Archive for Dairy Markets – Page 2

What goes up must come down in butter prices.

Butter price movement has been spectacular over the last two and a half months. The butter price was $2.62 on August 30th and increased by 88 1/2 cents, hitting a record high of $3.50 1/4 on October 6th. The price then dropped 90 1/4 cents to $2.60 on November 10th. We believed the end of 2021 and most of 2022 would be a crazy ride for butter, but this year has surpassed that time. Even though prices gained $1.24 1/2 from late 2021 to early 2022, the market then chopped about for a while before continuing its uptrend, finally hitting a peak on October 6, 2022, before falling again.

Nothing like the current price movement has occurred in history. The last time prices decreased this quickly was in late 2014, when the price plummeted $1.29 from September 25th to October 28th. But we’ve never seen it fluctuate so rapidly in such a short period of time.

The insane component of the butter movement was not a fear of a butter scarcity this year, as it was in 2022. Exports fell more in contrast to 2021 and early 2022. Butter exports reached 2,294 metric tons in September, a 46.4% decrease from September 2022. To make things worse, exports in September 2022 were 35.5% lower than in September 2021.

September exports were the lowest since 2020, while the monthly amount of butter exports was the lowest since November 2020.

Domestic butter demand surged as the second half of this year progressed, increasing purchasers’ willingness to acquire stock ahead of time. Butter output has also slowed, while cream supplies have tightened and churning has been decreased. As bidders got more aggressive, the expectation of increased prices became a self-fulfilling prophesy. Once the purchasing frenzy was over, sellers were more aggressive in order to shift high-priced supplies as fast as possible, resulting in a downward leap-frog effect. It is unclear how far prices will fall, but it is yet another typical example of a market that always falls faster than it rises.

Not only are we dealing with decreased milk costs and decreasing demand for fluid milk consumption, but schools are also facing a milk carton scarcity that might last many weeks or months. According to Pactiv Evergreen, the main maker of milk cartons in North America, demand for half-pint milk cartons is much more than predicted. The immediate consequences will be felt in New York, Pennsylvania, California, and Washington. School authorities are trying to find alternatives to cartons or restricting milk options. Not only are schools at risk, but so are hospitals, nursing homes, and jails. I’m not sure how demand for half-pint milk cartons can be much greater than predicted. According to fluid milk sales figures, there hasn’t been an increase in demand from schools or other organizations. It seems that this primary corporation was unable to provide its consumers, forcing them to turn to other companies for supplies or alternatives. It is undeniably an intriguing market.

U.S. Dairy Production Has A Rough Month

In September, the USDA reported a broadly mixed month for US dairy product output.

The overall cheese volume of 1.15 billion pounds was up 0.1% month on month but down 0.3% year on year, with advances in American and Hispanic cheeses wiping out losses in Italian cheeses.

In preparation for the holidays, butter output reached 145 million pounds, a 3% rise over the previous month and last year.

Dry milk product output was considerably lower, while whey product production was firm to higher, and frozen product production was lower than a year before.

The USDA will release its next set of dairy supply and demand estimates on November 9th.

Milk futures and cash dairy down Tuesday at CME

On the Chicago Mercantile Exchange, milk futures and cash dairy markets were down on Tuesday.

November Class III milk went down $0.11 to $17.06 a gallon. December’s price went down $0.24 to $16.87. January saw a $0.16 decrease to $17.04. In February, the price went down $0.15 to $17.56. Contracts for March through September varied from unchanged in May and June to fifteen cents lower in April.

The price of dry whey remained steady at $0.3850. One transaction was reported at $0.3825.

At $1.6975, forty-pound cheese bricks were down $0.0025. There were no sales registered.

Cheese barrels fell $0.0350 to $1.5450. Seven transactions were registered, with prices ranging from $1.5450 to $1.5725.

At $2.8975, butter was down $0.1125. Twelve transactions were registered, with prices ranging from $2.89 to $2.93.

Nonfat dried milk fell $0.0050 to $1.17. At that price, one sale was recorded.

Dairy Market Report: Lower production, strong domestic demand set the stage for milk price rebound

Reduced production and strong domestic consumption are showing up in dairy product production and inventory levels, offsetting weaker exports and setting the stage for the milk price rebound long foreseen in dairy futures markets and beginning to show up in dairy statistics. U.S. consumers continued their strong uptake of dairy during the summer.

READ REPORT

Health of Global Demand for Milk Powder Sparks Fear

The T.C. Jacoby Weekly Market Report Week Ending October 27, 2023

SMP fell hard at the GDT Pulse event on Tuesday. It’s too soon to know whether the Pulse auction represents a good indication of global SMP values or if it can be dismissed due to limited participation in such a nascent event. But it certainly sparked fears about the health of global demand for milk powder.

A poor showing at the Global Dairy Trade (GDT) Pulse auction spooked the milk powder markets this week and another month of disappointing trade data from China added further fright. The GDT debuted its Pulse auction in August, offering an indication of trends in whole milk powder (WMP) prices in the weeks between the full bimonthly events. This month, GDT added skim milk powder (SMP) to the Pulse docket. SMP values stabilized at the GDT in September and staged a convincing recovery in the first half of October. But SMP fell hard at the GDT Pulse event on Tuesday, retreating 4.7% from the comparable contract at last week’s full auction. WMP prices also took a step back, slipping 1.1% from last week’s mark. It’s too soon to know whether the Pulse auction represents a good indication of global SMP values or if it can be dismissed due to limited participation in such a nascent event. But it certainly sparked fears about the health of global demand for milk powder. CME spot nonfat dry milk slipped 3.5ȼ this week to $1.1975 per pound.

 

Chinese dairy import data was similarly unsettling. China brought in less than 42 million pounds of WMP in September, the lowest volume in five years. Chinese SMP imports also notched five-year lows at 43 million pounds. All told, Chinese milk powder imports fell 29.5% from year-ago volumes. These numbers are disheartening but not surprising. The product that arrived on China’s shores in September was purchased months before, at a time when China was notably absent from the global marketplace. But Chinese milk production has fallen below year-ago volumes for several months now, and Chinese buyers have been a little more active at the GDT and elsewhere. China still has large milk powder stocks, but it’s possible that China’s appetite for foreign product will improve going forward.

China’s imports of other dairy products were more reassuring. Butter and cheese imports both topped year-ago volumes once again. Chinese whey imports fell 11.6% short of the September 2022 tally, but Chinese imports of U.S. whey jumped from the very low volumes seen in February through August.

Closer to home, indications of demand were similarly mixed. USDA’s Cold Storage report showed that cheese stocks declined 23 million pounds from August to September. There were 1.47 billion pounds of cheese in refrigerated warehouses at the end of last month, up just 0.2% from September 2022. The month-to-month decline was stronger than usual, which might hint that cheese demand was better than previously thought. But it’s more likely that buyers had some catching up to do after very slow sales in August. Inventories of American-style cheeses, including the Cheddar that determines CME spot market values, hardly budged, slipping just 2 million pounds for the month. American-style cheese stocks were up 0.9% from a year ago. There simply wasn’t enough good news in the Cold Storage report to prop up prices in Chicago. CME spot Cheddar blocks fell 5.75ȼ to $1.73. Barrels slipped 2.75ȼ to $1.6825.

Butter stocks dropped 16.3 million pounds from August to September, clocking in at 275.4 million pounds. Butter stocks declined at a rapid clip in June through August, but the drawdown last some momentum in September as soaring prices det would-be buyers. September 30 stocks were much lower than those seen in 2019 through 2021, which explains why prices climbed this fall. But inventories were 3% greater than in September 2022, undermining the argument that prices should top year-ago levels. CME spot butter prices dropped hard this week, plummeting 16.75ȼ to $3.1925 per pound. As grocers and buyers finish stocking up for the holiday baking season, prices are likely to fall further, echoing last year’s sudden selloff.

As it often does, the whey market bucked the trend. CME spot whey powder climbed a half-cent this week to 40ȼ, hitting that mark for the first time since April. Dairy producers can expect 60ȼ per cwt. more from their Class III checks with whey at 40ȼ per pound than they could when it was languishing at 30ȼ. Stronger Chinese imports of U.S. whey likely helped at the margins, but the real reason for the whey rally is a dramatic increase in domestic demand for high-protein whey concentrates.

With most dairy products in the red, both Class III and Class IV futures took a sizeable step back this week. November and December Class III futures lost 72ȼ and 80ȼ, respectively. The futures forecast milk in the mid-$17s into early next year. Class IV contracts lost nearly as much ground, but prices are much, much higher. The October contract settled at $21.60, with November a dollar lower than that and December at $19.49.

Combines are rolling and grain prices are falling. December corn settled today at $4.8075 per bushel,

 

down more than 15ȼ for the week. There is plenty of corn on the U.S. balance sheet to satisfy domestic demand and keep prices relatively low. Grain values will spike if the trade becomes worried about a steep decline in South American crop prospects, which would quickly boost U.S. corn and soybean exports. But the forecast calls for showers in the driest parts of northern Brazil and Argentina, so those fears are taking a backseat for now. Indeed, U.S. corn and soy export prospects have diminished in the past few weeks as the dollar strengthened and U.S. export logistics faced additional complications. Low water levels on the Mississippi River have reduced barge traffic, and – just as grain started to flow in the northern United States and southern Canada – a labor strike has shut down all shipping on the St. Lawrence Seaway, a vital artery connecting the Atlantic Ocean to ports on the Great Lakes.

Nonetheless, USDA reported a spate of new corn and soybean export sales this week, and soybean meal is leaving our shores at a record-setting pace. Argentina is the world’s largest soybean meal supplier, and the U.S. is filling in the vacuum left by last year’s very small Argentine soy crop. December soybean meal jumped to $442.40 per ton today, up $18.50 from last Friday.

Original Report At: https://www.jacoby.com/market-report/health-of-global-demand-for-milk-powder-sparks-fear/

With the exception of cheese barrels, milk futures and the cash dairy market fell.

On the Chicago Mercantile Exchange, milk futures and cash dairy markets were down on Tuesday, with the exception of cheese barrels.

