USDA expects strong demand for dairy products into 2025

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The U.S. Department of Agriculture left its 2024 and 2025 milk production forecasts in its latest World Agriculture Supply and Demand Estimates report unchanged, with slight adjustments to cow inventories offset by slower growth in milk per cow.

2024 production and marketings were projected at 227.3 and 226.3 billion pounds, respectively, unchanged on both counts from last month’s estimate. 

2025 production and marketings were projected at 229.3 and 228.3 billion pounds, respectively. If realized, both would be up 2 billion pounds or 0.9% from 2024.

Commercial exports for 2024 were raised on a fat basis, largely due to higher expected shipments of cheese. Skim-solids basis exports were unchanged. Exports were raised for 2025 on a fat basis and a skim-solids basis based on expectations of continued strong international demand.

Imports for 2024 were raised on both a fat- and skim-solids-basis, supported by higher expected butter and milk protein-containing products, respectively. Import forecasts for 2025 were raised as well.

Butter, cheese, whey and nonfat dry milk price forecasts for 2023 were raised from the previous month on recent price strength. Cheese is expected to average $1.79 per pound in 2024, up 9.50 cents from last month’s projection, and compares to $1.7593 in 2023 and $2.1122 in 2022. The 2025 average was projected at $1.7950, up 13 cents from last month’s estimate.

Butter was projected to average $2.97 per pound for 2024, up 3.50 cents from last month’s estimate, and compares to $2.6170 in 2023 and $2.8665 in 2022. The 2025 average was projected at $2.9450, up 3 cents from last month.

The 2023 nonfat dry milk average was estimated at $1.1750 per pound, up from $1.16 last month, and compares to the 2023 average of $1.1856 and $1.6851 in 2022. The 2025 average forecast was kept at $1.14 per pound.

Dry whey is expected to average 43.50 cents per pound in 2024, up 3.50 cents from last month’s estimate, and compares to 36.18 in 2023 and 60.57 in 2022. The 2025 forecast is 40 cents per pound, up 2.50 cents from last month.

With the changes in product prices, Class III and Class IV milk prices were raised. The 2024 Class III is expected to average $17.90 per hundredweight, up $1.15 from last month’s estimate, and compares to the 2023 average of $17.02 and $21.96 in 2022. The 2025 average was estimated at $17.70, up $1.40 from a month ago.

The Class IV is projected to average $20.50 per cwt in 2024, up 25 cents from a month ago, and compares to $19.12 in 2023 and $24.47 in 2022. The 2025 projection at $20.10 is up 15 cents from what was expected a month ago. Strong demand for dairy products is expected to carry into 2025, according to the USDA.

The U.S. corn outlook was unchanged from last month at 14.86 billion bushels, with the yield forecast at 181 bushels per acre. The season average price remained at $4.40 per bushel. The USDA will release its acreage report June 28, which will provide survey-based indications of planted and harvested area.  

The outlook for U.S. soybeans includes higher beginning and ending stocks. Higher beginning stocks reflect reduced crush, down 10 million bushels on lower soybean meal domestic use, partly offset by higher exports. Production was projected at 4.4 billion bushels, with a yield of 52 bushels per acre. Ending stocks were projected at 455 million bushels, up 10 million. The soybean price forecast was unchanged at $11.20 per bushel. Soybean meal and oil prices were also unchanged, at $330 per short ton and 42 cents per pound, respectively.

The latest crop production report shows 95% of the U.S. corn crop was in the ground as of the week ending June 9, 3% behind a year ago and dead even with the five-year average. Emerged was 85%, 6% behind a year ago but 1% ahead of the average. Seventy-four percent was rated good to excellent, up from 61% a year ago.

Soybean plantings were at 87%, 8% behind a year ago but 3% ahead of the five-year average. Seventy percent has emerged, 13% behind a year ago but 4% ahead of the average. Seventy-two percent were rated good to excellent, up from 59% a year ago.

Dairy prices were mostly higher in mid-June except for butter. Cheddar blocks climbed to $1.9825 per pound Thursday, the highest since Aug. 31, 2023, but closed Friday at $1.97, up 12.50 cents on the week and 59.50 cents above a year ago.

