More milk is on its way. The Agriculture Department raised its estimate on 2021 milk production in the latest World Agricultural Supply and Demand Estimates report issued April 9, based “primarily on increased cow numbers.”

2021 production and marketings were estimated at 227.7 and 226.7 billion pounds respectively, up 400 million pounds on both. If realized, 2021 production would be up 4.5 billion pounds or 2.0% from 2020. 

The 2021 fat basis import forecast was reduced while fat basis exports were raised on higher expected shipments of cheese. The skim-solids basis import forecast was reduced on lower imports of milk proteins and several other dairy products while the export forecast was raised on strong gains in shipments of skim milk powders and whey. Lactose shipments remain relatively weak. 

Dairy product price forecasts were raised on improving demand, both domestically and in international markets. Prices of cheese, butter, nonfat dry milk, and whey were raised, boosting both Class III and Class IV prices.

Look for a 2021 Class III milk price average of about $17.10 per hundredweight, up 35 cents from last month’s estimate, and compares to the 2020 average of $18.16 and $16.95 in 2019.

The 2021 Class IV milk price is now estimated to average $15.15, up 70 cents from a month ago, and compares to $13.49 in 2020 and $16.30 in 2019.

In the week ending March 27, 65,900 dairy cows were sent to slaughter, up 3,600 from the previous week but 1,600 or 2.4% less than that week a year ago. 

The April 6 Global Dairy Trade auction reversed gears again. The weighted average inched back up 0.3%, after dropping 3.8% on March 16. Traders brought 55.3 million pounds of product to market, down from 59.2 million in the last event, and the average winning price was $4,081, down from $4,089.

Buttermilk powder led the gains, up 17.6%. It did not trade in the last event. GDT Cheddar was up 2.2% and butter was up 2.0%, after falling 2.8% last time. Anhydrous milkfat inched 0.8% higher, following a 3.7% rise. Skim milk powder was up 0.6%, after inching 0.7% higher, and lactose was down 6.5%, after shooting up 8.6% last time.

StoneX Group says the GDT 80% butterfat butter price equates to $2.5558 per pound U.S., up 5.2 cents, and compares to CME butter which closed Friday at $1.88. GDT Cheddar, at $1.9928 per pound, compares to Friday’s CME block Cheddar at $1.83. GDT skim milk powder averaged $1.5272 per pound, up from $1.5197, and whole milk powder averaged $1.8531 per pound, up from $1.8521. CME Grade A nonfat dry milk closed Friday at $1.2050 per pound.

Speaking of trade, the U.S. had a good February. StoneX Dairy reported that U.S. milk equivalent exports were up 16.3% from February 2020 when adjusted, and broker Dave Kurzawski talked about it in the April 12 Dairy Radio Now broadcast.

Nonfat dry milk/skim milk powder exports hit 157.8 million pounds, up 36.1% from a year ago, adjusted for the Leap Day, and up 11.2% year to date. Kurzawski said that powder exports to Mexico were up 27%.

Dry whey exports were good, thanks to China likely being the largest buyer of U.S. dry whey right now, up 22% from a year ago, according to Kurzawski.

Cheese exports totaled 66.5 million pounds, up just 1.1% from a year ago but down 3.9% for the two month period. However, February Cheddar exports were up 23.7%, according to Kurzawski.

Butter exports, which pale in comparison to powder for example, totaled 7.6 million pounds, but up 120.4% from a year ago and up 102.3% year to date. 

Kurzawski admitted that we are comparing against some weaker numbers a year ago and that may account for some of the percentage increases this year however, “The absolute numbers are above our expectations,” he said.

Block and barrel cheese producers reported strengthening food service demand this week, according to Dairy Market News. Some barrel producers said that April and May interests kept them from bringing loads to the spot market. Some Cheddar and jack cheese makers reported similar buyer interest. Cheese production is steady to ticking higher in plants throughout the Midwest though spot milk availability varies. Some milk prices were above the previous few weeks but some were $5 under Class. A number of contacts suggest growing food service demand has kept milk availability a little tighter and “Cheese market tones are steady to slightly bullish,” says DMN.

Central butter producers tell DMN that the culmination of spring holidays did not move the needle regarding general week to week activities. Cream multiples are similar to previous weeks, though cream is still tighter than it was throughout most of first quarter. Still, butter makers report there are cream multiples in the low/mid 1.20s, but they are becoming more limited. Butter plant managers say food service sales have maintained strength for three to four consecutive weeks but retail sales are on a steady seasonal decline. 

Grade A nonfat dry milk finished Friday at $1.2050 per pound, up 1.50 cents on the week and 30.75 cents above a year ago, with 7 cars finding new homes on the week.

CME dry whey saw its first price decline since March 10 this week and slipped to a Friday close of 63 cents per pound, 3 cents lower on the week but 28 cents above a year ago. There were two trades on the week at the CME.

A quick footnote on the whey. There’s a lot of concern about growing outbreaks of African Swine Fever in China, according to StoneX, “which has implications for dairy as well as grain markets.”

The dairy markets are doing well, much to the credit of growing restaurant trade and consumer demand. Interestingly, StoneX April 6 Early Morning Update stated that on Friday, April 2, TSA screened just over 1.5 million people at airports nationwide. It was the highest number recorded since March 12, 2020 which is actually the day before COVID was declared a national emergency. People were comfortable traveling and most likely shared meals with family members at home or restaurants,” says StoneX.

On farm dairy margins were “flat to slightly higher over the second half of March, with significant volatility in nearby milk futures contracts and new life of contract highs in deferred months further out on the curve,” says the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.

“The market remains supported by strong demand against a backdrop of surging milk production and increasing dairy product inventories,” the MW warned. “USDA’s Milk Production report showed February output at 17.63 billion pounds, up 2.1% from last year and the ninth consecutive month of increased milk production. January’s output was also revised higher to reflect 2.4% year-over year growth. Much of this increased output is being fueled by a larger milking herd which increased to 9.458 million cows in February, up 3,000 from January and 81,000 more than a year ago. The dairy herd is the largest since 1995 and strong production is expected to continue through the spring flush.”