USDA predicts lower cow inventories and slower growth

This column was written for the marketing week ending July 14.

The U.S. Department of Agriculture left its 2023 milk production forecast unchanged in its latest World Agricultural Supply and Demand Estimate 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 percent 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 percent from 2023.

Fats 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.

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 fat basis for 2023 were unchanged with 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

Mielke Market Weekly

By Lee Mielke

basis and a fat basis were lowered slightly.

Projected 2023 cheese, nonfat dry milk, and whey price averages were lowered from a month ago based on continued ample supplies of cheese and competition in international nonfat dry milk 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.

Nonfat dry milk 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 nonfat dry milk 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 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 percent more than a year ago. Year to date, 1,620,700 cows have been culled, up 8800 head or 5.8 percent from a year ago.

Cheese prices oscillated some the second week of July but moved higher. After gaining 5.75 cents the previous week, the Cheddar blocks climbed to $1.53 per pound July 13, highest since May 24, but closed July 14 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 July 11, highest since June 26, lost 3 cents July 12, and finished July 14 at $1.3925, 1.25 cents higher on the week, 67.75 cents below a year ago, and 8.75 cents below the blocks. Chicago Mercantile Exchange sales for the week totaled 22 cars of block and 53 of barrel.

Cash butter saw a July 14 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.

Grade A nonfat dry milk fell to $1.0775 per pound Monday, lowest CME price since Nov. 9, 2020. It rallied to a July 14 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 $1.00-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 July 12, the lowest price ever, but it gained 1.75 cents July 13, first gain in 8 sessions, and added a half-cent July 14 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 Global Dairy Trade 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 Pulse and down $85 from the July 4 GDT.

HighGround Dairy says “Contract 2 regular whole milk powder fell to the lowest price ever recorded on the Pulse Auction since it began in August 2022. This also marked the lowest C2 regular whole milk powder 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,” says the National Milk