Barrels finished at $2.02, 6.50 cents higher but 10.50 cents below its May 17 high for 2024, 49.50 cents above a year ago, and 5 cents above the blocks. Sales to the market of last resort totaled 17 cars of blocks and 13 barrels.

“Cheese market tones continue to garner bullish tailwinds,” says Dairy Market News. Midwest barrel processors “expect more bulls to come.” When spot barrel loads are available, they are not available for long. Mid-week spot milk prices were in line with the previous week, ranging from $2 to $1 under Class III. More cheesemakers are opting for extra milk in recent weeks as they expect further tightening and continued hearty demand, so production is very busy.

Cheese production is steady to lighter in the West. Milk volumes are tighter throughout much of the region as seasonal output ratchets lower. Some manufacturers cited unplanned downtime of other processors contributed to their ability to run at or near capacities. Cheese demand is steady domestically. International buying is steady to moderate. Some sentiment is that export sales may be more challenging in the second half of 2024, according to DMN.

Cash butter started the week falling to $3.08 per pound but recovered Tuesday, climbing back to $3.1050, but closed Friday at $3.09, down a quarter-cent on the week and 72.50 cents above a year ago. There were 10 sales for the week.

Central butter plant contacts tell DMN that cream availability has begun its seasonal shift lower and reported multiples are further evidence. Cream markets have been noticeably consistent throughout early and mid-spring, but as summerlike temperatures rise, so go multiples. Regularly reported multiples have shifted from the 1.15 range to the 1.20 range. Some butter plants report receiving as many as a dozen cream loads fewer than in previous weeks. Churning is still ongoing but is expected to quiet further near term. Butter demand is seasonally holding steady. Bulk butter, particularly salted loads, is available, but 82% of unsalted loads are relayed as being tight. “Butter market tones are achieving what other domestic dairy commodities are struggling to gain: an enduring and unambiguous bullishness,” DMN said.

Butter production is mostly steady in the West. A few manufacturers said churning schedules are as full as possible due to upcoming equipment maintenance. Unsalted bulk butter continues to be somewhat tight. Cream availability is tighter, but butter producers indicate it is ample. Domestic demand is steady for salted and unsalted butter. Export demand is steady from Canadian buyers, but moderate elsewhere, DMN said. Believe it or not, StoneX points out that there are some in the butter world that believe $4 butter is possible.

Grade A nonfat dry milk closed Friday at $1.1925 per pound, down a quarter-cent on the week and 3.50 cents above a year ago, with 26 sales on the week.

StoneX said that, in the 23-day month of May, 85 spot loads were traded. So far in just 10 trading days in June, 57 spot loads have changed hands.

Dry whey climbed to 48 cents per pound Wednesday, the highest since Feb. 26, 2024, but saw its Friday finish at 47 cents per pound, unchanged on the week, but 19.50 cents above a year ago, with only three Chicago Mercantile Exchange sales reported on the week.

Speaking in the June 17 “Dairy Radio Now” broadcast, broker Dave Kurzawski said, while U.S. milk production is not terrible, “it is under some bit of duress.”

We have come out of a two-year bear market cycle that put a lot of dairy farmers on the ropes as the costs of everything has gone up, he said. Now we have the avian influenza knocking down milk output.

When asked if we have an accurate measurement of the influenza yet, Kurzawski said no. He cited the USDA number of 90 dairies confirmed with it but believes it is closer to a thousand or more. The impact seemed to be worse in February and March than today, so maybe things are changing, but he said, “It’s a big deal and it’s going to be with us for the balance of the year.” 

The June 14 “Early Morning Update” stated that we have several problems on the farm: “Slaughter is off yet the herd isn’t growing (it’s flattening out) and headline milk production is still expected to be lower. Next week we’ll get May’s milk production and we’re expecting down 0.5%. Granted, milk production per cow rebounded to positive in March and April and feed costs are dramatically lower. Still, we could suggest that lower slaughter numbers are normal as milk prices rise. But that may be missing the big picture.”

“There are few replacement animals out there,” the Update states, “And the ones you can get your hands on will cost you dearly (reports are now over $3,000 per animal).” Add to that, avian flu where the worst cases are the older animals.

