Dairy farm milk production continues to struggle and remained below a year ago for the seventh consecutive month. The USDA’s preliminary data for January showed output at 19.09 billion pounds, down 1.1 percent from January 2023.The top 24 state total, at 18.3 billion pounds, was down 0.9 percent.

This was the biggest decline in milk output since January 2022, however, components were very strong, with component adjusted production increasing from plus 0.7 percent to plus 1.0 percent, according to StoneX broker Dave Kurzawski in the Feb. 26 “Dairy Radio Now” broadcast.

The December 50 state total was revised down 10 million pounds from last month’s estimate, which put output down 0.4 percent from 2022, instead of the 0.3 percent originally reported. The 24 state revision was down 8 million pounds, down 0.2 percent, instead of the 0.1 percent reported.

Nobody expected that, Kurzawski said, but the biggest surprise was cow numbers. January cows totaled 9.325 million, down 23,000 from the December count, which was revised 9,000 head lower, and is down 76,000 or 0.8 percent from a year ago. The herd peaked at 9.433 million head in March last year but is the smallest since August 2019. The 24 state January count, at 8.87 million head, was down 21,000 from the December count, which was revised down 7 million, and is 49,000 below a year ago.

“Generally we add cows in first quarter,” he said, “but we lost 23,000, however that’s only one side the equation.” The data is also interesting, considering January slaughter numbers ran 20 percent below a year ago and heifers are limited.

Output per cow in the 50 states averaged 2,047 pounds, up 32 pounds from December, but 7 pounds or 0.3 percent below January 2023. The 24 state average, at 2,062 pounds, was up 40 pounds from December but 9 pounds or 0.04 percent below a year ago.

The report shows there’s problems on the farm, Kurzawski said, and we have new processing coming online mid-year and into 2025. “We’re not going into that on a real strong footing on the farm and people need to pay attention to that,” he said. “We believe output will grow in the second half however we have lowered our estimate for the year to a plus 0.2 percent and that might be a little rich.”

The tally for 2023 milk production is 226.36 billion pounds, down 0.02 percentfrom 2022. Revisions to 2022 output decreased the annual total 46 million pounds. Revised 2023 output was down 187 million pounds from last month’s estimate. Annual total milk production has increased 9.9 percent from 2014, according to the USDA. Production per cow averaged 24,117 pounds, up 30 pounds from 2022. The average annual rate of output per cow has increased 8.4 percent from 2014.

The average number of milk cows on U.S. farms in 2023 was revised down 9,000 head to 9.39 million, according to the USDA, down 0.1 percent from 2022. The average cow number has increased 1.3 percent from 2014.

Meanwhile, dairy cow culling jumped the first month of 2024. The latest Livestock Slaughter report showed an estimated 250,200 head were sent to slaughter under federal inspection in January, up 25,500 head from December, but that was 47,700 head or 16.0 percent below January 2023.

The week ending Feb. 10 saw 61,700 head go to slaughter, up 1,700 from the previous week, but 5,700 or 8.5 percent below a year ago. Year to date, 337,400 head have been culled so far, down 68,600 or 16.9 percent from a year ago.

CME block Cheddar closed the last Friday of February at $1.55 per pound, up 7 cents on the President’s Day holiday shortened week and reversed two weeks of decline, as traders anticipated the afternoon’s January Cold Storage report. The blocks closed 33 cents below that week a year ago.

The barrels finished at $1.6150, 0.75 cents higher, 0.75 cents above a year ago, and 6.50 cents above the blocks. Sales totaled 19 loads of block and six of barrel.

Cheese buying interest remains quiet according to most Midwest contacts, says Dairy Market News. Barrel producers say orders are steady, if not strong. “Loads are going at above-market pricing, and if one customer backs away, another one will step in,” says DMN. Milk pricing was holding around Class III for the most part, ranging 50 cents under to 50 cents over at mid-week. Last year, the range was $10-$2.50-under Class III. Cheese production has held steadier in recent weeks, says DMN, as Cheddar inventories are slowly increasing in the region.

Retail cheese demand is steady to lighter in the West. Food service is stronger, and international demand is steady to moderate. Milk availability varies from “somewhat tighter to somewhat looser.” A health safety recall of product by an ethnic cheese manufacturer and a major processor scheduling some downtime for a system changeover, was expected to further contribute to milk availability and tighten available processing capacity for some parts of the West. Cheese makers note steady production and a few note near term inventories are tight.

Butter remains strong, closing Friday at $2.85 per pound, up 10 cents on the week, highest since Nov. 7, 2023, and 42 cents above a year ago, with 24 sales.

Cream is still abundant in the Midwest and a number of contacts expect that to continue for the month. Cream multiples are hovering at market up to 1.15 for churners. Slower ice cream production remains a factor. Butter demand is seasonally standard both in food service and retail, says DMN.

There’s plenty of cream in the West and churns are busy or near capacity as manufacturers build inventory for second and third quarter demand. Some contacts say butter supplies are tighter compared to the last couple years. Unsalted butter loads are somewhat tight while domestic demand is stronger. International inquiries have been more frequent and export demand is steady.

Grade A nonfat dry milk climbed to a Friday finish at $1.20 per pound, 3 cents higher on the week but 1.50 cents below a year ago, with 15 sales for the week.

“Dairy margins improved modestly over the first half of February as projected feed costs declined to new lows while milk prices were steady to slightly weaker,” according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC. “CME Class 3 milk futures continued their recovery that started in late January,” the MW stated, “but have since backed off the past couple weeks.”

Cheese production and demand have been improving, helping to support Class 3 prices.” The MW reported highlights from the latest Dairy Products report and warned, “The export market will need to improve in 2024 to help support higher dairy product values and milk prices. Recent declines in EU milk production are ‘encouraging,’” the MW stated. It also reported “2023 U.S. dairy product exports totaled slightly more than 5.8 billion pounds, down 7.3 percent from the prior year and the lowest annual volume since 2020. A struggling global economy led by weak demand in China worked against exports last year,” according to the MW.