November Class III milk was $17.19, a $0.10 decrease. December’s price was $17.05. January saw a $0.11 decrease to $17.32. February’s price went down $0.11 to $17.71. Contracts from March to September varied from twelve cents lower in March to three cents higher in May.

Dry whey fell $0.0075 to $0.3650. Twelve transactions were registered, with prices ranging from $0.3650 to $0.3725.

Cheese blocks weighing forty pounds were down $0.03 at $1.6850. Three transactions were registered, with prices ranging from $1.6825 to $1.6850.

Cheese barrels were $0.0050 higher at $1.6550. Four transactions were registered, with prices ranging from $1.65 to $1.6550.

Butter went down $0.02 to $3.28 per pound. There were no sales registered.

Nonfat dried milk fell $0.01 to $1.1875. One transaction was reported at $1.1975.

Cash dairy prices and milk futures both fell on Tuesday.

On the Chicago Mercantile Exchange, November Class III milk futures are down 16 cents to $17.67. December 33 is $17.56 lower. The January contract is down 12 cents to $17.85. Contracts are 9 to 18 cents lower from February to April.

Dry whey fell $0.0125 to $0.3675.

At $1.7425, blocks are down $0.0225.

Barrels are flat at $1.7350.

Butter has dropped $0.01 to $3.3650.

Nonfat dry milk is now $1.22, a $0.02 decrease.

Butter Market Descends in Dramatic Fashion

The T.C. Jacoby Weekly Market Report Week Ending October 13, 2023

The butter market’s luck has changed dramatically. After repeatedly setting record highs since late September, the market descended in dramatic fashion this week. Despite the decline, butter prices remain historically strong as cream is tight and buyers are making their final orders ahead of the holiday season.

Whether or not black cats or broken mirrors were involved, the butter market’s luck has changed dramatically. After repeatedly setting record highs since late September, the market descended in dramatic fashion this week. A quarter cent loss on Monday was followed by another two-cent decline on Tuesday. After taking a breather on Wednesday, another 8.5¢ loss on Thursday and 3.5¢ decline on Friday ultimately pulled the price down to $3.36/lb. at the end of today’s trading session. Cumulatively, the market lost 14.25¢ compared to last week. Lower prices helped to facilitate trading as eight loads moved during the week.

Despite the decline, butter prices remain historically strong as cream is tight and buyers are making their final orders ahead of the holiday season. But while the fundamentals hold, nobody wants to be stuck holding expensive inventories if prices fall further, in some cases leaving buyers and sellers in a standoff. Export demand remains understated while the pull from retail is steady to lighter, depending on the region, according to Dairy Market News.

 

On the heels of the weak production figures disclosed in last week’s Dairy Products report, nonfat dry milk (NDM) markets found the traction to move higher this week, busting through the $1.20/lb. threshold for the first time since the end of February. Half-cent increases on Monday and Thursday were complemented by a 3¢ gain on Wednesday that ultimately lifted prices to $1.22/lb., up 4¢ compared to last week. A total of 14 loads moved during the week.

After listing sideways for months, the NDM market seems to have found the conviction to move higher, albeit in a measured way. Several market participants indicate that Mexican demand remains robust and, remarkably, could even be strengthening. Logistical bottlenecks at the border threaten to slow the movement of product, but they have not yet been severe enough to affect market sentiment. After months of lackadaisical activity, demand from other global regions is also appearing to perk up. Domestic demand for milk powders is healthy. Meanwhile, condensed skim is relatively available, but Dairy Market News mentions that several dryers are performing regular maintenance which will curtail throughput and could fuel additional market gains.

Within the Class III complex, most of this week’s drama was found with dry whey. The spot dry whey market appreciated every day this week, adding a total to 3.75¢ to the price. At the end of today’s session, the price stood at 33.5¢ per pound, the highest dry whey price seen since early May. Not only were the gains impressive but the market was thrumming with activity as 70 loads traded hands.

Dry whey prices appear to be tracking the entire whey portfolio up as manufacturers of whey protein concentrates and whey protein isolates are also seeing the value of their products increase. Domestic whey demand is healthy while export demand is at least steady.

 

Cheesemaking remains active but as spot milk is now consistently priced at a premium, the whey stream is not excessive. With a limited whey stream and healthy demand for lucrative higher protein products, dry whey production is likely to slip around the edges, keeping support under prices in the coming months.

The cheese markets were relatively subdued again this week as they waited for a signal to push them one way or the other. Cheddar blocks were mostly unchanged except for a quarter cent loss on Thursday as two trades were made which pulled the price down to $1.70/lb. Barrels were somewhat busier, notching gains on Tuesday, Wednesday, and Thursday, lifting the price to $1.645/lb. an increase of 6.75¢ compared to last Friday. This narrowed the block barrel spread to 5.5¢, the slimmest it has been since late July.

For the moment, cheese seems to have struck a balance between supply and demand. Cheesemaking remains active though several plant managers reported to Dairy Market News that their facilities are down for maintenance, potentially slowing production. Domestic demand is steady to higher, with particularly upbeat retail demand reported in the Northeast. While current price levels should be sufficient to generate some additional export activity, most stakeholders report that meaningful new international sales have yet to materialize.

Cooler autumn temperatures have improved cow comfort in many parts of the country and have boosted yields as a result. Milk and cream availability have increased somewhat though processors are still paying a premium to get their hands on spot milk for manufacturing.

Bottlers remain active, placing additional pressure on spot milk supplies. Class IV milk futures markets largely dismissed the weakness seen in the spot butter market as prices remained resilient. On Friday, the NOV23 Class IV settled at $20.88/cwt. The Class III markets were mixed as nearby contracts lost a few cents while contracts later in 2024 mostly appreciated. The NOV23 Class III contract settled Friday at $17.41/cwt.

USDA trimmed yield expectations for the 2023/24 corn and soybean crops in its World Agricultural Supply and Demand Estimates report, released Thursday. The agency dropped corn yields to 173 bu./acre, slightly lower than most analysts’ expectations, in turn reducing production by 70 million bushels. Soybean yields were reduced to 49.6 bu./acre, also modestly lower than the average trade estimate. Both corn and soybean futures moved up on the news though they retreated today. DEC23 corn futures settled Friday at $4.9325/bu. while DEC23 soybean meal futures settled at $390/ton.

Original Report at: https://www.jacoby.com/market-report/butter-market-descends-in-dramatic-fashion/

Wednesday CME milk futures mixed, cash dairy stable to higher.

Milk futures were down in the short term but higher in the long term, while cash dairy markets were stable to higher on the Chicago Mercantile Exchange on Wednesday.

October Class III milk was $0.01 lower at $16.84. November’s price went down $0.10 to $17.23. December’s price went down $0.10 to $17.49. January saw a $0.07 increase to $17.99. Contracts from February to August varied from nine cents lower in July to twelve cents higher in February. July was the only month with a decreased price after January.

Dry whey was trading at $0.3150, up $0.0050. There were 21 transactions, with prices ranging from $0.31 to $0.3150.

For the third day in a row, forty-pound cheese blocks stayed steady at $1.7025, with no sales reported.

Cheese barrels gained $0.0075 to $1.6175. There were no sales registered.

The price of butter remained constant at $3.48. There were no sales registered.

Nonfat dried milk increased $0.03 to $1.2150. There were eight transactions, with prices ranging from $1.20 to $1.2150.

Cash dairy stable to higher Tuesday, CME milk futures mixed.

On the Chicago Mercantile Exchange, milk futures were neutral, while cash dairy markets were mainly higher, with the exception of butter.

October Class III milk was $0.03 lower at $16.85. November saw a $0.17 decrease to $17.33. December’s price went down $0.10 to $17.59. In January, the price went down $0.06 to $17.92. Contracts from February through August varied from unchanged in April, May, June, and August to five cents higher in July.

Dry whey was trading at $0.31, up $0.0075. Four transactions were made, with prices ranging from $0.31 to $0.3125.

For the second day in a row, forty-pound cheese blocks stayed steady at $1.7025, with no sales reported.

Cheese barrels increased $0.0325 to $1.61. There were two sales at $1.6025 and $1.6075.

Butter went down $0.02 to $3.48 a pound. There were two sales for $3.48 and $3.4850.

The price of nonfat dry milk remained steady at $1.1850. There were no sales registered.

CME Spot Butter Soars

The T.C. Jacoby Weekly Market Report Week Ending September 22, 2023

CME spot butter soared an astounding 28.25ȼ this week and closed right at the $3 mark. Exports are out of the question, but domestic demand is firm, and butter churns are running light.

Three dollar butter is back. CME spot butter soared an astounding 28.25ȼ this week and closed right at the $3 mark. Exports are out of the question, but domestic demand is firm, and butter churns are running light. Cream supplies are tight thanks to lower milk output and fierce competition from cheese vats and makers of whips and dips. Butter buyers are anxious as baking season looms large. They fear a repeat of last year’s persistently high prices and they’re chasing the market upward. October and November futures jumped 7.5ȼ today, the maximum gain allowed under the CME’s daily trading limits.

Milk powder prices also climbed, buoyed by a strong showing at the Global Dairy Trade (GDT) auction. Buyers in North Asia – which includes South Korea, Japan, and, most notably, China – snapped up more milk powder at the GDT than they have in two years, and they pushed prices higher to boot. Both whole milk powder (WMP) prices and the GDT Index rallied 4.6%, their second straight positive performance. GDT skim milk powder (SMP) finally showed some signs of life as well. In Chicago, CME spot nonfat dry milk (NDM) leapt 5.75ȼ to $1.17 per pound, matching its highest price since May.

Global milk powder production is slowing as milk output wanes and manufacturers direct milk to other uses. In Europe and the United Kingdom, milk collections topped year-ago volumes by just 0.2% in June and July, and driers ran light. New Zealand’s new season is off to a poor start. August milk solids output fell 0.9% from the prior year to the lowest volume since 2017. U.S. milk production continues to shrink. USDA trimmed its estimate of July milk output and now reports mid-summer production down 0.7% from July 2022. But August milk output was larger than expected, down just 0.2% from last year.

