US prices for cheese, powder competitive on global stage

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   The U.S. Department of Agriculture left its 2023 milk production forecast unchanged in its latest World Agricultural Supply and Demand Estimates report but lowered the 2024 estimate, citing lower cow inventories and slower growth in milk per cow.        

2023 production and marketings were estimated at 228.4 and 227.4 billion pounds, respectively, unchanged on both from a month ago. If realized, both would be up 1.9 billion pounds, or 0.84%, from 2022. 

2024 production and marketings were projected at 230.6 and 229.6 billion pounds, respectively, down 200 million pounds on both. If realized, 2024 production and marketings would be up 2.2 billion pounds, or 0.96%, from 2023.

Milk-fat basis exports for 2023 were lowered, primarily reflecting lower butter and cheese shipments. Skim-solids basis exports, also lowered, reflect lower exports of whey products as well as a number of other dairy products; however, these declines are partially offset by higher nonfat dry milk exports. 

Milk-fat basis exports for 2024 were reduced as USDA expects weakness in butter sales to carry into the next year. Skim-solids basis export reductions were largely due to lower-expected lactose exports, according to the WASDE.

Imports on a milk-fat basis for 2023 were unchanged, largely offsetting changes for a number of products, but skim-solids imports were lowered on lower milk protein concentrates. Imports for 2024 on both a skim-solids basis and a milk-fat basis were lowered slightly. 

Projected 2023 cheese, NDM and whey price averages were lowered from a month ago based on continued ample supplies of cheese and competition in international NDM and whey markets. Butter was unchanged. 

The 2023 cheese average was lowered to $1.6750 per pound, down 5.50 cents from a month ago, and compares to $2.1122 in 2022 and $1.6755 in 2021. The 2023 average was lowered to $1.69, down 8.50 cents from last month’s estimate.

Butter was projected at $2.4350 for 2023, unchanged from last month’s estimate, and compares to $2.8665 in 2022 and $1.7325 in 2021. The 2024 average was raised to $2.3450, up a penny from a month ago.

NDM will average $1.17 per pound in 2023, down 20 cents from last month’s WASDE, and compares to $1.6851 in 2022 and $1.2693 in 2021. The 2024 average will fall to $1.1250, down 50 cents from last month’s estimate.

The Class III milk price forecast was reduced due to weaker cheese and whey prices, and the Class IV decline reflects lower NDM prices. The 2023 Class III will average $16.05 per hundredweight, down 65 cents from last month’s estimate, and compares to $21.96 in 2022 and $17.08 in 2021. The 2024 average will fall to $15.95, down $1.05 from last month’s estimate.

The 2023 Class IV is expected to average $18.20 per cwt, down 15 cents from last month’s call, and compares to $24.47 in 2022 and $16.09 in 2021. The 2024 Class IV will average $17.45, unchanged from last month’s projection.

The U.S. corn outlook is for fractionally higher supplies and ending stocks. Corn beginning stocks were lowered 50 million bushels as greater feed and residual use more than offsets reductions in corn used for ethanol and exports. Corn production was forecast up 55 million bushels as greater planted and harvested area from the June 30 acreage report is partially offset by a 4-bushel reduction in yield to 177.5 bushels per acre. With supply rising fractionally and use unchanged, ending stocks are up 5 million bushels. The season-average farm price was unchanged at $4.80 per bushel.

Soybean production was projected at 4.3 billion bushels, down 210 million on lower harvested area. Harvested area, forecast at 83.5 million acres in the June 30 acreage report, was down 4 million from last month. The soybean yield forecast was unchanged at 52 bushels per acre. With lower production partly offset by higher beginning stocks, 2023-24 soybean supplies were reduced 185 million bushels. Soybean crush was reduced 10 million bushels, reflecting a lower soybean meal domestic disappearance forecast. 

Soybean exports were reduced 125 million bushels to 1.85 billion, based on lower U.S. supplies and lower global imports. The season-average soybean price was forecast at $12.40 per bushel, up 30 cents from last month. Soybean meal was projected at $375 per short ton, up $10. 

