The Agriculture Department lowered its estimate for 2021 milk production in the latest World Agricultural Supply and Demand Estimates (WASDE) report, fourth month in a row, and lowered its 2022 estimate, citing lower dairy cow numbers and output per cow.

2021 production and marketings were estimated at 227.0 and 226.0 billion pounds respectively, down 800 million pounds on production from last month’s estimates, and 700 million lower on marketings. If realized, 2021 production would still be up 3.8 billion pounds or 1.7 percent from 2020.

2022 production and marketings were estimated at 229.7 and 228.6 billion pounds respectively, down 900 million pounds on both. If realized, 2022 production would be up 2.7 billion pounds or 1.2 percent from 2021.

Cheese, nonfat dry milk (NDM), and whey price forecasts for 2021 were raised, based on current prices and lower expected production. The butter price was lowered slightly. All dairy product prices for 2022 were raised, largely on tighter supplies, according to the WASDE.

The 2021 cheese price average was projected at $1.68 per pound, up 40 cents from last month’s estimate, and compares to $1.9236 in 2020 and $1.7586 in 2019. The 2022 average was projected at $1.7150, up 6 cents from last month.

The 2021 butter price average was projected at $1.6850 per pound, down a nickel from a month ago, and compares to $1.5808 in 2020 and $2.2431 in 2019. The 2022 average was put at $1.7550 per pound, up 2.50 cents.

NFDM was projected to average $1.2450 per pound in 2021, up 2 cents from last month’s estimate, and compares to $1.0417 in 2020 and $1.0419 in 2019. The 2022 average will climb to $1.38, up 11 cents from what was expected last month.

Whey was projected to average 56.50 cents per pound in 2021, up a penny from last month, and compares to 36.21 cents in 2020 and 37.99 cents in 2019. The 2022 average will slip to 51 cents, up a penny from last month’s estimate.

Look for the 2021 Class III milk price to average $17.05 per hundredweight, up 40 cents from last month’s projection, and compares to $18.16 in 2020 and $16.96 in 2019. The 2022 Average was estimated at $17.10, up 65 cents.

The 2021 Class IV average was pegged at $15.70, up 15 cents from a month ago, and compares to $13.49 in 2020 and $16.30 in 2019. The 2022 average was projected to hit $17.15, up $1.10 from last month’s estimate.

In the week ending Oct. 2, 60,700 dairy cows were sent to slaughter, up 300 from the previous week, and 2,900 or 5 percent above that week a year ago. The 4-week rolling total is up 4.53 percent from a year ago, according to StoneX, as cull prices continue to hold a premium over last year’s levels.

Analyst and editor of the Dairy and Food Market Analyst newsletter, Matt Gould, said in the Oct. 18 ‘Dairy Radio Now’ broadcast that the WASDE recognized the tight margins on dairy farms where either the milk price hasn’t been high enough or feed prices haven’t been low enough and the breakeven level is not being met.

He said New Mexico was hit the hardest and where, in the past 100 days or so, 15,000 cows came up for auction. He concluded saying the report had good news on feed but, “We’re far from a world where we’re talking about cheap feed. With corn at $5 per bushel and higher, it costs significantly more to feed a cow this year than it did last year,” and farmers tell him, their break evens are $2-3 higher this year than they were a year ago, and run around $18.80 per cwt.

CME Cheddar block cheese fell to $1.76 per pound Wednesday but closed Friday at $1.78, down 3 cents on the week and 94 cents below a year ago. The barrels closed at $1.79, unchanged, after five consecutive weeks of gain, but are 41.50 cents below a year ago and an inverted penny above the blocks. First inversion since June 24. There were 9 sales of block on the week at the CME and 8 of barrel.

Central cheesemakers tell Dairy Market News there is plenty of milk available and was being offered from $1 under Class to just over. Labor shortages remain. Cheese demand for many varieties is “seasonally healthy,” and curd and barrel producers report not being able to produce enough, due to staffing shortages.

Western food service and retail cheese demand is holding steady. International demand is increasing as contacts note stronger interest from Mexico and Asia. Port congestion and a shortage of truck drivers continues to cause delays. Delivery delays are, reportedly, causing warehouse inventories to build. Cheese production is mixed but milk supplies are available. Some producers are running full schedules while others are below capacity due to labor shortages, DMN said.

Food service cheese sales have done well most of the year, StoneX said. “From a dollars perspective, food service sales were up 27.6 percent YOY in August. It’s pretty clear that these sales have been the driving force behind the recent gains in U.S. dairy consumption. That said, we did see a small slowdown in September as additional COVID restrictions were put in place.”

Contacts tell the Dairy and Food Market Analyst they are seeing a surge in inquiries from international customers for milk powder, butter and cheese. Editor and analyst Matt Gould wrote in his Oct. 8 edition, “We continue to believe that the dairy industry is managing thru the congestion, which is producing greater exports. Contacts are not reporting a significant worsening in access to sea freight. This despite ridiculous conditions at our ports. At the moment, there are two ships that have been waiting more than 20 days to dock at the Port of Los Angeles and 75 that are waiting to dock outside of Los Angeles/Long Beach. Congestion has also increased in the Gulf and the East.

“Even still, shipping costs may finally be leveling out. Spot rates from Los Angeles, California to Shanghai, China decreased by 5 percent this week and have fallen by 8.8 percent in the last month.”

Final 2020 consumption data confirms Americans love dairy. For the third consecutive year, per-capita dairy consumption increased, jumping to 655 pounds per person, up from 653 pounds in 2019, “showing a resilience,” said the National Milk Producers Federation.

Sad to say, fluid milk consumption continues to struggle, though it improved some from the previous month. USDA’s latest data shows August sales of packaged fluid milk products totaled 3.6 billion pounds, down 1.7 percent from August 2020, after plummeting 6.3 percent in July.

Conventional product sales totaled 3.4 billion pounds, down 1.7 percent from a year ago. Organic products, at 228 million pounds, were also down 1.7 percent, and represented 6.3 percent of total sales for the month.

Total packaged fluid milk sales for the eight months amounted to 29.2 billion pounds, down 4.8 percent from 2020. Conventional product sales totaled 27.3 billion pounds, down 5 percent. Organic products, at 1.9 billion, were down 2 percent, and represented 6.4 percent of total milk sales for the period.