Lower milk production is obviously supportive of milk powder prices, but demand matters too. The market was relieved to see China getting more aggressive at the GDT, but it remains wary, and the latest round of trade data offered little fodder for the bulls. China imported less WMP last month than it has in any August since 2016. China’s year-to-date WMP imports also stand at seven-year lows. And Chinese SMP imports, which had been going strong, fell 36% short of year-ago volumes last month. Despite disappointing trade from China, the U.S. milk powder market is as taut as a bowstring. It will shoot even higher at the first sign that China’s appetite for foreign milk powder has recovered.

Whey powder followed NDM upward. CME spot dry whey gained a half-cent and reached 30.5ȼ. High-protein whey prices continue to climb, and manufacturers are sending more of the whey stream into concentrates, which is helping to tighten up supplies of whey powder. But the whey market is also capped by poor demand from China. Chinese imports of U.S. whey fell to a 17-month low in August.

Cheese bucked the trend and suffered huge losses this week. CME spot Cheddar blocks fell a dime to $1.78 per pound, a two-month low. Barrels were even worse. They plummeted 21ȼ to $1.60, also the lowest price in two months. High prices this summer have stymied export opportunities this fall, and, now that the heat has abated, there is more fresh Cheddar making its way to Chicago. The trade expects cheese output to remain strong, as Midwestern milk output held firm in August despite the heat. There are also plenty of cows in the cheese states. Dairy slaughter volumes are not running quite as hot as they did this summer, and USDA reported no change in cow numbers from July to August. However, the agency did trim its assessment of the July milk-cow herd by 10,000 head, confirming the prevalence of sellouts and very high cull rates this summer.

 

The setback in the cheese markets took a heavy toll on Class III prices. October Class III fell 94ȼ this week to an inadequate $17.16 per cwt. November was not much better. It dropped 99ȼ to $17.34. Fourth quarter Class III futures now average just $17.45, which will not pay the bills. Dairy producers outside the cheese states will enjoy much better prices, although the share of their milk check derived from Class IV is likely falling as underutilized balancing plants represent an increasingly small share of the blend price. October Class IV jumped $1.24 this week and both October and November Class IV topped $20 for the first time since February. Dairy producers will certainly welcome these higher prices. This has been a tough year on the farm, and they have a lot of rebuilding to do.

 

Choppers and combines are rolling through the Corn Belt. Yields are extremely variable, but most farmers have been pleasantly surprised at how well their corn has held up through strange and often unfavorable weather. There is plenty of corn, and prices are approaching two-year lows. December corn settled today at $4.7725 per bushel, up a penny from last week. Corn futures often notch their seasonal low in late September. This looks like an opportunity for dairy producers to lock in grain costs at relatively attractive levels.

Soybean supplies are much tighter, and the soy crop appears to have struggled a bit more than corn through the late-season heat and drought. Crop analysts warn that scarce soybean supplies could reduce the crush and limit soybean meal output over the next 12 months. Nonetheless, soybean and soybean meal prices continued to fade. November soybeans finished at $12.9625, down another 44ȼ this week. December soybean meal settled at $385.80 per ton, down $6.30 from last Friday.

Original Report At: https://www.jacoby.com/market-report/cme-spot-butter-soars/

August cheese sales break all-time records

The most recent U.S. dairy stock data indicates minor month-to-month reductions for August. According to the USDA’s Cold Storage report, cheese stockpiles are approximately 1.5 billion pounds, down slightly from the previous month but up 1% year on year. Total cheese and other varieties of cheese, such as mozzarella and parmesan, set new monthly highs. Butter stocks were down 12% from the previous month but up 4% from a year earlier, totaling little more than 289 million pounds.

Australia will produce least dairy in 30 years. It might drive skyrocketing

Australia is on track to produce the least quantity of milk in 30 years, bringing dairy prices to all-time highs.

Australians can now hardly afford their own local goods because the dairy business has dropped so much.

However, there are still many people prepared to roll up their sleeves and tackle the problem.

In South Gippsland, farmer Benjamin Vagg’s mild encouragement is all that is required when 420 dairy cows arrive for their afternoon milk. After all, this is a $900,000 move.

Seven days a week, he begins his day at 5.30 a.m.

Vagg is half the age of the typical Australian dairy farmer, at 34. Even more unusual, he’s delighted about it.

“We have some of the best dairy farmers in the world In Australia,” Vagg said.

“It’s incredible. I’m sure I wouldn’t want to work in an office.

“In fact, I started my career out in a suit trying to be someone in a corner office in Melbourne somewhere, and then decided, ‘Nah I didn’t want to do that,'” said the man.

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However, not everyone is as enthusiastic about farming as Vagg. 20,000 Australians got money milking cows back in 1980. There are now less than 4000 remaining.

According to Michael Whitehead of ANZ’s Agri-Insights, Australian milk output is declining year after year, with this year projected to be the lowest in three decades.

Whitehead has been keeping a careful eye on things, and he believes this is why dairy products are becoming so pricey.

“We’ve got the same number of dairy processing companies, so they have to compete to get an ever-shrinking supply of milk,” he said.

“That pushes up the cost, which cuts their margins and means higher prices at the supermarket.”

According to John Williams, president of the Australian Dairy Products Federation, it was one of the most difficult periods the sector has ever encountered.

Williams, who represents cheese, butter, and yoghurt producers, believes the high pricing will drive Australians away from pricey Australian dairy and toward less expensive imported products.

“Look it’s not lost on me in this market,” he said.

“In particular, consumers are having a difficult time right now due to cost inflation, but this is true across the board.”

“They’re going to make choices they probably weren’t making 12 months ago”

Australians are increasingly unable to afford to produce their own dairy. Cheaper, foreign goods are taking over the nation.

In fact, the quantity of New Zealand dairy in Australia is now about 30% greater than it was this time last year.

So, unless you’re quite certain you’re eating Australian dairy, you probably aren’t.

“It’s occurring right now. “Right now, two of the top four butter brands in Australia are imported,” Whitehead said.

Farmers like Vagg are opposed to imported butter being slathered on top of Vegemite… yet he claims he can’t sell his milk for much less.

After all, his expenses have risen as well.

When asked whether he felt sorry for the manufacturers who are now paying him top price, the harsh farmer said, “About time.”

“It’s more difficult for shoppers,” he admits.

Australians are discovering that they may purchase dairy that is either local or inexpensive, but not both.

Dairy exports have been slowed by China’s falling demand.

According to the US Dairy Export Council, there are three major obstacles preventing exports this year.

Will Loux, Vice President of Global Economic Affairs, notes that the majority of July’s losses were due to a 40% decline in low-protein whey exports.

“We’re basically facing every headwind you can think of right now on the international market, with an absent China, a global economic crisis, and extreme competition from our major export competitors, and yet the US is only down 6%,” he adds.

For the first seven months of the year, dairy exports were down 12% in value. Loux expects China’s demand to increase, but the import mix will shift in the future.

“I believe you’ll see more skim milk powder imported for bakery and the like, or imported for ice cream,” he predicts. “I believe there will be more cheese going—we’ve seen that a lot this year.”

Cheese exports were unchanged (-1%) in July, with a resurgence in Japanese sales helping to overcome decreased demand. Nonfat dry milk/skim milk powder sales climbed significantly (+3%) due to increasing sales to Mexico.

Reduced worldwide milk output is in line with slowing demand.

According to the bank’s Q3 Global Dairy Quarterly, lower milk prices in most main global dairy-producing countries have started to result in decreased supply in recent months.

“However, in our opinion, a possible whiplash effect is becoming more likely,” said Lucas Fuess, senior dairy analyst at Rabobank in the United States.

“We may see a resurgence in demand emerging months before global milk output can recover,” he warned.

According to the data, milk output in Australia increased in May, marking the first month-on-month increase since mid-2021.

Growth continued in June, growing by 1.2%, bringing national output for the 2022-23 season to 8.129 billion litres, a 5% decrease year on year.

Rabobank forecasts a 2% increase in milk output in the 2023-24 season, owing to good on-farm profit margins and generally abundant feed and irrigation water availability.

According to the analysis, price signals for Australian dairy farmers are highly encouraging against a difficult global background, but larger price moves are unlikely until local and export market circumstances improve dramatically.

In 2022-23, Australian dairy export volumes fell. Total export volumes were down 15% for the season (up to May), with significant tonnage losses in skim milk powder (SMP), cheese, and liquid milk.

According to Rabobank, Australia’s exportable surplus will stabilize in 2023-24 owing to a modest milk pool recovery and slow domestic demand growth.

Rabobank has reduced its worldwide milk production prediction for 2023.

According to the analysis, milk production in the ‘Big 7’ export areas — New Zealand, Australia, the European Union, the United States, Uruguay, Brazil, and Argentina — is expected to increase by 0.3% year on year in 2023.

This decrease from the previous quarter’s forecast of 0.5% is due to output cuts in most significant worldwide areas, including the United States, the European Union, and New Zealand.

Global dairy production is anticipated to rise by 0.4% by 2024, significantly less than the 1.6% annual average increase witnessed from 2010 to 2020.

According to the research, attention is also focused on both supply and demand in China, where the severity of economic headwinds and the length of the halt in economic development are lowering the chances of a robust demand rebound.

Leading dairy processors indicate some market recovery, but this has yet to balance robust Chinese domestic milk production increase, according to Rabobank.

Milk production growth in the nation will decline in the second half of 2023 and early 2024, but no significant market rebalancing is predicted in the short future, and positive year-on-year imports are not forecast until late 2024 or early 2025.

Futures Fall as Cash Markets Mixed in Chicago Mid Week.

Milk futures continued to fall, while cash dairy markets on the Chicago Mercantile Exchange were mixed Tuesday. September Class III milk was $18.29, a $0.10 decrease. October was down $0.46 at $18.04, representing a loss of $1.17 per hundredweight over the previous three trading sessions. November’s price went down $0.26 to $18.24. December’s price went down $0.13 to $18.25. Contracts for January through August varied from one cent higher in May to nineteen cents lower in June.

