The December class III price is the highest since 2007. The 2022 average is $21.96, up from $17.08 in 2021 and $18.16 in 2020, a penny less than the USDA’s most recent forecast.
The government anticipates a 2023 average of $19.80. Late Friday morning, class III futures predicted a January price of $19.28, a February price of $18.40, and a March price of $18.34, with an October top of $19.90. The class IV price is $22.12, $1.18 lower than in November, $2.24 higher than a year ago, and the lowest since December 2021. Its average price in 2022 is $24.47, up from $16.09 in 2021 and $13.49 in 2020. The USDA predicts $20.10 in 2023.
The weighted average for the first Global Dairy Trade event of 2023 fell 2.8%, following a 3.8% decline on December 20 and a 0.6% rise on December 6. Traders brought in 73.8 million pounds of goods, up from 63.4 million pounds on December 20 and the largest since November 3, 2020. The average metric tonne price dropped to $3,365.00 US, down from $3,493.00 the previous time.
After not trading on December 20, buttermilk powder was the greatest draw on the average, falling 12.9%. Anhydrous milkfat was down 5.1% after dropping 2.2% the previous time, while butter was down 2.8% after falling 2.6% the previous time. Skim milk powder was down 4.3% after falling 4.8%, while whole milk powder was down 1.4% after falling 4.0%. GDT cheddar was down 2.7% after down 0.7% the previous time.
According to StoneX Dairy Group, the GDT 80% butterfat butter price is $1.9822 per pound US, down 5.5 cents from the previous week’s loss of 5.4 cents, and compared to CME butter, which ended Friday at $2.3825. GDT cheddar, at $2.1274, was down 5 cents from Friday’s CME block cheddar, which was $2.0550. GDT skim milk powder averaged $1.2874 per pound, down from $1.3447 (5.7 cents) and $1.4552 per pound, both down from $1.4723. (1.7 cents).
CME level Nonfat dried milk closed at $1.2975 a pound on Friday. “Total supply on sale climbed 4,000 metric tonnes at this event, and with a comparable rise in purchasing amount of over 5,000 MT, it is difficult to conclude that demand is down,” says Dustin Winston of StoneX.
More likely, market purchasers are hesitant to pay extra for volume since they are not in such desperate need of stuff. “Every area except Southeast Asia has a high purchase volume,” Winston adds.
According to Ron O’Brien of Nui Markets, global markets will enter 2023 “on the defensive.” O’Brien stated in the January 9 Dairy Radio Now programme that purchasers have the power, mostly owing to pressure from the Southern Hemisphere’s flush inventory that is still available. He expects “lacklustre demand out of Asia and growing supply in Oceania to continue to pull CME spot and front month futures down.
Where the rear months are greater than the front months, spot demand must continue over, particularly for butter and nonfat dry milk,” O’Brian stated.
“Inflation worries and supply chain nightmares are starting to fade,” he added, “but it’s a double-edged sword for dairies since end users are now interested in less safety stock and are re-evaluating future budgets owing to demand destruction.”
“Basis risk continues to afflict margins on all sides of the market,” says O’Brien. “Output prices based on CME spot markets continue to deviate from input prices based on federal order milk markets. There are significant differences between CME futures market settlements and real milk inspections. Variations in the block-barrel spread across time.
Worse, corn-based price variations of up to $3 when prices are already near $7,” he added.
Valley Milk in Turlock, California, has joined Hilmar and Milk Specialties Global on Nui’s platform, along with Seattle-based Darigold, to “provide further value to the marketplace by bringing buyers and sellers together, further boosting transparency for all that are engaged,” he concluded.
Meanwhile, dairy exports from the United States were high in November. According to the most recent USDA data, cheese exports totalled 82.7 million pounds, up 12.9% over the previous year.
According to HighGround Dairy, butter sales increased 160% to 18.6 million pounds, with exports to Canada reaching an all-time high, despite unit value being extremely low, “suggesting some form of blended fat, alternate item, or mislabeled product.” Bahrain’s demand for butter has also remained robust. Exports of nonfat/skim milk powder totalled 155.2 million pounds, a 3% decrease. Dry whey increased 17.4% to 43.8 million pounds.
