USDA Cuts 2023 Milk Production Forecast Based on Fewer Cows
Published: Friday, September 22, 2023
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Agriculture Department again lowered its milk production forecasts for 2023 and 2024 in its latest World Agriculture Supply and Demand Estimates, based on "an expected decline in cow numbers reflecting the average July 2023 cow number reported in the recent Milk Production report. The reduction in cow numbers is expected to continue through 2023," says the report, "and into the first half of 2024 as returns remain under pressure."
Output-per-cow for 2023 was forecast to increase at a lower rate than previously expected on recent data and the expected impact of high temperatures during the summer. The forecast of milk per cow for 2024 was unchanged.
2023 production and marketings were estimated at 227.5 and 226.5 billion pounds, respectively, down 400 million pounds on both from a month ago. If realized, production would still be up 1 billion pounds, or .4%, from 2022.
2024 production and marketings were projected at 230.4 and 229.4 billion pounds, respectively, down 100 million pounds on both. If realized, 2024 production and marketings would be up 2.9 billion pounds, or 1.3%, from 2023.
Price forecasts for 2023 cheese, butter and whey were raised, based on current price strength, but nonfat dried milk (NDM) was lowered. Cheese is expected to average $1.81 per pound in 2023, up 3.50 cents from last month's estimate, and compares to $2.1122 in 2022 and $1.6755 in 2021. It's expected to average $1.8450 per pound in 2024, up 9 cents from a month ago.
Butter will average $2.54 per pound in 2023, up 4.50 cents from last month's projection, and compares to $2.8665 in 2022 and $1.7325 in 2021. It is projected to average $2.55 per pound in 2024, up 12 cents from last month's estimate.
Nonfat dry milk was projected to average $1.16 per pound in 2023 and $1.09 in 2024. Dry whey was projected at 34.5 cents in 2023 and 31.50 cents in 2024.
Class III and Class IV milk price estimates were raised, reflecting changes in their component values. Look for the 2023 Class III to average $17.35 per hundredweight, up 45 cents from last month's estimate, and compares to $21.96 in 2022 and $17.08 in 2021. The 2024 projection is $17.55, up $1 from last month's estimate.
The 2023 Class IV price will average $18.60, according to the report, up a dime from a month ago, and compares to $24.47 in 2022 and $16.09 in 2021. The 2024 Class IV will average $18, up 20 cents from last month's estimate.
The week ending Sept. 2 saw 57,600 cows go to slaughter, down 1,600 from the previous week but 2,000, or 3.6%, more than a year ago. Year-to-date 2,040,600 head have been culled, up 110,600, or 5.4%, from a year ago.
The Cheddar blocks alternated some the week of Sept. 11, but fell to a $1.88 per pound close last Friday, as traders anticipated Monday afternoon's August Milk Production report. The blocks were down 4.50 cents on the week, lowest CME price since July 27, and 18 cents below that week a year ago when they were trading at $2.06 per pound. Class III futures have fallen as well.
The barrels closed last Friday at $1.81, down 1.75 cents on the week, 28 cents below a year ago when they were up almost 16 cents to $2.09, and were 7 cents below the blocks. There were 15 loads of block traded on the week and six of barrel.
StoneX reports that the milk supply is tighter, but there's a bleak view on demand ahead, and the lack of cheese exports makes market direction uncertain.
Midwest cheesemakers say milk was still somewhat snug last week, according to Dairy Market News, but near-term expectations are that availability will grow with improved cow comfort weather. Spot milk prices were still above Class III but have edged lower. Cheese orders are somewhat steady but varies plant to plant. Some remain concerned about fulfilling incoming orders while others say tighter milk has brought some balance in cheese inventories.
Retail and food service cheese demand in the West remains steady. Demand from international purchasers is moderate but has been consistent from Latin American buyers the first three quarters of 2023. Handlers report that Class III milk demand from cheese manufacturers is strong, and cheesemakers say milk supplies are in comfortable balance with processing capacity, says DMN.
Butter climbed to $2.7725 per pound last Wednesday, highest since Dec. 16, 2022, but closed the week at $2.7175, 3.75 cents higher and 41.50 cents below a year ago when it was still above $3. There were 33 sales on the week.
Midwest butter makers say cream tightened last week. Cream multiples have begun to edge nearer to 1.30 for butter processors. Churning is somewhat active with the adequate cream supply but contacts are less certain near-term, as milk output in the Upper Midwest is expected to grow with cooler temperatures.
Cream is tight in the West and many believe it will remain so near-term. Slightly lower cream multiples were reported at the top of the range last week, attracting more spot buyers. Some manufacturers are running steady production while others say output is less than anticipated due to current cream volumes. Retail and food service demand is strong to steady, while exports moderate to lighter.
Grade A nonfat dry milk finished last Friday at $1.1125 per pound up 1.25 cents on the week but 45.75 cents below a year ago, with 12 sales reported.
Dry whey closed last Friday at 30 cents per pound, down a quarter-cent on the week and 16 cents below a year ago, with 13 sales for the week at the CME.
StoneX says there are a few more bullish factors supporting the whey market than a couple months ago, such as tightening milk supplies, firming domestic demand and greater strength in whey protein concentrate markets diverting protein out of dry whey. China's smaller purchases are still a drag on the market.
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