Dry whey was trading at $0.30, up $0.0050. Two sales of $0.2975 and $0.30 were reported. Cheese cubes weighing forty pounds were down $0.0550 to $1.87. At that price, one sale was made. Cheese barrels down $0.0225 to $1.8050. At that price, three sales were recorded. Butter was trading at $2.7225, up $0.0425. Four transactions were registered, with prices ranging from $2.69 to $2.72. Nonfat dried milk stayed steady at $1.10, although five transactions were reported at that price, in contrast to Monday’s absence of purchasing activity.

Dairy prices, volumes rise at auction -GDT events

International milk prices and volumes rose at this month’s first Global Dairy Trade (GDT) auction on Tuesday.

The GDT Price Index was up 2.7%, with an average selling price of $2,888 per tonne. The index fell 7.4% at the previous auction on Aug 15, with an average selling price of $2,875, according to GDT Events.

A total of 37,729 tonnes of dairy products were sold at the latest auction, up about 12.4% from the previous sale, the auction platform said.

The auction results could affect the New Zealand dollar as the dairy sector generates more than 7% of the nation’s gross domestic product.

The New Zealand milk co-operative, which is owned by about 10,500 farmers, controls nearly a third of the world dairy trade.

GDT Events is owned by New Zealand’s Fonterra Co-operative Group Ltd, but operates independently from the dairy giant.

Chicago Mercantile Exchange, milk futures up, while cash dairy divided

On the Chicago Mercantile Exchange, milk futures were up, while cash dairy markets were divided. September Class III milk was $0.07 higher at $18.58 a gallon. October saw a $0.26 increase to $19.21. November saw a $0.27 increase to $18.98. December was $0.16 higher at $18.73. Contracts from January through July varied from unchanged in April, May, and July to thirteen cents higher in February.

Dry whey fell $0.01 to $0.31. Two sales of $0.31 and $0.3175 were reported. The cheese market is calm, with forty-pound blocks remaining constant at $1.9625. There were no sales registered. Cheese barrels remained constant at $1.8675 for the second trading day in a row. There were no sales registered. Butter was trading at $2.73, up $0.01. Sixteen transactions were made, with prices ranging from $2.73 to $2.76. Nonfat dried milk increased by $0.01 to $1.10. There were fifteen transactions, ranging from $1.0975 to $1.11.

Milk futures on the Chicago Mercantile Exchange fall

Milk futures on the Chicago Mercantile Exchange fell on Tuesday due to a stronger currency and little trading activity after the holiday.

September Class III milk is down seven cents to $18.54 a gallon. October is down four cents to $18.88. November is two cents higher at $18.61. The December contract is 11 cents higher at $18.55. Contracts for January through March are flat to three cents lower.

Dry whey increased $0.0150 to $0.32. From $0.31 to $0.32, three sales were made.

Blocks remain constant at $1.95.

Barrels are $0.0025 lower at $1.8675.

Butter increased by $0.05 to $2.71. There were 19 sales ranging from $2.70 to $2.71.

Nonfat dry milk has dropped $0.0175 to $1.0575. At $1.0750, five deals were executed.

The Global Dairy Trade index in New Zealand rose 2.7 percent on Tuesday, the most since the beginning of May. Whole milk powder gained the most, increasing by 5.3 percent, followed by anhydrous milk fat, which increased by 2.7 percent. Sales of buttermilk powder were down 6.5 percent.

Once again, DMC payments will be arriving in mailboxes; this is the amount to anticipate.

This calendar year, Dairy Margin Coverage (DMC) payments have been triggered owing to a period of low milk revenue. Another wave of DDMC payments is likely to arrive in producers’ mailboxes shortly.

The July DMC margin of $3.52 per cwt. triggers Tier I indemnity payments across all coverage levels, from the catastrophic price floor of $4 per cwt. to the highest coverage level of $9.50 per cwt. At the highest coverage level of $9.50, the top payout is $5.98 per cwt.

According to Erick Metzger, general manager of National All Jerseys, milk covered at $9.50/cwt. will receive more than $4,461 in indemnity payments for each million pounds enrolled. Year-to-date payouts have reached almost $21,242 per 1 million pounds insured at the highest level.

According to Phil Plourd, president of Ever.ag Insights, farmers can also use risk management systems such as Dairy Revenue Protection (DRP).

“These are also times when we are reminded that risk management necessitates vigilance and diligence.” I doubt many people expected margins to be this low in 2023. “However, here we are,” he adds.

The DMC program was established by the 2018 farm bill to provide farmers with protection when the gap between the all-milk price and the average feed price falls below the producer-selected margin trigger.

However, the milk revenue margin seems to be improving in the August DMC figures, which will be released at the end of September. The DMC decision tool predicts an August margin of $5.66 per cwt as of the closing of futures trading on the Chicago Mercantile Exchange on Aug. 31.

According to Jim Mulhern, CEO of NMPF, DMC’s catastrophic coverage level is at the top of his team’s farm bill wish list.

“The basic DMC’s catastrophic coverage level includes up to 5 million pounds of annual protection, which is equivalent to a 200 to 220 cow herd.” “We’re looking at DMC’s tier 2 adjustments—anything above basic—because those markets collapsing would be more akin to a truly ‘catastrophic’ event,” Mulhern explains.

In July, farm revenue continued to fall.

Farmers earned less money in July than in June.

According to the USDA, the farmer price index decreased 2.1% in July, with reductions in maize, hay, milk, and broilers more than balancing out increases in soybeans, pigs, lettuce, and strawberries.

The dairy index for July 2023 was down 2.8% from June and 32% from July 2022, with an all milk price of $17.40 per hundredweight, a $.50 decrease from the previous month and a $8.10 decrease from the previous year.

Higher movements in feeder cattle, concentrates, LP gas, and diesel offset reduced costs for feed grains, hay and forages, complete feeds, and nitrogen, resulting in a 0.1% increase in the index of prices paid.

The USDA’s index of prices received fell 7% year on year, showing losses sustained by certain producers, while the index of prices paid remained steady, indicating lowering inflation in portions of the business.

Heat Takes a Terrible Toll on Milk Yields

The T.C. Jacoby Weekly Market Report Week Ending August 25, 2023

U.S. milk output turned negative in July, as the heat took a terrible toll on milk yields. The milk production map and the July weather maps look nearly identical. The August weather map – and presumably the milk production map – will look much different. 

U.S. milk output turned negative in July, as the heat took a terrible toll on milk yields. Milk output totaled 19.08 billion pounds last month, down 0.5% from July 2022. The milk production map and the July weather maps look nearly identical. Simply put, milk output was down hardest where it was hottest. The August weather map – and presumably the milk production map – will look much different. Tropical Storm Hilary brought unusually mild temperatures to the West Coast, but the Upper Midwest is scorching. Through much of the summer, dairy producers in the heartland reported only modest declines in milk yields relative to the spring peak. But the bulk tanks are not as full today.

Dairy producers cashed a paltry milk check and some surprisingly large beef checks in July, and they culled hard. But the dairy herd barely budged. USDA estimates the dairy herd shrank by only 3,000 head in July. But the agency cut another 5,000 head from its estimate of the June milkcow head count, bringing the May-to-June decline to a steep 21,000 head. There were 9.4 million cows in U.S. milk parlors last month, 13,000 fewer than there were a year ago. A steeper setback in cow numbers is likely in August. Setting aside slaughter volumes in 1986 during the cow-kill program, dairy slaughter volumes have been record high for this time of year in four of the last seven weeks.

Both cheese and butter stocks tightened in July, which helps to explain the strong showing for both commodities in the spot markets last month. Butter inventories dropped 20.4 million pounds from June to July, an unusually steep decline. There were 347.5 million pounds of butter in cold storage warehouses last month. That’s 5% more than the very small volumes reported a year ago but considerably less than the mountain of butter in storage in July 2021.

 

In recent years, cheese stocks have typically grown from June to July, so this year’s 21.75-million-pound setback surprised. Cheese inventories tipped the scales at 1.489 billion pounds last month. That’s a lot of cheese, to be sure, but it’s 2.2% less than last year. The month-tomonth decline suggests that export deals booked earlier in the year helped keep product moving this summer. But today, with prices much higher, there are likely few buyers willing to return U.S. cheese exporters’ calls. After topping $2 last week, CME spot Cheddar blocks retreated, falling 8.25ȼ to a still lofty $1.945 per pound. Barrels slipped 0.75ȼ to $1.80. Butter also fell back from the recent highs, dropping 3ȼ to $2.67.

As always, the milk powder market took its cues from abroad. Whole milk powder (WMP) prices lost a little more ground at Tuesday’s Global Dairy Trade Pulse auction, and U.S. nonfat dry milk (NDM) values faded early in the week. Then after European and Kiwi skim milk powder (SMP) futures strengthened, CME spot NDM bounced back. It closed the week at $1.105, on par with last Friday.

The milk powder trade is desperately searching for any sign that Chinese WMP imports are set to improve. If you squint, the data looked a little less troubling than they once did. Chinese WMP imports topped year-ago volumes in May, June, and July. On its own, the monthly figures seem encouraging, with July WMP imports up 22.5% from a year ago. But a wider view paints a different picture. China is simply not importing WMP at the pace required to make up for this year’s very slow start. Chinese WMP imports are down 40.3% from last year to the lowest January through June total since 2016. Chinese imports of other dairy products look much better, with year-to-date imports of cheese, SMP, and whey at their second-highest totals on record, behind 2021.

 

Whey prices finally firmed this week. Spot whey climbed a penny to 28ȼ, their best showing in more than two months. USDA’s Dairy Market News explains, “Limited milk availability for cheese processing, along with recently firming high protein blend markets have created a slightly bullish safety net for a market that has been struggling to gain traction for the better part of the calendar year.”

Spot market action did not imply big gains for the dairy markets this week. But heat in the cheese states and a friendly Cold Storage report propelled Class III futures sharply higher. The September contract climbed 45ȼ to $18.94 per cwt. October Class III jumped 66ȼ to $18.65. The Class IV markets were less exuberant. September Class IV fell 35ȼ to $18.90, and deferred contracts lost a little ground as well.