According to HighGround Dairy, November volume was the biggest on record, with the largest gains to Mexico, especially on nonfat dry milk, and subsequently China.
According to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC, dairy margins fell considerably in the second half of December as milk prices continued to fall while expected feed costs rose.
“Milk prices were impacted by a boost in milk output throughout November, as well as cold storage statistics from the USDA,” according to the MW.
The MW highlighted highlights from the milk production and cold storage reports, which I previously reported on, attributing the rise in milk output to a mix of greater efficiency from a bigger milking herd and increased milk output.
“The cold storage data revealed a seasonal reduction in dairy product stockpiles during the month,” the MW found.
Cheese prices on the CME fell in the shorter first week of 2023. The cheddar blocks dropped 13.75 cents on the first day of trade, then dropped to $1.9725 per pound on Wednesday, the lowest since November 1, 2022, then recovered, rising 7.5 cents Friday to end at $2.0550, down eight cents for the week but six cents higher than a year earlier.
The barrels plummeted to $1.7150 on Wednesday, the lowest since December 21, 2022, but finished Friday at $1.725, 13.25 cents down on the week, 14 cents lower than a year ago when they rose 15.50 cents, and 33 cents lower than the blocks. On the week, sales totalled five block cars and eleven barrel cars.
According to Dairy Market News, Midwest cheesemakers are keeping busy as spot milk prices remain as low as they were during the holiday periods. Cheese demand varies, with some cheesemakers reporting a slowdown in recent weeks and others reporting consistent week-to-week demand. The availability of cheese has increased. Contacts indicated that surplus cheese was generally spoken for late in the year, but supplies are currently expanding in certain situations, according to Dairy Market News. According to StoneX, the best reductions on spot milk loads were roughly $10 under class, “but it is doubtful that offers will remain that low.”
Western cheese demand is stable to slightly lower in food service and retail, while foreign demand is mixed. Lower pricing from worldwide suppliers are leading to lower demand, however some companies claim good sales to Asian markets. Milk is still accessible for cheesemakers, and some are getting it at a discount. According to Dairy Market News, schedules remain busy, but certain factories continue to report supply delays and staffing difficulties.
Spot butter rose a quarter penny Friday to settle at $2.3825, 36 cents lower than a year ago, after remaining at $2.38 a pound for the entire Christmas and New Year’s week. This week there were no sales. Cream is said to be commonly available both inside and outside of the Midwest.
Multiples are somewhat higher in some circumstances, but still lower as compared to non-holiday seasons. When personnel and haulage cooperate, butter output with the widely available cream is busy, and machines are functioning at capacity. According to Dairy Market News, butter demand has eased somewhat late in the year and in the first week of 2023, and “market mood has obviously cooled down after the fall’s bullish spell.
According to contacts, the market timbre is now ambiguous.
There are other factors at play, but strong production increases and sufficient cream supply are unlikely to support market tones, since demand has slowed in recent weeks.”
To begin the year, demand for cream in the West is being exceeded by plentiful cream supply.
Some butter producers utilise cream internally rather than selling it at the beginning of the year. Cream deliveries are delayed owing to transportation challenges, while butter production is high and exceeds demand. “With near-term demand for physical butter and nonfat dry milk being generally satisfied, we continue to expect that demand for fat will remain robust in January,” StoneX writes.
The issue is retail demand, since costs for a pound of butter can range from $6 to $7 to $8 or more, depending on the shop and brand. Anecdotal talks indicate that current demand for NFDM is somewhat modest, but the likelihood of buy side interest down the line appears to be improving.”
The week’s GDT did not assist Grade A nonfat dry milk, which finished Friday at $1.2975 per pound, down 3.75 cents, the lowest since August 27, 2021, and 37 cents lower than a year ago. This week, four sales were recorded.
