The Agriculture Department lowered its 2021 milk production estimate in its World Agricultural Supply and Demand Estimates (WASDE), as slower-than-expected growth in milk per cow more than offset higher forecast cow numbers.

The 2022 production estimate was raised however, based on higher expected cow numbers. The WASDE stated that USDA’s Cattle report, to be released on July 23, will provide a mid-year estimate of the cow inventory and producer intentions regarding retention of heifers for dairy cow replacement. 

2021 production and marketings were estimated at 228.2 and 227.2 billion pounds respectively, down 300 million pounds on production from last month’s estimates and 200 million pounds less on marketings. If realized, 2021 production would still be up 5 billion pounds or 2.2% from 2020. 

2022 production and marketings were estimated at 231.6 and 230.5 billion pounds respectively, up 500 million pounds on both. If realized, 2022 production would be up 3.4 billion pounds or 1.5% from 2021. 

Cheese, butter, nonfat dry milk (NDM), and whey price forecasts for 2021 were lowered from last month on relatively high stocks and weaker-than-previously-expected demand. As a result, Class III and Class IV prices were lowered.

USDA analysts project a 2021 Class III average of $16.80 per hundredweight (cwt.), down 65 cents from last month’s projection, and compares to $18.16 in 2020 and $16.96 in 2019. Thursday’s futures settlements, added to the already announced Class III prices, would portend a $17.23 average for 2021. The 2022 average was estimated at $16.75, down 40 cents from last month’s estimate.

The 2021 Class IV average was estimated at $15.40, down 45 cents from last month, and compares to $13.49 in 2020 and $16.30 in 2019. The 2022 Class IV average was projected at $15.75, down 20 cents from a month ago.

Price forecasts for cheese and butter in 2022 were lowered on larger expected stocks and higher production, but forecasts for NDM and whey were unchanged. 

Dairy economist and principal Bill Brooks, of Missouri-based Stoneheart Consulting, reported in the July 19 Dairy Radio Now broadcast that dairy farm profitability this year will be about $1.81 per cwt. below that of a year ago, based on July 12 futures prices, and $1.17 below the five-year average. On a brighter note, he said profitability looks a little more promising next year.

In the week ending July 3, 52,900 dairy cows were sent to slaughter, down 2,900 from the previous week but 6,500 or 14.0% above that week a year ago.

Dairy demand remains good, according to USDA’s latest data. May total cheese demand was down 4.7% from the record set in April, but was 1.7% above May 2020, the fifth consecutive month to top a year ago, and up 6.1% year to date

Butter disappearance was up 4.5% from April but 1.0% below a year ago, though year to date is up 4.4%.

There was lots of red ink on the powder. Nonfat dry milk and skim milk powder was down 15.4% from April and 21.4% below a year ago. HighGround Dairy points out that while nonfat dry milk exports jumped to another record high into May, it was not enough to overcome a steep decline in domestic disappearance.

Dry whey was down 11.5% from April, weakest May volume on record due to weak domestic demand, according to HGD, and was 4.6% below a year ago.

Fluid milk sales continue to falter. May sales totaled 3.6 billion pounds of packaged fluid products, down 4.3% from May 2020. Conventional product sales totaled 3.4 billion pounds, down 3.9% from a year ago. Organic products, at 225 million, were down 10.6%, and represented 6.2% of total sales for May.

Whole milk sales totaled 1.2 billion pounds, down 9.7% from a year ago, with year to date consumption down 8.3% from a year ago. Whole milk represented 32.4% of total milk sales for the five month period.

May skim milk sales, at 203 million pounds, were down 15.3% from a year ago and down 14.7% year to date.

Total packaged fluid milk sales for the five months amounted to 18.7 billion pounds, down 4.8% from 2020. Conventional product sales totaled 17.5 billion pounds, down 5.1%. Organic products, at 1.2 billion pounds, were down 0.4%, and represented 6.4% of total milk sales for the period. The figures represent consumption in Federal milk marketing order areas, which account for approximately 92% of total fluid milk sales in the U.S. 