 

The Corn Belt heat wave and the ProFarmer crop tour gave the grain trade a lot to chew on this week. After taking corn and soybean samples in seven states, the tour pegged the national average corn yield at 172 bushels per acre, below USDA’s August estimate of 175.1 bushels but comfortably near the market consensus. ProFarmer assessed the soybean yield at 49.7 bushels per acre, also below USDA’s August figure at 50.9 but slightly above last year’s tour average at 49.5.

The trade assumes that the soaring temperatures will not help either row crop, but, judging by the calendar, the impact will be much more severe for soybeans than for corn. With that in mind, November soybeans surged 34.5ȼ this week to $13.8775 per bushel and December soybean meal jumped $26 to $415 per ton. December corn futures bounced around but ultimately finished at $4.88, a nickel lower than last Friday.

Original Report At: https://www.jacoby.com/market-report/heat-takes-a-terrible-toll-on-milk-yields/

Dairy producers in Cork lose over €500 million as milk prices collapse.

Milk price decreases have cost Irish dairy producers over 38% of their earnings in the last year.

Surprising new numbers have shown the magnitude of the financial crisis confronting dairy farmers throughout Cork as a result of continued milk price decreases, with over half a billion Euro wiped off their profits this year.

The data produced by the Irish Creamery Milk Suppliers organization (ICMSA) so sobering that organization president Pat McCormack calls them a “disaster for the rural economy.”

Dairygold was the latest processor to cut its July quoted milk price by 2 cents per pound to 36 cents per pound, with a spokeswoman claiming that “global milk markets continue to weaken due to pressure on demand in key markets, with no sign of near-term correction.”

To put the magnitude of recent milk price cuts into perspective, Dairygold paid its milk suppliers 55.5c/pl in June of last year.

This reflects a year-on-year decrease of little more than 35%.

According to the ICMSA, the persistent drop in milk prices has cost dairy farmers throughout the nation €2 billion in earnings, with Cork suffering the brunt of this.

According to their projections, milk income in Cork will equal €1,269,394.000 in 2022. According to the ICMSA, the income number for 2023 is now €777,865,000, a €491,529,000 or 38.7% decrease.

The ICMSA conducted a comprehensive examination of each of the 26 counties to determine the decrease in dairy farmer income over the previous two years.

The results reveal that milk values have dropped dramatically, with about €2 billion less estimated to be paid to dairy producers in 2023 compared to 2022.

ICMSA president Pat McCormack described this as “an astounding amount to lose” and predicted that it would have a “very serious impact” not only on dairy farmers but also on the wider rural economy this year and in 2024 as farmers tightened their purse strings and made drastic cuts to their spending.

“We all know that farmers spend in their communities, and many local services and businesses rely on them.” It is unsurprising to see dairy farmers’ spending power diminish considerably, as observed by companies in rural towns that offer products and services to dairy farmers and the larger dairy sector,” Mr McCormack said.

“From concrete to shed suppliers, to milking equipment to farm machinery, reports are coming back that dairy farmers have stopped buying and investing, and only the very basics are being purchased, and this is going to have a dramatic impact on the local economy,” he continued.

According to Mr. McCormack, with a dairy outlet multiplier of two, the overall loss to the Irish rural economy in 2023 may be as high as €4 billion.

“At the county level, we see Cork losing nearly half a billion in direct revenues, while Tipperary will lose nearly a quarter of a billion in direct revenues.” “With so many indirect jobs reliant on the dairy sector, the multiplier effect can bite even harder in these counties,” Mr McCormack said.

Given the current weather and pricing circumstances, the ICMSA research utilized an average total milk price of 59cpl for 2033 and a projected average price of 37cpl for 2023, with output predicted to reduce by 2% year on year.

“This means that nearly 38% of dairy revenues have been wiped away in the last year, and this analysis does not include the very severe cost elements facing dairy farmers, implying that dairy farm incomes will be severely impacted in 2023,” Mr McCormack added.

“While fertiliser prices have fallen slightly, most fertiliser was purchased at inflated prices earlier in the year or last year, and unfortunately, electricity and feed remain stubbornly high,” he said.

Mr McCormack urged Agriculture, Food and Marine Minister Charlie McConalogue to organize a meeting of the Dairy Forum so that a “clear strategy” could be put in place to kick-start an urgent recovery in milk prices.

“This is required not only by the farmers who produce the milk on a daily basis, but also by the larger rural businesses that rely on it for revenue,” Mr McCormack added.

On Thursday, both milk futures on the CME and cash dairy prices climbed.

On the Chicago Mercantile Exchange, milk futures and cash dairy markets were up on Thursday, with the exception of cheese and nonfat dry milk.

September Class III milk was $0.02 higher at $18.89 a gallon. October saw a $0.15 increase to $19.10. November was $0.24 higher at $18.78. December was $0.13 higher at $18.65. Contracts from January to July were six cents higher in February and thirteen cents higher in July.

Dry whey was $0.02 higher at $0.3050. One transaction was recorded at $0.30.

The price of forty-pound cheese bricks remained constant at $1.9925. There were no sales registered.

The price of cheese barrels stayed steady at $1.86. There were no sales registered.

Butter was trading at $2.6450, up $0.0250. Fourteen transactions were made, with prices ranging from $2.6450 to $2.67.

Nonfat dried milk fell $0.02 to $1.0725. There were four transactions, with prices ranging from $1.07 to $1.0850.

Dairy trade index has fallen for 7 months in a row.

The Global Dairy Index fell 7.4% on Tuesday, its sixth consecutive trading day.

The Cheddar cheese market recovered, while all other items lost value.

The price of cheddar cheese increased 5.8% to $4,127 per metric ton, or $1.87 per pound.

Prices for whole milk powder declined 10.9% to $2,548 per metric ton, or $1.15 per pound.

Skim milk powder fell 5.2% to $2.333 per metric ton, or $1.05 per pound.

The price of anhydrous milk fat fell 5.3% to $4,452 per metric ton, or $2.01 per pound.

Butter prices dropped 3% to $4,539 per pound, or $2.05 per pound.

125 successful bidders purchased 33,580 metric tons of dairy goods in 20 bidding rounds during Tuesday’s trade session.

Since May 16th, the Global Trading Index has declined in all seven trading sessions.

An Overview of Milk Price Increases in Europe

A comprehensive examination of European inflation and its effects on dairy goods such as milk, cheese, and butter. In addition, the Idele conference in Paris last June examined record food inflation, consumption, and dairy commerce.

Christine Goscianski of the Idele economics service reminded the audience in her presentation that 2022 saw unprecedented food inflation. Food consumption prices in the EU-27 increased by over 12% in 2022 compared to 2021. This rise was smaller in some countries, such as Ireland (+6.9%) and France (+7%), while it was larger in others (+12.6% in Germany, +13% in Portugal, and +14.5% in Poland). This rise in food costs was matched by an increase in distributor brand market share (+2.3% in Spain, +1.4% in Germany, and +0.5% in France).

“The beginning of 2023 was marked by a sharp acceleration in the rise of food prices in Europe, with an increase in sales of consumer products at discount (+1 point between January 2022 and January 2023),” Goscianski said, adding that consumption of dairy products held up rather well in the EU-27 in 2022, but should fall in 2023 as a result of high food inflation.

Germany has seen unprecedented food inflation.

In 2022, the price of dairy goods in Germany increased by 20-40% compared to 2021: +21% for Emmental and UHT milk, +22% for Gouda, and +41% for butter. This resulted in a decrease in dairy product purchases, which was most noticeable in liquid milk (-6% over the past 12 months, -9% in March 2023) and fresh cheeses (-7% over the last 12 months, -9% in March 2023).

Organic milk is losing market share to vegetable juices and pasture milk as costs climb sharply, affecting the organic sector. Finally, rising food prices in Germany increased trade in dairy goods, impacting both exports and imports.
France: Trade balance decline

In France, there are four factors to consider when it comes to inflation:

a +7.9% increase in dairy product prices in 2022 in stores, with the highest increase for dairy fat (+11.7%) and even higher in-store prices in early 2023; a -2.5% decrease in dairy product sales in 2022 in stores, with the largest drop being for butter (-6.8% over 12 months); consumer arbitrage: buy less and downscale (increasing use of private label ranges, fewer organic products purchased, success of discounters);

Italy has one of the lowest rates of inflation.

Despite having one of the lowest rates of food inflation in Europe, Italy had a 10-20% increase in food costs in 2022, depending on the product: +9.8% for UHT milk, +20.8% for butter.

“However, the beginning of 2023 is marked by a slowing in this rise in food prices, particularly those of dairy products,” said the speaker, who noted that the discount market share has increased from 17.5% of sales in value in 2019 to 20.6% in 2022, despite a very high rise in prices in this channel.

Organic purchases in Italian households declined from 3.9% in 2021 to 3.6% in 2022. In 2022, trade in value increased with inflation (both for imports and exports), but the balance contracted.

Strong inflation in the United Kingdom

Food costs increased by 16.9% in 2022 and then skyrocketed in early 2023 (+33% for milk and 39% for cheddar cheese in April 2023). While dairy product sales are down, cheese sales are holding up better.

“We also see a decrease in the range of dairy product consumption, and branded milk volumes are declining faster than private-label products,” Goscianski added.

Organic milk volume sales are falling considerably (-13.5% in 2022/2021 against -5.6% for non-organic milk). Organic dairy products accounted for 2.9% of total dairy retail volume in 2022. Finally, like with the other European nations, volume exports are increasing, but the value balance is worsening.

Conclusion

Inflation currently affects food goods more than other things:

In the EU-27, consumer prices increased by 9.1%.
Food costs increased by 18.2% in the EU-27.

Eurostat data: January-April 2023/January-April 2022

Inflation has a particularly large influence for dairy goods.
Consumer inflation arbitrage: less amounts bought, more private label, less organic, discount success. Store sales of dairy goods seem to be improving.

In-store purchases in France in 2022 (in volume):

Beef: -6.4% Eggs: -1.6% Dairy products: -6.4% -2.5% Fruits and vegetables: -5% Fish: -12%

For a few weeks, general inflation has been lower, with food inflation falling marginally in May.

The USDA predicts a drop in dairy output and an increase in dairy prices.

In Friday’s supply and demand report, the USDA reduced its milk output predictions. The USDA anticipated 2023 milk production at 228.4 billion pounds in July, but their August update reduces that estimate to 227.9 billion pounds.

