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Few replacement cows are out there; herds are not growing
Mielke Market Weekly
By Lee Mielke
 The USDA left its 2024 and 2025 milk production forecasts in its latest World Agriculture Supply and Demand Estimates report unchanged, with slight adjustments to cow inventories offset by slower growth in milk per cow.
2024 production and marketings were projected at 227.3 and 226.3 billion pounds respectively, unchanged on both from last month’s estimate. If realized, both would be 900,000 pounds or 0.4 percent from 2023.
2025 production and marketings were projected at 229.3 and 228.3 billion pounds respectively. If realized, both would be up 2 billion pounds or 0.9 percent from 2024.
Commercial exports for 2024 were raised on a fat basis, largely due to higher expected shipments of cheese. Skim-solids basis exports were unchanged. Exports were raised for 2025 on a fat basis and a skim-solids basis based on expectations of continued strong international demand.
Imports for 2024 were raised for both a fat and skim-solids basis, supported by higher expected butter and milk protein containing products, respectively. Import forecasts for 2025 were raised as well.
Butter, cheese, whey, and nonfat dry milk (NDM) price forecasts for 2023 were raised from the previous month on recent price strength. Cheese is expected to average $1.79 per pound in 2024, up 9.50 cents from last month’s projection, and compares to $1.7593 in 2023 and $2.1122 in 2022. The 2025 average was projected at $1.7950, up 13 cents from last month’s estimate.
Butter was projected to average $2.97 per pound for 2024, up 3.50 cents from last month’s estimate, and compares to $2.6170 in 2023 and $2.8665 in 2022. The 2025 average was projected at $2.9450, up 3 cents from last month.
The 2023 nonfat dry milk average was estimated at $1.1750 per pound, up from $1.16 last month, and compares to the 2023 average of $1.1856 and $1.6851 in 2022. The 2025 average forecast was kept at $1.14 per pound.
Dry whey is expected to average 43.50 cents per pound in 2024, up 3.50 cents from last month’s estimate, and compares to 36.18 in 2023 and 60.57 in 2022. The 2025 forecast is 40 cents per pound, up 2.50 cents from last month.
With the changes in product prices, Class III and Class IV milk prices were raised. The 2024 Class III is expected to average $17.90 per cwt, up $1.15 from last month’s estimate, and compares to the 2023 average of $17.02 and $21.96 in 2022. The 2025 average was estimated at $17.70, up $1.40 from a month ago.
The Class IV is projected to average $20.50 per cwt. in 2024, up 25 cents from a month ago, and compares to $19.12 in 2023 and $24.47 in 2022. The 2025 projection at $20.10, is up 15 cents from what was expected a month ago. Strong demand for dairy products is expected to carry into 2025, according to the USDA.
Dairy prices were mostly higher mid-June except for butter. The Cheddar blocks climbed to $1.9825 per pound Thursday, highest since Aug. 31, 2023, but closed Friday at $1.97, up 12.50 cents on the week and 59.50 cents above a year ago.
The barrels finished at $2.02, 6.50 cents higher but 10.50 cents below its May 17 high for 2024, 49.50 cents above a year ago, and 5 cents above the blocks. Sales to the market of last resort totaled 17 cars of block and 13 of barrel.
“Cheese market tones continue to garner bullish tailwinds,” says Dairy Market News, and Midwest barrel processors “expect more bulls to come.” When spot barrel loads are available, they are not available for long. Mid-week spot milk prices were in line with the previous week, ranging $2- and $1-under Class III. More cheesemakers are opting for extra milk in recent weeks as they expect further tightening and continued hearty demand so production is very busy.
Cheese production is steady to lighter in the West. Milk volumes are tighter throughout much of the region as seasonal output ratchets lower. Some manufacturers cited unplanned downtime of other processors contributed to their ability to run at-or-near capacities. Cheese demand is steady domestically. International buying is steady to moderate. Some sentiment is that export sales may be more challenging in second half of 2024, according to DMN.
Cash butter started the week falling to $3.08 per pound but recovered Tuesday, climbing back to $3.1050, but closed Friday at $3.09, down a quarter-cent on the week and 72.50 cents above a year ago. There were 10 sales for the week.
Grade A nonfat dry milk closed Friday at $1.1925 per pound, down a quarter-cent on the week and 3.50 cents above a year ago, with 26 sales on the week.
StoneX pointed out that, in the 23-day month of May 85 spot loads were traded. So far in just 10 trading days in June 57 spot loads have changed hands.
Dry whey climbed to 48 cents per pound Wednesday, highest since Feb. 26, 2024, but saw its Friday finish at 47 cents per pound, unchanged on the week, but 19.50 cents above a year ago, with only three CME sales reported on the week.
Speaking in the June 17 “Dairy Radio Now” broadcast, broker Dave Kurzawski said while U.S. milk production is not terrible, “it is under some bit of duress.”
We have come out of a two-year bear market cycle that put a lot of dairy farmers on the ropes as the costs of everything has gone up, he said. Now we have the avian influenza knocking down milk output.
When asked if we have an accurate measurement of the influenza yet, he said no. He cited the USDA number of 90 dairies confirmed with it but believes it’s closer to a thousand or more and said the impact seemed to be worse in February and March than today so maybe things are changing but “It’s a big deal and it’s going to be with us for the balance of the year,” he concluded.
The June 14 “Early Morning Update” stated that we have several problems on the farm. “Slaughter is off yet the herd isn’t growing (it’s flattening out) and headline milk production is still expected to be lower. Next week we’ll get May’s milk production and we’re expecting down 0.5 percent. Granted, milk production per cow rebounded to positive in March and April and feed costs are dramatically lower. Still, we could suggest that lower slaughter numbers are normal as milk prices rise. But that may be missing the big picture.
“There are few replacement animals out there,” the Update states, “And the ones you can get your hands on will cost you dearly (reports are now over $3,000 per animal).” Add to that, avian flu where the worst cases are the older animals.
“The issues with milk production are not a July or August problem, the Update concludes. “They’re more likely a 2024/2025 problem. Maybe longer. Demand has a say and prices can still fall in this environment, but underpinning the whole deal will be this perpetual issue on the dairy farm.”
Speaking of slaughter, dairy cow numbers for the week ending June 1 totaled 42,900 head, down 4,700 from the previous week and 8,900 or 17.2 percent below a year ago.