CME grade A nonfat dry milk closed Friday at $1.2975 per pound.StoneX’s Dustin Winston says “Total supply on offer increased 4,000 metric tons in this event and with a corresponding increase in purchase quantity of nearly 5,000 MT it is hard to say that demand is down.

More likely, it seems that market buyers are unwilling to pay up for volume as they are not in such a dire need for product. Purchase volume for every region except SE Asia,” says Winston.

Nui Market’s Ron O’Brien says global markets enter 2023 “on the defensive.” Speaking in the January 9 Dairy Radio Now broadcast, O’Brien said buyers have the leverage, mostly due to pressure from the Southern Hemisphere’s flush inventory which remains on offer.He expects “lackluster demand out of Asia and increasing supplies in Oceania to continue to pressure CME spot and front month futures lower.

Where the back months are higher than the front months must play out to inspire spot demand to carry forward, specifically for butter and nonfat dry milk,” O’Brian explained.“Inflation fears and supply chain nightmares are beginning to recede,” he said, “but it’s a double edged sword for dairies as end users are now interested in less safety stock and are re-evaluating future budgets due to demand destruction.”

“Basis risk continues to plague margins on all sides of the market,” according to O’Brien. “Output prices based on CME spot markets and input prices based on federal order milk markets continue to diverge. Wide variances in CME futures market settlements and actual milk checks. Historical variances in the block-barrel spread.

And worse enough corn-basis variances of as much as $2 to $3 when prices are already near $7,” he said.Valley Milk in Turlock, California is Nui’s newest platform addition, along with Seattle based Darigold, joining Hilmar and Milk Specialties Global to “bring additional value to the marketplace by bringing buyers and sellers together, further increasing transparency for all that are involved,” he concluded.

Meanwhile, U.S. dairy exports remained strong in November. USDA’s latest data shows cheese exports totaled 82.7 million pounds, up 12.9% from a year ago.

Butter, at 18.6 million pounds, was up 160%, with shipments to Canada at an all-time high, although unit value was incredibly low, according to HighGround Dairy, “suggesting some sort of blended fat, alternative item or mislabeled product.” Butter demand from Bahrain also remained strong.Nonfat/skim milk powder exports totaled 155.2 million pounds, down 3%. Dry whey, at 43.8 million pounds, was up 17.4%.

HighGround Dairy says this was the highest November volume on record, with the largest gains to Mexico, primarily on nonfat dry milk and then China.Dairy margins weakened further over the last half of December as milk prices continued to drop while projected feed costs moved higher, according to the latest Margin Watch (MW) from Chicago based Commodity and Ingredient Hedging LLC. “

A build in milk production during November along with cold storage data from USDA both pressured milk prices,” according to the MW.

The MW reported highlights from the milk production and cold storage reports, which I have previously reported, crediting the increase in milk output to a combination of increased efficiency from a larger milking herd.

“The cold storage report reflected a seasonal decline in dairy product stocks during the month, although the drawdown was not as large as in previous months as high prices are beginning to negatively impact demand, the MW concluded.

CME cheese prices plunged in the shortened first week of 2023. The cheddar blocks lost 13.75 cents the first day of trading then fell to $1.9725 per pound Wednesday, lowest since November 1, 2022, but rallied, jumping 7.5 cents Friday to close at $2.0550, down eight cents on the week but six cents above a year ago.

The barrels fell to $1.7150 Wednesday, lowest since December 21, 2022, but closed Friday at $1.725, 13.25 cents lower on the week, 14 cents below a year ago when they jumped 15.50 cents and are 33 cents below the blocks. Sales totaled five cars of block on the week and 11 of barrel.

Midwest cheesemakers are running busy schedules, according to Dairy Market News, as spot milk prices remained as low as they were during the holiday weeks. Cheese demand varied, with some cheesemakers saying demand slackened in recent weeks, while others say it is steady week to week. Cheese availability has grown. Late in the year, contacts suggested extra cheese was mostly spoken for, but now stocks are in some cases growing, says Dairy Market News.StoneX reported that the greatest discounts on spot milk loads were around $10 under class, “but it is unlikely that offers are able to stay that low.”

Western cheese demand is steady to lighter from food service and retail and international demand is mixed. Lower prices from global suppliers is contributing to the lighter demand, while some report strong sales to Asian markets. Milk remains available for cheesemakers and some are purchasing it below class prices. Schedules are busy, says Dairy Market News, but some plants continue to report delayed deliveries of supplies and labor shortages.

Spot butter, after holding Christmas week and most New Year’s week at $2.38 per pound, inched up a quarter cent Friday to close at $2.3825, 36 cents below a year ago. There were no sales on the week.Cream is reportedly widely available from within and outside the Midwest.

Multiples are a little steeper in some cases, but still discounted when compared to off holiday seasons. Butter output, with the widely accessible cream, is busy and plants are running at capacity when staffing and hauling cooperates. Butter demand lightened some late in the year and the first week of 2023, says Dairy Market News, and “Market sentiment has clearly settled down from the fall’s bullish stint.