The predicted cow inventory is lower for this year and 2024, while the expected production per cow is lower for 2023 but unchanged for 2024.

Because of recent price increases, the study upped the predicted 2023 butter and cheese prices. Whey pricing expectations for this year have been reduced. Nonfat dry milk (NDM), Class III, and Class IV have a better prediction. In 2023, the all-milk price will rise to $19.95 per cwt.

Butter and cheese costs are expected to rise in 2024, while whey prices are expected to fall. Nonfat dry milk prices are expected to remain stable. Class III and IV pricing are higher due to increased product costs. The predicted all-milk price in 2024 has been increased to $19.35 per hundredweight.

The USDA anticipates reduced dairy imports and exports in the United States. Imports of fat and skim-solids have been reduced from previous month due to lower-than-expected imports of cheese and butter. The prediction for fat basis exports in 2023 has been reduced owing to decreased exports of cheese, butter and butterfat products, and whole milk powder. The projection for skim-solids exports is lower, owing mostly to reduced whey product sales.

Analysis on the future of dairy prices by Rabobank

Following Fonterra’s modification of the farmgate milk price prediction earlier today, RaboResearch Senior Agricultural Analyst Emma Higgins provides analysis below.

The farmgate milk price forecast has been drastically revised. Fonterra has reduced its prior midpoint of $8.00/kgMS by $1.00/kgMS, with a new midpoint of $7.00/kgMS for the current 2023/24 milk production season. The new milk price estimate range is $6.25/kgMS to $7.75/kgMS.

Before dawn, it is always the darkest.

Dairy commodity prices are currently lower than 5-year norms after this week’s GDT auction. This is a big movement in dairy commodity price, which has been occurring since the second quarter of last year. It will be difficult for individuals who are going through this moment of transition.

Costs have risen 13% year on year. The agricultural price expenditure index for Q1 2023 reveals that total input prices increased 13% year on year (Q1 23 vs. Q1 22). Interest rates are the greatest movers (+50% year on year), followed by fertilizer (+11% year on year), dairy shed expenditures (+11%) year on year, and insurance premiums (+9% year on year). At the same time, Fonterra’s farmgate projection mid-point fell 11% year on year.

Fonterra’s newest farmgate predicted mid-point (August 2023) is 24% lower than the same time in 2022.

The drop is primarily due to decreasing import demand from China, which is now experiencing a milk boom that has been building for many years. Production growth is moderating, which is what markets want for rebalancing, but the pace of increase in the first half of 2023 has surpassed our expectations. Milk supply increased 7.5% year on year in the first half of 2023, with a slowing in Q2 compared to Q1.

The dairy commodities markets are going through another cycle.

The markets are now sluggish and tough. However, we do not believe that this is a super-cycle slump.

For comparison, during the dairy slump (seasons 2014/15 – 2015/16), the milk price fell from $8.40/kgMS (2013/14) to $4.40/kgMS (2014/15). When adjusted for inflation, it equates to the milk price in today’s terms falling from over $10.60/kgMS to $5.50/kgMS.
There are some signs of hope for pricing out there.

The triggers for a rebalancing inside China are in action, as indicated in our recent Agri Monthly report (attached). Milk prices are falling, cost pressures are increasing, and farm growth is stalling. China is reopening, but demand settings remain weak and unpredictable.

RaboResearch argues that inventory levels in dairy markets are low outside of China. This is a significant departure from the Dairy Downturn era, when certain dairy commodity prices, notably SMP, were under pressure for a prolonged length of time because to EU intervention inventories. Another significant distinction between the Dairy Downturn and this time is that the supply picture is considerably more modest. Whether it’s pricing pressure in the US, weather concerns in parts of the EU, or even El Nino dangers in the future, the challenge for milk supply growth from key exporting nations is evident.

In the future, New Zealand milk production will need consistent weather. Budgets will not appreciate spring storms or anything going wrong in the closing months of winter.

Rabobank is presently working on its third quarter dairy quarterly report, which will contain an updated milk price estimate. This is scheduled to be published in early September.

Dairy Markets Still Feeling the Summer Sizzle

The T.C. Jacoby Weekly Market Report Week Ending July 28, 2023

Cheese and butter prices both jumped once again this week. The sudden strength in the cheese market reflects a shortage of Cheddar that is fresh enough to trade at the spot market in Chicago, a phenomenon that can lead to dramatic but often short-lived spikes in the sultry summer months.

The dairy markets are still feeling that summer sizzle. Cheese and butter prices both jumped once again this week. CME spot Cheddar blocks leapt 12.5ȼ to $1.9075 per pound. That put them higher than year-ago prices for the first time since early February. Barrels rallied 10.75ȼ to $1.7625. The sudden strength in the cheese market reflects a shortage of Cheddar that is fresh enough to trade at the spot market in Chicago, a phenomenon that can lead to dramatic but often short-lived spikes in the sultry summer months.

Fresh Cheddar may be scarce, but there is plenty of cheese. On Tuesday, USDA reported 1.51 billion pounds of cheese in cold storage warehouses on June 30, the highest mid-year inventory on record. Stocks were 0.3% greater than in June 2022 and they grew 12.6 million pounds from May to June, a month in which cheese stocks often shrink. Inventories of American-style cheeses did decline modestly last month, but, at 853.3 million pounds, they were still up 0.8% from a year ago and notched the highest June stocks figure on record.

CME spot butter hiked to a new peak this week, touching a fresh 2023 high Thursday at $2.6925. It finished at $2.68, up 9.75ȼ since last Friday. Tuesday’s Cold Storage report helped to explain butter’s impressive summer climb. Butter stocks dropped unexpectedly in June, falling 20.4 million pounds last month to 347.5 million pounds. Stocks are 5% greater than the uncomfortably tight levels from this time last year, but they’re quite a bit lighter than butter buyers would like to see ahead of the fall baking season. Meanwhile, cream multiples are ramping up as scorching temperatures take a toll on milk production and components.

CME spot nonfat dry milk also logged impressive gains. It climbed 4ȼ to a six-week high at $1.16. Lower milk production is reducing the lineup of trucks at driers, and production is falling accordingly. Meanwhile, export demand remains strong thanks to robust orders from Mexico.

Spot whey powder slipped 0.25ȼ to 25ȼ per pound. USDA’s Dairy Market News describes demand for whey as “lackluster.” Cheese vats are full and whey production continues apace, leading to some concerns about storage space for dry whey and other dry products. It’s going to be hard to lift whey prices significantly when the trade is worried about having enough places to stash it.

Strong spot cheese prices propelled August Class up 55ȼ this week to $17.26 per cwt. Other Class III contracts finished a few higher, and fourth-quarter futures averaged $18.43. Class IV futures logged strong gains. The August contract advanced 52ȼ to $19.05. Fourth quarter futures rallied about 70ȼ to an average of $19.33.

Today’s futures prices are considerably better than those that determined the June milk checks or those on which July milk revenue will be based. But they’re still not enough to pay the bills on many farms, especially for producers who will continue to suffer discounts on their already-low Class III revenue. Dairy producers are leaving the industry in growing numbers, and dairy slaughter volumes remain high. The milk-cow herd continues to shrink, setting the stage for higher prices in the year to come.

It’s certainly hot, but the weather was not as dry as feared. Scattered showers moved across the Corn Belt and they’re expected to do so again next week. But moderate drought persists in most of the Farm Belt, and crop yields likely continue to slip. December corn futures fell 6ȼ this week to $5.3025 per bushel. November soybeans closed at $13.825, down 19.5ȼ. September soybean meal closed at $433.60 per ton, up another $7.30.

Source;  https://www.jacoby.com/market-report/dairy-markets-still-feeling-the-summer-sizzle/

Fonterra updates farm gate milk price projection

Fonterra has indicated that it would lower its expected Farmgate Milk Price range for the 2023/24 season.

According to the cooperative, the range will be reduced from $7.25 to $8.75/kgMS to $6.25 to $7.75/kgMS, with the midpoint dropping from $8.00 to $7.00/kgMS.

The news comes after the price of whole milk powder (WMP) fell 7.29% earlier this week on the Global Dairy Trade (GDT) auction platform, bringing WMP prices to their lowest level since early 2019.

According to Fonterra CEO Miles Hurrell, the updated pricing range reflects continuous lower import demand for whole milk powder from Greater China.

“When we announced our opening 2023/24 season forecast Farmgate Milk Price in May, we noted that it reflected our expectation that China’s import demand for whole milk powder would increase in the medium term,” Hurrell explains.

He claims that total GDT whole milk powder WMP prices have dropped 12% since then, with China’s portion of WMP volumes on GDT events following below-average levels.

“This reflects China’s current surplus of fresh milk, resulting in increased levels of local production of whole milk powder and a reduction in near-term whole milk powder import requirements.”

“The medium to long term outlook for dairy, particularly New Zealand dairy, looks positive, with milk production from key exporting regions flat compared to last year,” Hurrell adds.

Bearish trend continues in Chicago Thursday

Milk futures on the Chicago Mercantile Exchange fell Thursday, extending the week’s gloomy trend, while cash markets were mainly down. Class III milk for August is down 40 cents to $17.09. September is down 34 cents to $17.19. The October contract is down 30 cents to $17.67. November is 22 cents cheaper at $18.00. Contracts from December to February are five to fifteen cents lower. At $0.2650, dry whey is up $0.0025. Two transactions were made at prices ranging from $0.2625 to $0.2650. Blocks are constant at $1.96. Barrels have fallen $0.0450 to $1.8250. At $2.6150, butter is down $0.0150. At $1.12, nonfat dried milk is down $0.0025. At $1.12, two deals were completed.

Milk dumping likely to stop as dairy prices rise

Wisconsin dairy farmers benefited from a rapidly expanding export market, particularly to Asian countries, in recent years. But when those same markets pulled back on their orders, farmers had more milk than they knew what to do with.

The U.S. exported over 16 million fewer pounds of cheese in May 2023 compared to the same period a year earlier, according to the U.S. Dairy Export Council.