Speaking in the July 17 Dairy Radio Now broadcast, StoneX broker Dave Kurzawski said USDA predicts a record yield on soybeans and increased ending stocks, which would benefit dairy farmers buying feed, but cautions it’s still too early in the season as the crops mature and deal with weather ahead.

He said there is light at the end of the milk-price tunnel. U.S. prices for cheese and powder especially are very competitive on the global stage. We’re in the first half of the year, which traditionally sees milk output increase and inventories grow, but during the second half of the year, we make less milk and draw down those inventories. With finances being what they are, milk output could drop quickly, he said. He also expects better demand ahead, all which will strengthen prices, but he said, “It’s going to be a tough year for dairy farmers.”

The latest Crop Progress report shows 22% of U.S. corn crop was silking as of the week ending July 9, up from 8% the previous week, 8% ahead of a year ago and 1% ahead of the five-year average. 55% of the corn was rated good to excellent, up from 51% the previous week, but down from 64% a year ago. 

The report shows 39% of the soybeans were blooming, up from 24% the previous week, 9% ahead of a year ago and 4% ahead of the five-year average. Ratings put 51% of the beans at good to excellent, up 1% from the previous week but 11% behind a year ago.

The week ending July 1 saw 59,300 dairy cows go to slaughter, up 2,800 head from the previous week and 7,500, or 14.5% more, than a year ago. Year-to-date, 1,620,700 cows have been culled, up 8,800 head, or 5.8%, from a year ago.

Cheese prices oscillated some the second week of July but moved higher. After gaining 5.75 cents the previous week, cheddar blocks climbed to $1.53 per pound Thursday, highest since May 24, but closed Friday at $1.48, up 8.75 cents on the week and 51.50 cents below a year ago when they dropped 11.50 cents to $1.9950.

The barrels climbed to $1.42 Tuesday, highest since June 26, lost 3 cents Wednesday, and finished Friday at $1.3925, 1.25 cents higher on the week, 67.75 cents below a year ago, and 8.75 cents below the blocks. CME sales for the week totaled 22 cars of block and 53 of barrel.

Midwestern cheesemakers report a continuance of hearty demand, said Dairy Market News. Retail cheddar-American style cheesemakers said customers have ramped up ordering, and plants are pushing capacity limits to meet customer needs. Barrel producers report similar notes. Any extra loads are moving, said DMN, and concerns about warehouse space are noted, but some of that is based on cheese that requires more aging time. Milk remains available in the Upper Midwest, but the farther south you go, the tighter the milk. Spot prices continue at double-digits below Class III, but some have been reported at Class in the central-southern states. Contacts expect seasonal milk supply limitations to hamper upcoming production and potentially boost market prices, said DMN.

Western food service cheese demand is steady while retail is steady to moderate. Sources note strong cottage cheese and cream cheese sales thus far for the year. Manufacturers of frozen pizzas report less demand for third quarter than a year ago, which is negatively impacting mozzarella sales. Loads are available to meet demand with some reports of higher warehouse capacities. Class III milk is ample for strong for the vat. Export demand is mixed. Interest from Asian and Mexican purchasers is moderate, according to DMN.

Cash butter saw a Friday finish at $2.55 per pound, up 7 cents on the week, highest since Dec. 20, 2022, but still 38 cents below a year ago, on 45 sales.

Cream has begun its seasonal disappearing act in terms of affordability for churning, said DMN, and some expect limits on spot cream for the remaining summer months. Warmer temperatures are hampering milk output, in general, and southern plants are vying for more Upper Midwestern cream. That said, there are Upper Midwest butter plants reporting cream availability is not as tight. They point out that current cream access this late into summer is unique to 2023. 

Cream is tighter in the southern areas of the West with California joining the triple-degree temperature club. Cream is available throughout the West and meeting manufacturers’ needs. Some relay that cream demand from ice cream makers is below last year’s levels but expect warmer weather to change that, while others expect Class II draws to decline further. Butter production is steady to lighter. Retail and food service butter demand is strong to steady though some report fourth-quarter buying is comparatively lighter than third-quarter buying thus far. 

Grade A nonfat dry milk fell to $1.0775 per pound Monday, lowest CME price since Nov. 9, 2020. It rallied to a Friday close at $1.1050, up 1.75 cents on the week but 55.50 cents below a year ago. Eleven loads exchanged hands on the week.