With two sales recorded, dry whey maintained stable for three sessions but concluded the week at 39 cents per pound, down 2.5 cents and 36.75 cents from a year ago.
Dairy producers noticed a small improvement in one of the profitability indicators. For the third month in a row, the November milk feed price ratio increased. According to the most recent agricultural pricing data, the November ratio is 1.93, up from 1.92 in October and compared to 1.92 in November 2021.
The entire millk price average fell to $25.6 per hundredweight, a 30 cent decrease from October, but was $4.90 more than November 2021.
California’s pricing per hundredweight was $26.40, down 20 cents from October but $6 more than a year earlier. Wisconsin’s was $23.60, down 80 cents from October but $3 more than a year earlier.
The November national corn price averaged $6.49 per bushel, down a penny from October and 59 cents from the previous month, but still $1.23 per bushel higher than November 2021.
Soybeans rose $14 per bushel, up 50 cents from October after falling 60 cents the previous month, and were $1.90 per bushel higher in November 2021.
Alfalfa hay has decreased $14 per tonne since October, after rising $4 in the previous month to a new high. The November average dipped to $267 per tonne, still $54 per tonne higher than the previous year.
The November cull price for beef and dairy combined averaged $78.40 per hundredweight, down $5.70 from October and $7.10 from the previous month, but $9.20 more than November 2021 and $6.80 higher than the 2011 base average.
“Income above feed expenses in November were over the $8 per hundredweight threshold needed for stable to growing milk production for the 14th month in a row,” says Bill Brooks of Stoneheart Consulting in Dearborn, Missouri.
“Alfalfa hay prices hit a new all-time high price in November, and all three commodities were in the top two for November all-time high prices. Feed prices were the highest in November history, and the seventh highest all time. According to Brooks, the total milk price remained in the top 10, with the eighth highest recorded.
“For 2022, milk income above feed costs (using December 30 CME settlement futures prices for class III milk, maize and soybeans plus the Stoneheart projection for alfalfa hay) are predicted to be $12.17 per hundredweight, a rise of 48 cents per hundredweight against the previous month’s estimate. “By 2022, revenue over feed would be beyond the amount required to maintain or increase milk production, and $4.38 per hundredweight higher than in 2021,” adds Brooks.
“Looking to 2023, milk income above feed expenses (using December 30 CME settlement futures prices for class III milk, maize and soybeans plus the Stoneheart projection for alfalfa hay) are predicted to be $8.18 per hundredweight, a loss of 59 cents per hundredweight over last month’s estimate. “Income over feed in 2023 would be above the amount required to sustain or increase milk production,” Brooks said, “but down $3.99 per hundredweight from the forecast in 2022.”
According to National Milk Producers Federation President and CEO Jim Mulhern, the Environmental Protection Agency will betray dairy producers in politics. “NMPF is sad that dairy farmers, who try every day to be environmental leaders, may have to live under a WOTUS regulation that is burdensome, ambiguous, and unduly complex,” Mulhern stated.
“Because the EPA’s most recent iteration fails to resolve what has now been a 50-year struggle to define what constitutes a water body subject to federal regulation under the Clean Water Act, our members will face continued uncertainty as they attempt to understand and comply with ambiguous regulations.”
“NMPF was delighted with the Navigable Waters Protection Rule (NWPR), but upset when it was repealed. NMPF is particularly upset that the EPA did not listen to several farm stakeholders who urged the agency to postpone regulation on a new WOTUS rule until the Supreme Court issued its decision in the Sackett case, which is due this spring.”
“EPA’s current iteration is not a total return to the unworkable regulation established in 2015,” the NMPF said. The EPA’s specified exemptions at least attempt to address some of agriculture’s worries about ambiguity. Even yet, the EPA is reintroducing significant uncertainty in this version of the rule as it seeks to identify what is a ‘Water of the United States,’ as shown in the handling of ditches, ephemeral streams, and groundwater, all of which were largely excluded under the NWPR. The NMPF fully expects further lawsuits as a result of this rule.”