Selling on a global scale also involves global competition. Wisconsin cows now sell alongside those from Europe and else where. More competition drives down prices.

Staffing challenges continue to plague many industries as baby boomers retire in droves and younger generations are simply too small to fill the holes. This is also true for the creamery industry, where a lack of adequate staffing means that operations cannot process as much milk as they once did.

Combine all of these forces together with naturally higher milk production from cows in the spring months, and the market is flooded.

Milk’s short shelf life means that producers cannot store excess product and wait for prices to recover. All the extra gets dumped.

Phil Plourd, president of Ever Ag Insights, the market analysis arm of an agricultural logistics company, acknowledges that milk dumping hurts the dairy industry’s brand image.

“It’s not a good look, right? And it seems wasteful, and it’s like ‘Oh, this is good milk, what the heck are we doing?,’” he said.

Despite these factors all pressing down on the price of milk, Plourd believes that prices will likely rebound in the near future and bring an end to the majority of milk dumping for the year.

Hotter weather in July and August reduces milk production in cows.

Farmers will also likely respond by reducing their herds, Plourd said. High prices for beef will offer some additional encouragement.

Prices have already moved in a promising direction for farmers in the past week. The cost of butter and a block of cheddar rose two and ten percent respectively.

“We usually find our way out of it before too long,” Plourd said. “And it can be a painful process, but the people in the industry are generally resilient.”

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July Class III milk prices could plummet to $13.80/cwt, nearly $12 lower than July 2022

After record high milk prices in 2022, milk prices continue to fall reaching prices not seen since 2020 and 2021. Class III prices for July could dip to $13.800/cwt, $5.63 below January and a whopping $11.99 below a healthy $25.79 just a year ago.

Prices dipped into the $13 rante from October of 2020 to February of 2021. Milk prices are now well below profitable levels for dairy producers.

What’s to blame?

Much lower cheese and dry whey prices have contributed to lowering the Class III price. The price of 40-pound cheddar cheese was in the $1.30’s to $1.40’s per pound in June with some improvement in July to the high $1.40’s.  A year ago in July, 40-pound blocks were ranging from $1.94 to $2.11 per pound. In June, Cheddar barrel cheese reached as high as the mid $1.50’s per pound but declined to as low as $1.34 in June. In July barrels were in the low $1.40’s per pound. A year ago, in July barrels ranged from $1.55 to $1.83 per pound.

However, both blocks and barrels may be starting to trend higher. Today on the CME, 40-pound blocks increased $0.135 per pound to $1.72 and barrels increased $0.12 per pound to $1.58. Dry whey started the year at $0.415 per pound, got as high as $0.4675 per pound in March but has been as low as $0.225 to as high as $0.2775 per pound in June and July and is now $0.25. A year ago, in July dry whey ranged from $0.445 to $0.50 per pound.

What about the milk supply?

These prices show that milk prices are subject to rather small changes in milk supply, milk demand or a combination of changes in supply and demand. Last year milk production was just 0.1% higher than the year before. This year milk production from January to June has been 0.7% higher than a year ago but the increase is slowing. June milk production was unchanged from a year earlier.

Increased domestic demand and/or dairy exports are required to take up this increased production to prevent falling milk prices. Record high milk prices last year resulted in higher retail prices of dairy products which may have dampened domestic demand some. With lower milk prices, retail dairy product prices are starting to decline some but not nearly to the extent of lower milk prices.

Dairy exports enjoyed healthy sales last year with record cheese exports. But on a volume milk solids equivalent basis, May exports were 13% lower than a year ago with cheese exports down 18% lower and dry whey product exports down 29%. May was the third consecutive month dairy exports were lower than the previous year.

Weaker demand from key export markets such as China and increased competition from New Zealand have dampened exports. Lower dairy exports mean more milk is needed to clear the domestic market without lowering milk prices.

Have we hit bottom?

The July Class III price should be the bottom for the year with the price trending upward for the remainder of 2023. Milk cow numbers fell by 16,000 from May to June. June cow numbers decreased by 5,000 animals from this time last year were finally below a year ago, down 5,000. There was no increase in milk per cow. As a result, June milk production was unchanged from a year ago.

June milk production compared to a year earlier for the five leading dairy states and their cow numbers were: California -1.2%, 4,000 fewer cows; Wisconsin +1.0%, 2,000 fewer cows; Idaho +1.9%, 14,000 more cows; Texas -5.0%; 13,000 fewer cows; and New York +3.4%, 7,000 more cows. All of last year Texas was just behind South Dakota with the highest increase in milk production. But the loss of 8,000 cows from an explosion and fire along with hot weather have reduced milk production.

Other states having relatively strong increase in June milk production over a year ago were: SD +6.9%, Ohio +3.3%, Mich. + 3.2%, GA +3.0%, Ind. +2.7%, Iowa +2.5% and Minn. +1.6%. June milk production was below a year ago by 7.1% in New Mexico, 3.1% in Oregon and 1.2% in Florida.

Milk production likely to stay down

Milk production is likely to run below year ago levels for the remainder of the year. With the existing widespread drought this year’s final crop production is uncertain. The drought has already reduced alfalfa hay production. Feed prices will remain at relatively levels. Higher feed prices and lower milk prices will make margins tight for dairy producers. Dairy producers are likely to reduce cow numbers in response.

Domestic demand may improve as retail prices soften some. Dairy exports could improve some by the third quarter of the year. Except for butter the price of cheese, dry why and nonfat dry milk/skim milk power are very competitive on the world market. Some export markets may take advantage of these lower prices and start to increase purchases.

Milk prices to trend upward

Milk prices will trend higher for the remainder of the year. Milk production will be in its seasonal low August through September. Schools will begin to open at the end of August and early September which will help beverage milk sales. By October butter and cheese stocks will start to build to meet the higher season sales of cheese and butter Thanksgiving through Christmas.

Class III futures show a continued improvement in the Class III price with it rising into the $15/cwt range by August, the $16’s by September and the $17’s for the remainder of the year. However, the latest USDA forecast is not as optimistic. USDA has Class III averaging just $14.30 for the third quarter and $15.05 for the fourth quarter with the average for the year $16.05 compared to $21.96 last year.

With the sensitivity to small changes in milk supply and/or demand I think the probability is high for third quarter and fourth quarter prices to be higher than USDA’s forecast. But time will tell.

Cropp is Professor Emeritus at the University of Wisconsin Cooperative Extension, University of Wisconsin-Madison

 

 

Milk price swings drain dairy margins

The rapid decline of milk prices in recent months has drained returns on dairy farms and created quite a challenge for farmers.

Dan Ziller, a dairy farmer from Huntley and president of the McHenry County Farm Bureau, said negative margins have impacted plans to build a new facility on his family farm.

“We (he and his wife, Carol) have kids working to take over the farm,” Ziller told FarmWeek. “They still want to continue with it, but to see a swing like this makes it very hard to plan.”

USDA reduced its price estimates this month to $16.05 per hundredweight for Class III milk and $18.20 for Class IV, down $5.91 and $6.27, respectively, from last year. Ziller reported his local milk price is closer to $14 for July, which puts the operation in the red.

USDA attributed the drop in Class III milk prices to weaker cheese and whey prices while the decline of Class IV prices reflects lower nonfat dry milk prices.

“What a difference a year makes,” Ziller said. “Our operation is labor intensive, so we’re way below our cost of production with where prices are now. We need prices near $19 to $20.”

The Zillers are enrolled in USDA’s Dairy Margin Protection Program through the Farm Service Agency (FSA). But it hasn’t entirely stopped the recent financial bleeding.

“We are fortunately in the FSA dairy program,” Ziller said. “It helps, but it’s not enough to make up the difference.”

The Zillers’ daughter, Meredith, plans to take over management of the dairy herd while their son, David, looks to take over crop and feed production on the farm.

“We’re trying to build a new facility,” Ziller noted. “It remains in the planning process. We’re adjusting to figure out where we can cut costs.”

Retired dairy farmer Tom Doolittle of Antioch, president of the Lake County Farm Bureau, said he exited the business years ago when his equipment and facilities became outdated.

He’s concerned for current dairy farmers as recent margins are unsustainable.

“When I came back to farm full time with my father in 1969, there were quite a few dairies,” Doolittle said. “But, here in Lake County, urbanization continues. We have one dairy left in the county.”

Lake County had about 125,000 acres in production ag when Doolittle first started farming. Now, there’s about 25,000 farm acres left in the county as most was swallowed up by urban sprawl, he noted.

Current milk prices are “terrible for this day and age,” Doolittle said. “And, with feed prices so high, it just kills the income for a small dairy farm.”

Timing of the recent milk price decline also adds insult to injury as rising temperatures in the summer typically fuel a rally with higher demand and reduced production.

David Anderson, Texas A&M AgriLife Extension economist, said the lack of a summer price bump could be attributed to a few factors. U.S. dairy production is up, but overall demand is struggling, which created a glut of milk in some areas.

“The milk market is complex, so that makes it interesting,” Anderson said. “There is a seasonality to the supply side and the demand side that keeps the market constantly moving.”

The next usual boosts in dairy demand are coming up in August, when school returns to session and drives built-in demand for carton milk, followed by the holidays when consumers typically increase their use of cheese, milk and other dairy products for baking.

“Milk and feed futures suggest producer profitability should improve considerably by October when Class III milk prices are anticipated to increase by about $3 (per hundredweight),” CoBank’s Knowledge Exchange noted in a recent report.

But for the time being, there doesn’t appear to be much relief in sight for dairy farmers.

“U.S. milk producers continue to struggle in the current price environment,” according to the CoBank report. “While several factors are to blame for this year’s milk price decline, the sharp drop in American/cheddar-style cheese prices (which declined by a third) is the most significant.”

Source: farmweeknow.com

Dairy Markets Start the Week Higher in Chicago

On the Chicago Mercantile Exchange milk futures and cash dairy prices were higher again Monday. August Class III milk was up $0.75 at $17.46.  September was up $0.75 at $18.42. October was up $0.75 at $18.97.  November was up $0.75 at $19.22.  December through June contracts ranged from thirty-eight cents higher in May to sixty-seven cents higher in December.

