

The national corn price averaged $4.07 per bushel, up 8 cents from October but 59 cents below a year ago. Soybeans averaged $9.84 per bushel, down 7 cents from October and $3.16 per bushel below a year ago. Alfalfa hay averaged $165 per ton, down $8 from October, and $44 per ton below a year ago.

Looking at the cow side of the ledger, the November average cull price for beef and dairy combined was at $124 per cwt., down $4 from October, but $20 above November 2023, and $52.40 above the 2011 base average.

Milk production margins dropped for the second month in a row but remained at historically high levels and 90 cents per cwt. below October, according to dairy economist Bill Brooks of Stoneheart Consulting in Dearborn, Missouri.

“Income over feed costs in November was above $15 per cwt. for the ninth time in history, at $15.80, and above the $8 per cwt. level needed for steady to higher milk production for the 13th month in a row,” Brooks said. “Input prices were mostly lower in November with all three input commodities remaining in the top 11 for November all-time. Feed costs were the eighth highest ever for the month of November and decreased 10 cents per cwt. from October. The November all-milk price returned to the top 10 all-time, at the second highest recorded,” said Brooks.

“Dairy producer profitability for 2023 in the form of milk income over feed costs, was $8.00 per cwt.,” Brooks said. “The profitability was $3.91 below 2022 and $1.72 lower than the 2018-2022 average. In 2023, the decrease in milk income over feed costs was a result of the milk price decreasing more than feed prices dropped. Income over feed in 2023 was around the level needed to maintain or grow milk production,” said Brooks.

“Milk income over feed costs for 2024, using Dec. 31 CME settling futures prices for Class III milk, corn, and soybeans plus the Stoneheart forecast for alfalfa hay, are expected to be $13.37 per cwt., a gain of 7 cents per cwt. versus last month’s estimate. Income over feed in 2024 would be above the level needed to maintain or grow milk production and up $5.37 per cwt. from 2023’s level,” Brooks said.

Looking at 2025, Brooks said, “Milk income over feed costs are expected to be $14.09 per cwt., a gain of 72 cents per cwt. versus 2024. Income over feed in 2025 would be above the level needed to maintain or grow milk production, and down 71 cents per cwt. from last month’s estimate.” 

Dairy cow culling for the week ending Dec. 21 totaled 54,500, down 900 from the previous week, and 1,300 or 2.3% below a year ago. Year to date, 2,668,600 cows have been slaughtered, down 364,700 head or 12.2% from a year ago.

The last Global Dairy Trade Pulse auction of 2024 took place Tuesday, December 31, and saw 4.93 million pounds of product sold, down from 4.96 million in the Dec. 24 Pulse. Prices on both skim milk powder and whole milk powder were down from the previous Pulse.

Singapore Exchange futures are pointing toward a decline in value in the first GDT event of 2025, warned StoneX analyst Dustin Winston. “The recent GDT pulse showed weakness for both whole milk powder and particularly for skim milk powder. Anhydrous milkfat futures are also projecting a decline in value,” he said.

StoneX analyst Nate Donnay said in the Dec. 28 Global Dairy Outlook, “We’ve been trending toward stronger production across the major exporters, and the forecast is still calling for good growth through at least the first half of 2025, but bird flu in California dented U.S. production hard in November.

Weather conditions in New Zealand have been deteriorating, which could push their production forecast lower if things don’t improve soon. Farm gate margins still look good across the major exporters. Components in the milk are still generally growing, and we’re lapping easy comparables, but for the first time in a while there are some downside risks around the production forecast.”

Donnay cited milk prices and said, “The demand side is nuanced. Clearly Chinese buyers were aggressive in recent months, which helped to push global dairy prices higher, but we’ve now seen whole milk/skim milk prices trend lower during December on GDT.”

“Anecdotally, it sounds like consumption growth in China is still on the weak side,” Donnay said. “And now that stocks of imported product have been rebuilt a bit, buyers are stepping back from the market again. At the same time, imports by some Middle East/North Africa and Southeast Asia countries were weaker than expected in October and their forecasted imports for the remainder of the year and into 2025 have been shaved a bit.”

“I think we’ve hit a pocket of weak demand with buyers pushing back at the higher price levels,” Donnay said. “China restocked and buyers are feeling more comfortable about future supply and they are willing to hold off on purchases short-term. The market continues to look roughly balanced. Supply is growing but underlying demand doesn’t look bad once we get through the current pocket of weakness.”

Looking at another demand note, the Dec. 30 Daily Dairy Report said 2024 was the “Year of Protein.” “The protein craze, which began years ago, continued to accelerate this year,” the DDR said, “And it shows no signs of abating, according to a report by RaboResearch, the research arm of Rabobank.”

“For protein, it seems, more is always better, with products competing in a protein arms race to have the front-of-pack label vaunting the highest values. Food manufacturers are adding protein to everything from cookies to pasta sauces. Even naturally protein-rich products, such as Greek yogurt, are offering ever higher protein lines. Americans just can’t seem to get enough protein, which is very good news for the dairy industry,” the DDR said.