DAIRY MARKET REPORT
VOLUME 27 | ISSUE 12
OVERVIEW
12/16/2024
October’s Dairy Margin Coverage margin receded $0.40/cwt from its record level a month earlier to $15.17/ cwt, the second highest level since margin protection became dairy’s basic federal safety net mechanism. October fluid milk sales were 1.3% higher than a year earlier, which continued to keep past three-month and year-to-date sales growth positive. Yogurt and butter showed particularly strong U.S. consumption gains during August-October, despite both reaching their highest ever retail prices during the period.
Following 16 consecutive months when U.S. dairy cows were below year-earlier numbers, USDA reported the national milking cow herd grew by 10,000 cows year-over-year in October. Together with other factors, this likely indicates a return to expansion mode for U.S. milk production. Stocks of all cheese dropped almost to pre-pandemic levels at the end of October, likely driven by constrained production growth and robust exports. Cheese price weakness was responsible for dropping the Class III price by almost $3/cwt in November from a month earlier.
COMMERCIAL USE OF DAIRY PRODUCTS
October fluid milk sales were 1.3% higher than a year earlier, which continued to keep past three-month and year-to-date sales growth positive and raised the probability that fluid sales will show positive growth, adjusted for leap year, for all of 2024. That would be
the first time this has happened since 2009. Yogurt and butter showed particularly strong consumption gains in the U.S. domestic market during August-October, all the more noteworthy given that both products reached their highest ever national average retail prices in September.
U.S. DAIRY TRADE
This year’s fourth quarter has started out like its first half for U.S. dairy exports, with a weaker, though still historically robust, pace compared to a strong third quarter. Measured as a percent of domestic milk solids production, exports averaged 16.4% during the first half, then jumped to 17.4% in the third quarter, with each month over 17%, but then returned back to 16.2% in October. The major products for which October exports were well below their third quarter averages; nonfat dry milk/skim milk powder, and dried and
modified whey, fell below their first-half averages as well. October imports, meanwhile, were equivalent to 4% of domestic milk solids production, following the third quarter averaging 3.9% and the first half at 3.6%. The largest milk solids volume increases in October were for out-of-quota butter, unsweetened whole milk powder, and sweetened condensed milk, as well as in-quota butteroil and dairysugar mixtures.
U.S. DAIRY IMPORTS
MILK PRODUCTION
The number of cows in the U.S. milking cow herd was lower than a year earlier during each of the 16 consecutive months between June 2023 and September 2024, by a weighted-average of 56,000 cows, an average reduction of 0.6%. This came to an end with the preliminary USDA report that the national milking cow herd was 10,000 cows larger in October than a year ago. Together with the growth in monthly U.S. average milk per cow since July and the
growth in U.S. liquid milk production each month since August, this may well signal a definitive return to expansion mode for basic milk production in the U.S. dairy farm sector.
U.S. milk solids production continues to expand by almost a percentage point faster than liquid milk production, due to the ongoing rapid increases in the component composition of milk coming from U.S. dairy farms.
DAIRY PRODUCTS
Among the major dairy product categories, butter, non American-type cheese, and nonfat dry milk experienced significant increased production during August-October,
while American-type cheese, skim milk powder, and dry whey showed significant drops.
DAIRY PRODUCT INVENTORIES
Month-ending stocks of all cheese have dropped this year by more than 100 million (pounds) from levels they maintained very consistently over the previous three years. Except for two months in the fall of 2020 at comparable levels, total cheese stocks at the end of October this year – 1,343 million pounds – were lower than they have been since late 2019, prior to the COVID-19 pandemic.
Several reasons may explain this drop. Cheese production growth has moderated this year. Following two years
when cheese production increased by less than 10 million pounds from the year prior, production expanded by 43 million pounds in 2021 and by 27 million pounds in 2022. In 2023, the annual increase was back down to around 10 million pounds; year-to-date, it’s up by just 6 million pounds. Domestic commercial use has followed much the same pattern as production and would therefore not appear to be a major contributor. But annual export growth has risen from just under 10 million pounds in 2021 and 2022 to 15 million in 2023 and to 16 million this year-to-date.
DAIRY PRODUCT AND FEDERAL ORDER CLASS PRICES
Monthly NDPSR survey prices of butter and cheddar cheese were stable to lower in November than a month earlier, while nonfat dry milk and whey eked out small increases. The stable butter and rising nonfat dry milk prices generated higher Class IV and Class II prices, while the steep drop in the cheese price was the dominant factor in dropping the Class III price almost $3/cwt over the month.
Prices of dairy products at retail were, on average, 18% lower than retail prices of all food and beverages during November. Most dairy products hit their highest retail prices at various times from mid-2022 through early 2023, but a few, such as frozen products and butter have risen since then to hit slightly higher prices in more recent months. The only dairy product category to reach a new retail price high in November is fresh milk other than whole milk.
MILK AND FEED PRICES
The monthly margin under the Dairy Margin Coverage (DMC) program receded by $0.40/cwt from September’s record level to $15.17/cwt, the second highest level since margin protection became the basic federal safety net mechanism for dairy. The October all-milk price was down $0.30/cwt from September to $25.20/cwt, while the DMC feed cost formula rose slightly from September, by $0.10/cwt of milk, mostly on a higher price for premium alfalfa hay.
LOOKING AHEAD
USDA’s World Agricultural Supply and Demand Estimates (WASDE) monthly report in December raised its forecasts for 2024 and 2025 annual milk production. This is the second consecutive month USDA has raised the 2024 forecast and its first increase in the 2025 production forecast. The department now estimates that total milk production will be essentially the same in 2024 as the previous year’s production and then grow by 0.8% in 2025.
Consisent with these indications of a definite return to growth for U.S. milk production, WASDE has lowered its estimates of the U.S. average all-milk price over the past three months by $0.40/cwt for 2024 and by $0.90/ cwt for 2025. USDA now sees the average milk price in
2024 coming in $2.30/cwt higher than in 2023 and 2025’s average price coming in about the same as 2024’s. At the same time as the December WASDE, the CME dairy futures were looking at a $0.35/cwt year-over-year higher average price next year.
Mid-December dairy and grain futures indicated that the DMC margin would average around $11.85/cwt for all of calendar year 2024. As of mid-December, the Dairy Margin Coverage Decision Tool on the USDA’s Farm Service Agency website had not been updated with its DMC margin forecasts for 2025. But the CME futures indicated at that time that the DMC feed cost would not change significantly in 2025 from the year currently ending.
Dairy Management Inc.™ and state, regional, and international organizations work together to drive demand for dairy products on behalf of America’s dairy farmers, through the programs of the American Dairy Association®, the National Dairy Council ® , and the U.S. Dairy Export Council ®
The National Milk Producers Federation (NMPF) develops and carries out policies that advance dairy producers and the cooperatives they own. NMPF’s member cooperatives produce more than two-thirds of U.S. milk, making NMPF dairy’s voice on Capitol Hill and with government agencies. Peter Vitaliano, National Milk Producers Federation pvitaliano@nmpf.org www.nmpf.org