In spot trade dry whey was up $0.0075 at $0.26.  Two sales were recorded at $0.2575 and $0.26. Cheese blocks were up $0.08 at $1. 8625.  Five sales were recorded, ranging from $1.80 to $1.85. Cheese barrels were up $0.0175 at $1.83.  No sales were recorded. Butter was up $0.03 at $2.6125.  Eleven sales were recorded, ranging from $2.60 to $2.6125. Nonfat dry milk was up $0.03 at $1.15.  Five sales were recorded, ranging from $1.13 to $1.15.

Milk Futures Continue Higher in Chicago Tuesday

Milk futures on the Chicago Mercantile Exchange closed higher Tuesday following strong cheese demand while cash markets were mixed.

July Class III milk up three cents at $13.86. August 49 cents higher at $15.80. September up 39 cents at $16.50. October 29 cents higher at $17.30. November through January contracts 10 to 28 higher.

Dry whey down $0.01 at $0.24. Fourteen sales were made from $0.24 to $0.2475.

Blocks up $0.09 at $1.5850. Four trades were made at $1.5050 and $1.5850.

Barrels up $0.05 at $1.4575. Four sales were made from $1.42 to $1.4575.

Butter unchanged at $2.56.

Nonfat dry milk down $0.0150 at $1.10.

Low milk prices hurting dairy farmers despite summer demand

Summertime usually means big business for dairy farmers across the country, but this year has brought sour results as milk prices remain at low levels.

According to the U.S. Department of Agriculture, the price per hundredweight of milk is currently around $17, down almost $8 from the peak of last summer.

“We’re producing more milk than we did last year, and normally when supplies go up, prices go down, and so prices to farmers are down dramatically from where they were last year,” said David Anderson, professor and extension economist at the Texas A&M AgriLife Extension service. “We set some record high prices on milk prices to farmers. We’re down 25% from that level a year ago.”

Increased production is largely to blame according to Anderson. Year-to-year production increases are typical, but industry advances in addition to changing demand and uses for dairy products make an already complicated market tougher.

“Consumer demand is changing. We drink less fluid milk, but we eat more cheese, and that leads to this kind of dynamic, ‘If I got a hundred pounds of milk, what am I gonna make out of it?’” said Anderson.

Increased feed prices in addition to general production costs are also hurting farmers. Anderson said that when feed prices are high, farmers will sometimes cut production, which in the long run can help prices return to normal levels.

“It’s not a perfect correlation in terms of timing. Dairy farmers lose money because costs go up or milk prices have come down,” said Anderson. “They lose money; they start producing less, and that drives the price back up, so we are in this real price-and-income squeeze on dairy farmers right now.”

Source: kltv.com

Positive trends for UK dairy farms despite extreme volatility, report says

There have been positive trends for dairy farmers despite the sector facing unprecedented volatility, a new report by dairy specialist Kingshay says.

Dairy producers across the country faced volatility in 2022-23 with record high prices across the board, from inputs to milk markets.

However, they secured record margins over purchased feed – although the gap between the top and bottom performers widened further, showing the importance of attention to detail.

According to the annual Kingshay Dairy Costings Focus Report, milk prices have increased by 61% over the past 10 years, reaching an average of 50.98p/litre in December 2022.

However, there was a sharp drop in the first half of 2023, with prices losing more than they gained in the second half of 2022.

Kathryn Rowland, senior farm services manager at Kingshay, said: “The gap between the top and bottom 10% of prices reached a peak differential of 16.2p/litre in February, with producers in Scotland suffering the worst prices on a regional basis,” says

The hot, dry summer of 2022 caused milk from forage to drop slightly, with many producers turning to feed winter forage stocks.

The bottom 25% of producers used almost a tonne (917kg) more concentrate per cow than their higher performing counterparts, at 3,197kg fed over the 12 months.

Not only did the summer impact yields, but fertility too. Ms Rowland said: “Cows didn’t display such obvious oestrus cycles due to the hot weather.”

She added: “As a result, days to first service increased from 69 to 75, and given the high milk price, the cost of each day of extended calving interval increased to £5.89/day per cow.

When comparing production systems, year-round housed cows produced the greatest margin per cow, with low to moderate yielding organic herds leading on a per-litre basis.

However, the gap between the top and bottom quartile of those within the same systems widened again, showing the potential to improve performance within an existing system rather than switching to an alternative.

New to Kingshay’s report this year is heifer trends, which found 62% of herds were not hitting the age at first calving target of between 23 and 25 months.

Also, 50.2% of cows leaving the herd are in their first three lactations, before they have fully paid for the cost to rear them and this can have a big impact on carbon footprints.

Herd size has grown by 23% over the past 10 years, although there was a dip in 2019 to 2021 when flying herds were not restocking due to high heifer prices.

“Since 2021, herd size has recovered its long-term trend, rising from an average of 201 cows to 217,” explained Ms Rowland.

Yields have also grown by 10% over the past decade, but over a shorter period have stagnated, remaining around 8,400 to 8,450 litres per cow since 2020.

“This could be due to a reduced focus on production alone, with a shift towards efficiencies and margins,” she added.

Milk from forage and grazing has also remained static since 2020, but over 10 years has grown by 31% and 9%, respectively.

At the same time, concentrate use per cow has grown by 12%, with prices up by 46% to a record high of £357/t (rolling 12 month average).

As a result, total purchased feed costs have jumped by 58% per cow and 44% per litre of milk produced.

Ms Rowland said: “Thankfully, the milk price has increased by 61% over the same period – also to a record high – meaning the milk price to feed price ratio has widened by 10%, to 1.33.

“The larger the ratio, the better it is for farmers – and last year was the highest it had been since 2018.”

The 10-year trend looks positive when it comes to the bottom line. “The average margin over purchased feed improved by 86% on a per cow basis, and 69% on a per litre basis, to £2,865 and 33.87p/litre, respectively – their highest levels since Kingshay first started the costings service back in 1998.

“A much needed additional margin to cover increases in all the non-purchased feed input costs,” explained Ms Rowland.

Close attention should be paid to cost of production for the next 12 months, to assess the impact of high input costs, with accurate budgets essential for planning cash flow.

“Margins over purchased feed continues to be a key way to easily monitor production, feed efficiency and feed costs, along with milk quality and price each month, with comparisons to similar herds.”

Source: farminguk.com

Milk Markets Start the Week Higher in Chicago

Milk futures were higher in the near term and cash dairy prices were higher Monday on the Chicago Mercantile Exchange.

July Class III milk July was up a penny at 13.83. August Class III milk had most of the trading volume and was up $0.22 at $15.31.  September was up $0.19 at $16.11.  October was down $0.01 at $17.01.  November was unchanged at $17.58.  December through June contracts ranged from unchanged from December through May to eleven cents higher in June.

Dry whey was up $0.0025 at $0.25.  No sales were recorded.

Cheese blocks were up $0.0150 at $1. 4950.  Three sales were recorded from $1.48 and $1.49.

Cheese barrels were up $0.0150 at $1.4075.  No sales were recorded.

Butter was up $0.01 at $2.56.  Twenty sales were recorded, ranging from $2.5525 to $2.5675.

Nonfat dry milk was up $0.01 at $1.1150.  No sales were recorded.

Record Low Milk Prices During Rough Summer for Dairy Farmers

High milk creation, lukewarm homegrown interest, floundering send out deals, and a sketchy weather conditions market for feed wares all are powering anxious vulnerability for U.S. dairy makers.

The principal half of Summer 2023 in dairy markets will be noted for breaking records, and not positively. As per dairy item dealers T.C. Jacoby, the USDA declared in late June the pay over feed cost determined in May as a component of the Dairy Edge Inclusion (DMC) program tumbled to $4.83/cwt., the most minimal figure seen starting from the formation of that program. Furthermore, on July 7, dry whey cratered at 22.75₵/lb., the most minimal cost at any point found in that market.

On the June 28 episode of the “Parlor to Plate” web recording from Ever.Ag, the subject for exploring the months ahead was discipline and persistence. Examiner Jim Spainhour said the U.S. corn and soybean crops keep on wavering on the meteorologist’s every word, and makers should be extremely key to control feed costs in what will stay an exceptionally unstable product market until the end of the mid year.

“Safeguard your potential gain and give yourself a roof as far as how high your protein and grain uses may be,” he encouraged. “Use a few procedures on the Trade, while leaving a portion of that disadvantage adaptability would it be a good idea for us we see a break.”

Dairy market examiner Kathleen Wolfley encouraged a comparative procedure to safeguard makers from low milk costs utilizing the Dairy Income Security (DRP) Protection program. “Lay in certain floors, play some safeguard, and basically shield yourself from even lower costs,” she proposed. “Discipline and tolerance pay off.”

Wolfley said around 25% of the U.S. milk supply was safeguarded by DRP protection in the primary quarter of 2023, with around 20% covered for Q2 and Q3.

Greg Steele, Senior Dairy Loaning Expert for Companion Monetary, said 2023 is turning out to be an extraordinary illustration of the worth of makers taking the long view with risk the executives. “The people who have risk the executives devices set up are partaking in a superior edge at the present time, in light of choices they made 6-9 months prior whenever the market potential open doors were a lot more grounded than they are today,” he expressed.

Steele proceeded to say that the U.S. dairy industry is entering another time in which processors presently have base projects set up, like a standard framework. In view of their creation history, dairies have limits on the allocation of milk they can sell the processor, with sharp punishments assuming they surpass those edges.

Another unsettling advancement: processors lessening their number of supporters. Because of oversupply combined with work issues, handling limit is pushed to the limit in certain pieces of the country. That has prompted instances of unloading milk, and a few makers getting sees that they have 30, 60, or 90 days to track down another processor.

“By the details of the agreements they have, processors are giving supporters notice that they never again need to take their milk,” shared Steele. “We urge makers to comprehend the relationship they have with their processor, take generally excellent consideration of it, take a gander at the legally binding arrangements they have set up, and investigate an Arrangement B of elective choices in the occasion their processor cuts off their friendship.”

Wolfley likewise underscored it’s a crucial time for makers to remain proactively participated in their promoting choices. “Trust isn’t a gamble the board technique,” she exhorted.

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