October’s Dairy Margin Coverage margin receded $0.40 per hundredweight from its record level a month earlier, to $15.17 per hundredweight. That’s the second highest level since margin protection became dairy’s basic federal safety-net mechanism. October fluid-milk sales were 1.3 percent more than a year earlier, which continued to keep growth positive of past three-month and year-to-date sales. Yogurt and butter showed particularly strong U.S. consumption gains during August-October, despite both reaching their most ever retail prices during the period.
Following 16 consecutive months when U.S. dairy cows were less than year-earlier numbers, the U.S. Department of Agriculture reported the national milking-cow herd grew by 10,000 cows year-over-year in October. Together with other factors, that likely indicates a return to expansion mode for U.S. milk production. Stocks of all cheese decreased almost to pre-pandemic levels at the end of October, likely driven by constrained production growth and robust exports. Cheese-price weakness was responsible for decreasing the Class III price by almost $3 per hundredweight in November from a month earlier.
Commercial use of dairy products – October fluid-milk sales were 1.3 percent more than a year earlier, which continued to keep past three-month and year-to-date sales growth positive. And it raised the probability that fluid sales will show positive growth, adjusted for leap year, for all of 2024. That would be the first time that’s happened since 2009. Yogurt and butter showed particularly strong consumption gains in the U.S. domestic market during August-October, all the more noteworthy given that both products reached their most ever national average retail prices in September.
U.S. dairy trade – This year’s fourth quarter has started out like its first half for U.S. dairy exports, with a weaker – though still historically robust – pace compared to a strong third quarter. Measured as a percent of domestic milk-solids production, exports averaged 16.4 percent during the first half, then increased to 17.4 percent in the third quarter – with each month more than 17 percent – but then returned back to 16.2 percent in October. The major products for which October exports were well less than their third-quarter averages – nonfat-dry-milk and skim-milk powder, and dried and modified whey – decreased to less than their first-half averages as well.
October imports, meanwhile, were equivalent to 4 percent of domestic milk-solids production, following the third quarter averaging 3.9 percent and the first half at 3.6 percent. The largest milk-solids volume increases in October were for out-of-quota butter, unsweetened-whole-milk powder and sweetened-condensed milk as well as in-quota butteroil and dairy-sugar mixtures.
Milk production – The number of cows in the U.S. milking-cow herd was less than a year earlier during each of the 16 consecutive months between June 2023 and September 2024, by a weighted-average of 56,000 cows. That’s an average reduction of 0.6 percent. That came to an end with the preliminary USDA report that the national milking-cow herd was 10,000 cows larger in October than a year ago. Together with the growth in monthly U.S. average milk per cow since July and the growth in U.S. liquid-milk production each month since August, that may well signal a definitive return to expansion mode for basic milk production in the U.S. dairy-farm sector.
U.S. milk-solids production continues to expand by almost a percentage point faster than liquid-milk production, due to the ongoing rapid increases in the component composition of milk coming from U.S. dairy farms.
Dairy products – Among the major dairy-product categories, butter, non-American-type cheese and nonfat dry milk experienced significant increased production during August-October. But American-type cheese, skim-milk powder and dry whey showed significant decreases.
Dairy-product inventories – Month-ending stocks of all cheese have decreased this year by more than 100 million pounds from levels they maintained very consistently during the previous three years. Except for two months in the fall of 2020 at comparable levels, total cheese stocks at the end of October this year – 1.343 billion pounds – were less than they have been since late 2019, prior to the COVID-19 pandemic.
Several reasons may explain the decrease. Cheese-production growth has moderated this year. Following two years when cheese production increased by less than 10 million pounds from the year prior, production expanded by 43 million pounds in 2021 and by 27 million pounds in 2022. In 2023 the annual increase was back to about 10 million pounds; year-to-date it’s increased by only 6 million pounds. Domestic commercial use has followed much the same pattern as production and would therefore not appear to be a major contributor. But annual export growth has increased from about 10 million pounds in 2021 and 2022 to 15 million in 2023 and to 16 million this year-to-date.
Dairy-product, federal-order-class prices – Monthly National Dairy Products Sales Report survey prices of butter and Cheddar cheese were stable to less in November than a month earlier, while nonfat dry milk and whey eked out small increases. The stable butter and increasing nonfat-dry-milk prices generated greater Class IV and Class II prices, while the steep decrease in the cheese price was the dominant factor in decreasing the Class III price almost $3 per hundredweight during the month.
Prices of dairy products at retail were, on average, 18 percent less than retail prices of all food and beverages during November. Most dairy products hit their greatest retail prices at various times from mid-2022 through early 2023. But a few – such as frozen products and butter – have increased since then to hit slightly greater prices in more-recent months. The only dairy-product category to reach a new record retail price in November was fresh milk other than whole milk.
Milk, feed prices – The monthly margin under the Dairy Margin Coverage program receded by $0.40 per hundredweight from September’s record level to $15.17 per hundredweight, the second-largest level since margin protection became the basic federal safety-net mechanism for dairy. The October all-milk price decreased $0.30 per hundredweight from September, to $25.20 per hundredweight. The Dairy Margin Coverage feed-cost formula increased slightly from September, by $0.10 per hundredweight of milk, mostly on a greater price for premium alfalfa hay.
Looking ahead – The USDA’s World Agricultural Supply and Demand Estimates monthly report in December increased its forecasts for 2024 and 2025 annual milk production. That’s the second-consecutive month the USDA has increased the 2024 forecast and its first increase in the 2025 production forecast. The department now estimates that total milk production will be essentially the same in 2024 as the previous year’s production, and then grow by 0.8 percent in 2025.
Consistent with those indications of a definite return to growth for U.S. milk production, World Agricultural Supply and Demand Estimates has during the past three months reduced its estimates of the U.S. average all-milk price by $0.40 per hundredweight for 2024 and by $0.90 per hundredweight for 2025. The USDA now sees the average milk price in 2024 coming in $2.30 per hundredweight more than in 2023 – and 2025’s average price coming in about the same as 2024’s. At the same time as the December World Agricultural Supply and Demand Estimates, the Chicago Mercantile Exchange dairy futures were looking at a $0.35 per hundredweight year-over-year larger average price next year.
Mid-December dairy and grain futures indicated that the Dairy Margin Coverage margin would average about $11.85 per hundredweight for all of calendar-year 2024. As of mid-December, the Dairy Margin Coverage-Decision Tool on the USDA’s Farm Service Agency website had not been updated with Dairy Margin Coverage margin forecasts for 2025. But CME futures indicated at that time that the Dairy Margin Coverage feed cost would not change significantly in 2025 from the year currently ending.
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