More Cows to Enter System, Increasing Milk Output
Published: Friday, December 20, 2024
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Agriculture Department sees more milk ahead and raised its milk production forecasts in the latest World Agriculture Supply and Demand Estimates (WASDE) report. The 2024 forecast was raised, based on higher expected milk cow numbers, says USDA. Ditto for 2025, as additional cows are expected to partially offset slower growth in milk per cow.
2024 production and marketings were projected at 226.3 and 225.3 billion pounds, respectively, up 300 million pounds on both from last month's estimate. If realized, both would be down 100 million pounds, or .04%, from 2023.
2025 production and marketings were projected at 228 and 227 billion pounds, respectively, up 300 million on both. If realized, both would be up 1.7 billion pounds, or .75%, from 2024.
Cheese and butter price forecasts for 2024 were lowered, nonfat dry milk was unchanged, and whey was higher, based on recent prices. The Class III milk price average forecast was lowered, as lower expected cheese prices more than offset the higher expected whey price.
The Class III average for 2024 was estimated at $18.90 per hundredweight, down 15 cents from last month's WASDE, and compares to $17.02 in 2023 and $21.96 in 2022. The 2025 average was projected at $18.80, down 50 cents from a month ago, due to lower cheese price forecasts.
The 2024 Class IV milk price was unchanged at $20.75 and compares to $19.12 in 2023 and $24.47 in 2022. The 2025 average was raised a dime to $20.40, with the higher nonfat dry milk price more than offsetting expected lower butter prices.
The lower prices for cheese and butter are expected to continue into 2025, according to the WASDE. The price forecast for nonfat dry milk and whey were increased on higher-than-previously expected demand.
Speaking in the Dec. 16 "Dairy Radio Now" broadcast, StoneX broker Dave Kurzawski said the WASDE had few surprises but cautioned that predicting milk production in 2025 "might be a fool's errand," as bird flu is still very much in the picture, especially in California.
The Agriculture Department's Animal and Plant Health Inspection Service announced a National Milk Testing Strategy which "builds on measures taken by USDA and federal and state partners since the outbreak of the highly pathogenic avian influenza (HPAI) H5N1 in dairy cattle was first detected in March."
USDA issued a new federal order, as well as accompanying guidance, requiring that raw, unpasteurized milk samples nationwide be collected and tested. Testing will begin in processing plants in California, Oregon, Michigan, Mississippi, Colorado and Pennsylvania.
The guidance was developed with input from state, veterinary and public health officials and will "give farmers and farmworkers better confidence in the safety of their animals and ability to protect themselves, and will put us on a path to quickly controlling and stopping the virus' spread nationwide," said Agriculture Secretary Tom Vilsack.
The Dec. 9 Daily Dairy Report reminds us that "While pasteurization kills the virus in milk and dairy products, a high viral load in raw milk can spread within a milking parlor via birds, mammals, farm equipment and people carrying infectious material on their clothing. States regulate the sale of raw milk for human consumption, but the Food and Drug Administration prohibits the interstate sale of raw milk because it can contain illness causing bacteria. No one has contracted bird flu through consuming pasteurized milk," the DDR stated.
Of course all U.S. milk is already tested for antibiotics before it's even unloaded at the processor as part of Pasteurized Milk Ordinance, and has been so for many years. This directive gives more transparency, according to Kurzawski, but the bottom line is that pasteurization protects the U.S. milk supply.
Dairy cow culling remains well below that of a year ago. The USDA's latest data shows 43,900 cows were culled the week ending Nov. 30, down 11,300, or 20.5%, from a year ago. Year to date, 2,502,400 dairy cows had been retired from the dairy industry, down 360,700, or 12.6%, from a year ago.
Cash dairy prices were mixed in the second week of December. The Cheddar blocks closed last Friday at $1.80 per pound, up a dime on the week, highest since Nov. 4, and 28 cents above a year ago.
The barrels climbed to $1.73 last Thursday, highest since Nov. 18, but finished last Friday at $1.7275, 3.75 cents higher, 27.75 cents above a year ago, and 7.25 cents below the blocks. There were 14 sales of block on the week and 18 of barrel.
U.S. cheese is the cheapest in the world, said HighGround Dairy's Dec. 9 "Morning Huddle." "When that occurs, exports tend to increase, pushing prices higher. That may be part of what is providing support to the market presently. However, new cheese production has started in the Plains states, with more slated to begin in 2025. The increased supplies could offset the supply-demand balance and weigh down prices in the New Year as well, or at least prevent a material rally. European cheese prices are in decline and domestic demand has also been fairly soft into the end of the calendar year," HGD warned.
Midwest cheesemakers had positive demand notes last week, says Dairy Market News, although some said demand has been somewhat sluggish the past few weeks. Cheese is readily available. Barrel makers in the region say they have had some extra loads for sale on the spot market, but not at a concerning level. Milk availability has begun to tick higher in the region. Some sub-class spot milk prices were reported due to unexpected plant downtime, but other cheesemakers say they're not getting many offers. Milk, in their location, is somewhat snug.
Cheese production is generally steady in the West. Milk demand from cheese makers is mixed. Class III spot loads remain tighter in the southwest part of the region than elsewhere. Domestic cheese demand from spot load buyers is mixed but steady from contractual buyers, says DMN, while export demand is steady.
The butter fell to $2.4650 per pound last Friday, lowest CME price since Dec. 14, 2023, down 8 cents on the week and 2.50 cents below a year ago on 30 sales.