“The issues with milk production are not a July or August problem, the Update concludes. “They’re more likely a 2024/2025 problem. Maybe longer. Demand has a say and prices can still fall in this environment, but underpinning the whole deal will be this perpetual issue on the dairy farm.”

Speaking of slaughter, dairy cow numbers for the week ending June 1 totaled 42,900 head, down 4,700 from the previous week and 8,900 or 17.2% below a year ago. Year to date, 1,390,800 have been culled, down 187,600 or 13.5% from 2023.

Checking demand, the USDA’s latest dairy supply and utilization data shows April cheese consumption hit 1.2 billion pounds, up 2.1% from April 2023. Domestic use was only up 0.3%, but exports were up 26.7%.

HighGround Dairy reported, “Other cheese domestic use saw the highest April on record with data back to 2011 but was almost entirely offset by plummeting demand for American cheese, which fell to the lowest April volume since 2020.”

Butter usage was down 5.6%, with domestic use down 6.3%, which accounts for 96% of total use, according to HGD. Exports surprisingly were up 21.7% and topped those of a year ago for the first time since January 2023.

Nonfat/skim milk powder utilization plunged 32.2% from a year ago, the lowest level since November 2018, said HGD, with YTD domestic consumption down 48.3%, the lowest level on record. April exports were down 2.4%.

Dry whey consumption jumped 34.0%, thanks to a 68.4% rise in domestic use, an all-time high for April, according to HGD, while exports were only up 1.4%.

Meanwhile, April fluid milk sales came in at 3.6 billion pounds, up 5.9% from April 2023. Fluid sales YTD were up 1.5%. I will have more details next week.

Tuesday’s Global Dairy Trade Pulse auction saw 3.79 million pounds of product sold, up from 3.6 million on May 28. Of the total offered, 98.3% sold.

HGD reported there were 187,391 pounds less instant whey milk powder and 339,508 pounds more regular WMP sold versus the last Pulse. One hundred percent of the 1.1 million pounds of skim milk powder on offer was sold. Of the 551,150 pounds of instant WMP max on offer this week, 66% was sold. Instant WMP also declined versus the prior Pulse and was down $60 per metric ton or 1.7%.

On a brighter note, one of the highlights of the dairy industry that I touched on in my June Dairy Month column this year was sustainability. The dairy industry may be on the verge of taking another step in its environmental efforts.

The U.S. Food and Drug Administration has approved the feed ingredient Bovaer for use in lactating dairy cattle. The June 3 “Daily Dairy Report” said, “Bovaer is a feed additive that suppresses the enzyme that forms methane, thus reducing emissions. It was developed by DSM-Firmenich and is being commercialized in North America through a strategic collaboration with Elanco Animal Health.”

“Methane is a greenhouse gas that contributes to global warming by trapping heat in the atmosphere,” said the DDR. “The average cow produces 220 pounds of methane per year, mostly through enteric fermentation. According to Elanco, using one tablespoon of the ingredient per cow per day can reduce methane emissions by 30%. This is the equivalent of reducing carbon dioxide emissions by 1.2 metric tons annually. If 1 million cows were on Bovaer, it would be the equivalent of pulling 285,000 cars off the road for one year,” DDR said.

Last but not least, the International Dairy Foods Association held its 40th annual Capitol Hill Ice Cream Party this week, and more than 1,000 members of Congress and their staff attended, according to an IDFA press release.

IDFA staff and leaders from U.S. ice cream makers served more than 950 gallons of ice cream, 1,200 ice cream novelties and 32 ice cream cakes during the event, which was held in Union Square Park in front of the U.S. Capitol.

“IDFA’s Capitol Hill Ice Cream Party is our way of showing appreciation to the public servants, members of Congress and all the individuals working in Congress and within our federal agencies,” said Michael Dykes, IDFA president and CEO. “We are so pleased to have welcomed our largest crowd for this event in recent years. Ice cream is as bipartisan as you can get. And the ice cream party is an opportunity for us to all come together, share a few laughs, and enjoy America’s most popular frozen treat, ice cream.”

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