Contacts say market timbre is uncertain at the moment.There are a number of factors involved, but strong production pushes and plentiful cream supplies are not expected to firm market tones, as demand has quieted in recent weeks.”Demand for cream in the West is being outpaced by ample cream availability to start the year.

Cream is being used internally by some butter producers as opposed to selling it at start of the year prices. Cream delivery delays are due to transportation issues, but butter output is strong and outpacing demand.StoneX says “With near term demand for physical butter and nonfat dry milk appearing mostly satiated, we continue to believe that demand for fat will continue to be strong in January.

It’s retail demand that is the problem as prices for a pound of butter hit $6, $7, $8 or more depending on the retailer and brand. Anecdotal conversations point to relatively weak immediate demand for NFDM, but the prospect of buy side interest down the road a bit seems to be improving.”

Grade A nonfat dry milk was not helped by the week’s GDT and closed Friday at $1.2975 per pound, down 3.75 cents, lowest since August 27, 2021, and 37 cents below a year ago. There were four sales reported on the week.

Dry whey held steady for three sessions but finished the week at 39 cents per pound, down 2.5 cents and 36.75 cents below a year ago with two sales reported.Dairy farmers saw a slight improvement in one of the measures of profitability. The November milk feed price ratio inched higher for the third month in a row. The latest ag prices report shows the November ratio at 1.93, up from 1.92 in October and compares to 1.92 in November 2021.

The all millk price average slipped to $25.6 per hundredweight, down 30 cents from October, but was $4.90 above November 2021.California’s price averaged $26.40 per hundredweight, down 20 cents from October, but $6 above a year ago. Wisconsin’s, at $23.60, was down 80 cents from October, but $3 above a year ago.

The November national corn price averaged $6.49 per bushel, down a penny from October, after falling 59 cents the previous month, but is still $1.23 per bushel above November 2021.Soybeans crept up $14 per bushel, up 50 cents from October after dropping 60 cents a month ago and were $1.90 per bushel above November 2021.

Alfalfa hay dropped $14 per ton from October, after jumping $4 a month ago and hit a record high. The November average fell to $267 per ton, still $54 per ton above a year ago.

The November cull price for beef and dairy combined averaged $78.40 per hundredweight, down another $5.70 from October, after dropping $7.10 the previous month, but is $9.20 above November 2021 and $6.80 above the 2011 base average.

Dairy economist Bill Brooks of Stoneheart Consulting in Dearborn, Missouri says “Income over feed costs in November were above the $8 per hundredweight level needed for steady to increasing milk production for the 14th month running.”

“Alfalfa hay prices set a new all-time record high price in November and all three commodities were in the top two for November all time high prices. Feed costs were the highest ever for the month of November and the ninth highest all time. The all milk price was able to stay in the top ten at the eighth highest recorded, according to Brooks.

“For 2022, milk income over feed costs (using December 30 CME settling futures prices for class III milk, corn and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $12.17 per hundredweight, a gain of 48 cents per hundredweight versus the previous month’s estimate. 2022 income over feed would be above the level needed to maintain or grow milk production and $4.38 per hundredweight above the 2021 level,” writes Brooks.

“Looking at 2023, milk income over feed costs (using December 30 CME settling futures prices for class III milk, corn and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $8.18 per hundredweight, a loss of 59 cents per hundredweight versus last month’s estimate. 2023 income over feed would be above the level needed to maintain or grow milk production,” Brooks warned, “but down $3.99 per hundredweight from 2022’s estimate.”

In politics, dairy farmers will be slighted by the Environmental Protection Agency, according to the National Milk Producers Federation President and CEO Jim Mulhern. “NMPF is disappointed that once again dairy farmers, who every day strive to be leaders in environmental stewardship, may need to live under a WOTUS rule that is cumbersome, unclear and overly complicated,” said Mulhern.

“Because the EPA’s most recent iteration fails to resolve what is now 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 comprehend and comply with unclear regulations.”

“NMPF was pleased with the Navigable Waters Protection Rule (NWPR) and disappointed when it was revoked. NMPF is also disappointed that EPA failed to listen to numerous agriculture stakeholders that called on the agency to stay rulemaking on a new WOTUS rule until the Supreme Court ruled on the Sackett case, expected this spring.”

NMPF cautioned that “EPA’s latest iteration is not a complete return to the unworkable rule adopted in 2015. EPA’s listed exemptions at least try to address some of agriculture’s concerns over lack of clarity. Even so, EPA is reintroducing considerable ambiguity in this version of the rule as it attempts to determine what is a ‘Water of the U.S.’ as seen in the treatment of ditches, ephemeral streams and groundwater, all of which were largely categorically out under the NWPR. NMPF fully anticipates continued litigation as a result of this rule.”