Checking CME dairy prices; the 40 pound Cheddar blocks climbed to $1.7525 per pound Tuesday, highest since May 13, but then came Wednesday and prices retreated from there. They closed the third Friday of the month at $1.6150, down 11 cents on the week and $1.0450 below a year ago when they plunged 25.50 cents, after setting a new record high of $3.00 per pound on July 13.

The 500 pound barrels got to $1.6475 Tuesday, highest since June 15, but saw their Friday close at $1.44, down 14 cents, 99 cents below a year ago, and 17.50 cents below the blocks. 7 cars of block were sold on the week and 27 of barrel.

Spot milk remains widely available in the Midwest, according to Dairy Market News. Cheese production is busy, but a growing number of cheesemakers are staying clear of the spot milk market as they already have plenty. Staffing and labor shortages are becoming more problematic. Cheese demand is steady to busy. Food service orders from the Eastern region, namely pizza cheese buyers, are keeping Midwestern producers busy, says DMN.

The continuing shortage of containers for 640-pound cheese is raising concern on the effect on prices. StoneX speculates; “It would seem if we have an issue with 640’s, production will flip to 40’s and that would mean more lots available to come to spot but it also likely means that the blocks will remain a bit tighter. 

That could shift some production to the barrels as well, leaving them a bit over supplied, and could result in a wider block/barrel spread for a period of time.” 

StoneX adds that; “One area we believe may be underestimated by the trade is schools opening up this August and September. And not just schools, but the expected bump in food service as people cover their grills and eat out more. In fact the confluence of both of these factors is normally known and priced in. But this year it’s worth asking if the supply chains have what they need.”

Grade A nonfat dry milk saw some ups and downs but ended Friday at $1.2525, 0.25 cents higher on the week and 25.25 cents above a year ago, with 13 trades.

Exports are still helping to keep this market above $1.20, says StoneX, with Mexico holding a large role in keeping demand strong.

Dry whey closed at 53.75 cents per pound, up 3 cents on the week and 20.25 cents above a year ago, on 5 sales.

In politics; the Food and Drug Administration announced a final rule on the standards of identity for yogurt. The National Milk Producers Federation says the new rule defines what is and isn’t yogurt and “has much broader, and potentially very positive, implications in one of the most contested consumer issues of the day, the proper labeling of milk and dairy products.” 

The new rule is modernized to fit changes in yogurt-making technology, according to NMPF, and revokes the previous individual standards of identity for low-fat and nonfat yogurt. Compliance is expected by Jan. 1, 2024. 

“The new rule is rooted in a response to a citizen’s petition from the National Yogurt Association filed in February 2000,” NMPF stated. “The slow pace isn’t unusual, unfortunately, and undoubtedly there will be quibbles with some details of the 22-page document.” NMPF says “FDA’s decision is important: It defends principles that support transparent food labeling and protects consumers. And those principles matter well beyond yogurt, with the FDA promising a review of a much larger issue, the labeling of plant-based milk alternatives by next June.”

Dairy processors don’t agree however and have filed a formal objection to the rule. Dr. Joseph Scimeca, Senior Vice President of Regulatory and Scientific Affairs for the International Dairy Foods Association (IDFA), stated “After 40 years of waiting since FDA first issued standards for yogurt, the FDA dropped a new final rule on the standard of identity for yogurt in late June, underscoring a lack of transparency in the FDA rulemaking process. Because the rulemaking process has been so severely delayed and because the agency has consulted very little with yogurt makers, the final rule is already out of date before it takes effect. For the most part, FDA relied on comments submitted 12 or more years ago to formulate its final rule, as if technology has not progressed or as if the yogurt making process itself has been trapped in amber like a prehistoric fossil.”

 “Although the IDFA, which represents the nation’s yogurt makers, has been offering feedback or assistance to the FDA since it released its initial proposed rule in 2009, the agency has largely ignored our comments and suggested revisions to ensure a modernized standard. The result is a yogurt standard that is woefully behind the times and doesn’t match the reality of today’s food processing environment or the expectations of consumers. Unfortunately, IDFA has been left with no reasonable options except filing a formal objection to this final rule and imploring the agency to revisit the final rule to amend and truly modernize the standard of identity for yogurt.”