Milk production forecasts for 2022 and 2023 were raised from last month in Friday morning’s World Agricultural Supply and Demand Estimates report (WASDE). The cow inventory was raised in both years based on the July 1 dairy cow inventory provided in the recent Cattle report. Output-per-cow was forecast to increase at a slightly more rapid pace in 2022 and the 2023 forecast was raised as well. 

2022 production and marketings were estimated at 226.8 and 225.7 billion pounds respectively, up 800 million pounds on both from last month’s estimates. If realized, 2022 production and marketings would both be up 500 million pounds or just 0.2% from 2021. 

2023 production and marketings were estimated at 229.2 and 228.1 billion pounds respectively, up 900 million pounds on production and up 800 million on marketings. If realized, 2023 production would be up 2.4 billion pounds or 1.1% from 2022 and marketings would be up 2.4 billion pounds or 1.1%

Forecasts for 2022 butter prices were raised slightly from last month on current price strength, but the 2022 cheese price was forecast lower with expectations of larger supplies and continued large stocks. Forecasts for nonfat dry milk (NDM) and whey prices were also lower on observed prices and expected supplies. 

Forecasts for 2023 cheese, butter, NDM, and whey prices were all lowered on expectations of greater supplies and strong competition in international markets. With lower product prices, the Class III and IV price forecasts were lowered. 

 The Global Dairy Trade auction held its first GDT “Pulse” on August 9 with 2.1 million pounds of Fonterra whole milk powder being offered. The resulting price averaged $3,425 U.S. per metric ton after 5 minutes of trading. There were 33 participating bidders and 15 winning bidders, compared to the regular event which draws well over 100. The price was down $95 per metric ton or 2.7% from the August 2 main event, according to HighGround Dairy.

“China demand still remains a big question,” says StoneX. “Their demand has been poor recently and we expect that will continue for at least a few more months. Whole milk powder in particular has been an area of weakness and this has carried through to declining prices across the GDT.” Other regions have stepped up to purchase some of the difference, StoneX concludes, “but the volume lost is hard to fully cover so prices likely won’t see a change in trend until we see China demand revive.” 

Cash dairy product prices at the Chicago Mercantile Exchange strengthened the second week of August from the week before, with the exception of butter. The week was a little lean on USDA fodder for the dairy markets to feed on. 

Speaking in the August 15 Dairy Radio Now broadcast, broker Dave Kurzawski said the best possible job right now could be an export sales manager for a major cheese company because “the job will do itself.” “We have really attractive prices,” he reasoned, “and European cheese manufacturers who would normally be highly competitive against the U.S. in certain markets, are just not going to be there like they have been in the past, due to weather issues, energy issues, or shipping issues. The U.S. manufacturer has a real good shot at getting extra business as we go forward the next few months,” he concluded, so he doesn’t see much downside for cheese ahead. 

Cash butter closed at $2.9350 per pound Friday, down 7.50 cents on the week but $1.2650 above a year ago, though the $3 mark seems to have some magnetic qualities at play. There were 34 sales reported on the week.

Central butter producers are starting to see tighter cream supplies, according to DMN, and with prices hovering around $3, they are willing to bid a little higher on multiples. There has also been an increase in micro-fixing, a procedure of cutting one pound blocks or sticks from larger frozen blocks, however that requires additional employees and staffing concerns remain. Butter sales are seasonally fair. Some producers say they are seeing slight upticks in recent weeks, as customers begin fall inventory preparations.

Cream volumes continue to decline in the West, says DMN, as high seasonal temperatures negatively affect milk output. Strong demand for cream is present. Seasonally climbing cream multiples and labor shortages have contributed to some butter makers selling loads of cream. Butter output is steady to lower as labor shortages and high temperatures cause plants to run reduced schedules. Demand for butter in retail and food service continues to soften. 

Sales of butter are down compared to this time last year, but “some are optimistic that they will increase in the coming weeks as customers prepare for increased fall baking demand,” says DMN.

In politics, the National Milk Producers Federation (NMPF) commended the inclusion of $20 billion in new funding for USDA conservation programs in the “Inflation Reduction Act” which passed the Senate. 

An NMPF press release stated; “The funding, spearheaded by Senate Agriculture Committee Chairwoman Debbie Stabenow, D-MI, will help dairy farmers advance their proactive sustainability leadership by enhancing farm bill conservation programs with an emphasis on key dairy areas of opportunity, including feed management. The new investments will provide important voluntary technical assistance to dairy farmers who undertake such stewardship practices, including targeted new funding that emphasizes critical farm practices that yield significant environmental benefits for dairy.”

“Dairy farmers seize environmental sustainability opportunities whenever possible,” said Jim Mulhern, NMPF president and CEO. “The funding increases in this package will better position dairy farmers to effectively implement the dairy sector’s Net Zero Initiative and fulfill its 2050 environmental stewardship goals. We are very grateful to Chairwoman Stabenow for her success and leadership in securing this meaningful new conservation investment, which will be a game-changer for dairy.”

Milk flows are seasonally trending lower across most of the U.S., according to DMN’s weekly update. Aside from a few pockets, combinations of high temperatures, high humidity, and drought are pressing milk volumes lower. Class I sales are picking up as schools restarting has school districts placing orders. The upswing of milk bottling has caused some milk to bypass manufacturing. 

Looking internationally, the global market is having an impact on the Australian wheat price, according to DMN. Local prices are reportedly up, on average. This, with other factors, such as elevated grain and fertilizer prices, along with natural gas prices, have created an upward shift in the Australian farmgate milk price. Nonetheless, labor shortages continue to be a problem as farmers compete for workers. The result of the shortages has been elevated industry exoduses by dairy farmers and reductions in herd sizes, says DMN.

More than 1,500 dairy farms have reportedly exited the industry since 2016, diminishing Australian milk production from 9.5 billion liters in 2015-2016 to 8.8 billion liters in 2020-2021. Meanwhile, the risk to margins is ongoing and are projected to offset the strong milk prices and projected promising seasonal conditions. Sources anticipate a flat milk pool for the new season as major retailers now propose to increase the retail store milk price.

While it is early in the season, DMN warns that the impact of weather conditions in New Zealand must be considered there. Soil moisture level is currently being supported by a stream of warm temperatures, following heavy rainfall in much of the country, as market sources expect milk solids for the season to rise 4% over last season. New Zealand’s latest milk solids numbers rose above the previously projected output level. The June forecast ended the month up 1.1% year-over-year, although initially projecting a 0.4% decline, says DMN.