Analyst Jon Spainhour warned in the July 7 “Weekly Wire,” “Chinese participation is frightening. Previously, Southeast Asia seemed able to pick up the slack. However, it seems highly unlikely that they can absorb the full loss of Chinese demand. If they can’t, and, I repeat, it is unlikely they will, New Zealand will be forced to alter production schedules. That would put more skim milk powder into the market and likely push prices lower” and “could move to the $1-per-pound area. There will be a lot of trade that takes place at this highly psychological level, but I do think we can go there and possibly even move into the mid-90s.”

Dry whey continued to break records, in the wrong direction, falling to 22.50 cents per pound Wednesday, the lowest price ever, but it gained 1.75 cents Thursday, first gain in eight sessions, and added a half-cent Friday to close at 24.75 cents per pound, up 2 cents on the week, highest since June 27, but 20.75 cents below a year ago. There were 48 CME sales reported on the week. Whey’s situation is very similar to powder with too much supply and too little demand.    

Tuesday’s GDT Pulse saw just under 2.1 million pounds of Fonterra whole milk powder sold at $3,000 per metric ton, down $55 from the last GDT Pulse and down $85 from the July 4 GDT Pulse. 

HighGround Dairy said, “Contract 2 regular WMP fell to the lowest price ever recorded on the Pulse Auction since it began in August 2022. This also marked the lowest C2 Regular WMP price on the GDT platform since November 2020 as weak demand continues to challenge global markets.”

In politics: “Slurries of highly processed ingredients are not equivalent to dairy,” said the National Milk Producers Federation, which is taking that truth to government and consumers. 

NMPF listed the ingredients of a plant-based beverage in a press release this week: “Water, animal-free whey protein (from fermentation), sunflower oil, sugar, less than 1% of: vitamin A, vitamin B12 (cyanocobalamin), vitamin D2, riboflavin, citrus fiber, salt, dipotassium phosphate, acacia, gellan gum, mixed tocopherols (antioxidant), calcium potassium phosphate citrate, natural flavor.” 

Compare that to the label you see on a gallon of cow’s milk, challenged NMPF. “After more than four decades of plant-based imposters using dairy terms that violate the agency’s Standard of Identity for milk, lab-based fermenters of single dairy proteins are trying to mislead consumers in the exact same way,” NMPF said. “Consumers shouldn’t be led to believe otherwise.”

A letter to the U.S. Food and Drug Administration asked the agency to “take action against the brand Bored Cow, which is marketing its beverage as ‘animal-free dairy milk’ because it uses a single fermented whey protein (real milk has dozens of protein variants and literally hundreds of different fatty acids).” NMPF noted that “it is baseless, preposterous and absurd to call such a product milk.” Lab grown “meat” is the next “Franken food” being mixed up for the dinner table. Buyers beware.

Last of all, a call to support and promote a bipartisan measure to expand healthy milk varieties for schools to choose. Claudia Larson, NMPF senior director of government relations, said, “The Whole Milk for Healthy Kids Act, which would return whole and 2% milk to school lunch menus, has been introduced in the past. But with a growing tide of science to back up its benefits, this year the legislation has advanced farther than ever before, with a possible House floor vote as early as this month. House Agriculture Committee Chair GT Thompson, R-PA, Rep. Kim Schrier, D-WA, and Sens. Roger Marshall, R-KS, and Peter Welch, D-VA, are leading the effort.”

“Allowing schools to serve 2% and whole milk is a commonsense solution to a national child nutrition problem,” Larson said. “No other food delivers the same rich and unique nutrition package as milk, which provides 13 essential nutrients, including three of the four public health concerns. Milk plays an especially significant role in providing the nutrition critical for childhood health and development. Milk is the number one source of protein for kids 2 to 11, serves as the top source of calcium, potassium, phosphorus and vitamin D for children ages 2 to 18, and provides seven of the 14 nutrients the American Academy of Pediatrics recommends for optimal brain development.” 

Write your elected officials. Tell your friends and neighbors. If farmers won’t, who will?

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