Central butter makers say demand is less than robust but steady or slightly down compared to a year ago. Inventories are in good shape. Cream remains abundant. Churning is busy, but butter makers are paring schedules to alleviate stock overgrowth, says DMN. Most contacts expect cream to remain readily accessible for the rest of the year, and perhaps deep into first quarter 2025.
Western retail butter production is steady to stronger, while bulk output is lighter. Some manufacturers indicate lower milk production and/or stronger retail butter demand in some parts of the region have been contributing factors for lighter bulk production in recent weeks. Some sellers convey stronger butter demand. Cream is widely available for the most part but a few stakeholders say that finding homes for excess cream is not an easy task, according to DMN.
Grade A nonfat dry milk saw its Friday finish at $1.3775 per pound, down 1.25 cents on the week but 21.75 cents above a year ago, with 20 sales on the week.
Dry whey had a great week, soaring to last Friday's close of 79.25 cents per pound, up 8.25 cents on the week, highest CME price since Feb. 23, 2022, and 39.75 cents above a year ago. There were seven CME sales on the week.
"Record prices in the whey protein isolate market have provided lift across the complex, pushing all markets higher," said HighGround Dairy. "More people are taking weight-loss drugs, and the prescribed diet is one of low calories, but nutrient-dense foods, like high-protein dairy. Industry contacts believe that the increased use of these medications is driving the rise in demand. In addition, small, short-term supply hiccups on dry whey production side have also provided an immediate boost to spot and futures prices," according to HGD.
Checking demand, the USDA's latest Dairy Supply and Utilization report shows October total cheese disappearance hit 1.3 billion pounds, up .9% from October 2023. Domestic demand was up just .2%, while exports were up 12.4%, up for the 10th month in a row, according to HighGround Dairy.
Butter utilization, at 222.8 million pounds, was up 11.5%, sixth largest since 2019 says HGD, as "domestic usage surged by double-digits, up 11.3% versus a year ago for the second consecutive month." Exports were up 23.3% but only totaled 5.3 million pounds. Year to date exports are down 1.6% from a year ago.
Nonfat-skim milk powder disappearance fell to 183.8 million pounds, down 9.9% from a year ago, down for the 13th time in 15 months according to HGD, and the lowest value for the month since 2018. Exports dropped 4.3% in October.
Last Tuesday's Global Dairy Trade Pulse saw 4.86 million pounds of product sold, mirroring the previous Pulse quantity. HGD reported that 98% of the total offered was sold, with less regular whole milk powder and more instant whole milk powder versus the last Pulse. The price on skim milk powder was down slightly from the previous Pulse, while the price on whole milk powder was up slightly.
In politics, the International Dairy Foods Assn. shared its federal policy priorities last Monday with President-elect Trump's transition team. IDFA President and CEO Michael Dykes, said, "IDFA and its more than 300 members are looking to the new administration to help U.S. dairy drive innovation, reduce barriers to business efficiency, and open new market access for healthy, nutritious U.S. dairy products around the world."
Dykes said, "U.S. dairy is the most productive in the world, but workforce challenges, dwindling export market opportunities and burdensome regulations are creating uncertainty for our industry. By presenting these policy priorities, we are looking for areas of collaboration with the Trump administration so U.S. dairy farmers and processors can usher in a new golden age in healthy, high-quality, U.S. dairy nutrition."
Meanwhile, the National Milk Producers Federation thanked the Dietary Guidelines Advisory Committee last week for "recognizing dairy's important role in a healthy diet and its continued recommendation of three servings of dairy for Americans two years and older."
"Throughout this process, the committee looked carefully at the nutrition dairy products provide," said a NMPF press release. "The committee's scientific review showed that reducing or eliminating dairy from the diet leads to undernourishment in key nutrients for millions of Americans."
"The review also made clear that expanding the food group to include additional plant-based alternative beverages outside of fortified soy is not supported by scientific evidence." Specifically, the committee noted, "the direct substitution of plant-based milk alternatives for cow's milk within the patterns may introduce unintended consequences for meeting other nutrient recommendations and may vary by product selected. This is especially important, as the dietary guidelines greatly affect the food options available to children through school meals and other nutrition programs.
"NMPF also thanks the committee for acknowledging that dairy is an equitable option that provides accessible and affordable sources of essential nutrients to everyone, and that lactose-free and lactose-reduced dairy foods can provide those same nutrients for people who may not be able to tolerate regular dairy.
"We are disappointed that the committee only recommends consumption of unflavored milk, especially as they acknowledged that flavored milk contains beneficial nutrients and did not explicitly conclude any connection between flavored milk consumption and obesity risk."
NMPF said, "It is reassuring that the committee came to multiple conclusions supporting dairy that are backed by decades of scientific evidence. We encourage the agencies to look further into recent science supporting the benefits of whole milk in the diet."
"The committee found evidence that substituting higher-fat dairy with lower-fat dairy showed no association with cardiovascular disease morbidity, and it also found evidence of positive benefits for growth and bone health specifically related to whole milk consumption by young children. We see these conclusions as positive steps. We will continue to advocate for consideration of full-fat dairy in the final dietary guidelines expected to be released next year," NMPF stated.
Closing on a happy note, "Class I milk activity has been busy this fall," according to DMN. "Demand for bottled milk has been strong the past few months. Demand for other Class I bottling has also picked up in recent weeks. Demand for milk for Class III also continues to be strong. Midwest spot milk prices were anywhere from $3 under Class III to flat class," according to DMN.
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