The “Mielke” Market Weekly

Wildfires wreak havoc on southern US dairy industry

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The U.S. Department of Agriculture lowered its milk production forecast in its fifth consecutive World Agriculture Supply and Demand Estimates report, citing a smaller dairy cow inventory and slower growth in output per cow.

2024 production and marketings were projected at 227.3 and 226.3 billion pounds, respectively, down 900,000 pounds on both from last month’s estimate. If realized, both would only be up 900,000 pounds, or 0.4%, from 2023.

Cheese is expected to average $1.71 per pound in 2024, up 2 cents from last month’s estimate, and compares to $1.7593 in 2023 and $2.1122 in 2022.

Butter was projected to average $2.80 per pound, up 3 cents from last month’s estimate, and compares to $2.6170 in 2023 and $2.8665 in 2022.

Nonfat dry milk will average $1.21 per pound in 2024, down 2.50 cents from a month ago, and compares to $1.1856 in 2023 and $1.6851 in 2022.

The dry whey average was projected at 45 cents per pound, down 3 cents from a month ago, and compares to 36.18 cents in 2023 and 60.57 cents in 2022.

Class III milk is expected to average $17.15 per hundredweight in 2024, up a nickel from last month’s estimate, and compares to $17.02 in 2023 and $21.96 in 2022. The Class IV average, at $20.10, is up a dime from a month ago, and compares to the 2023 average of $19.12 and $24.47 in 2022.

The WASDE lowered world ending stocks of corn and soybeans but left U.S. stocks unchanged. The corn outlook was unchanged, but the season-average corn price was lowered to $4.75 per bushel. Global coarse grain production was forecasted 2.7 million tons lower to 1.5 billion.

The foreign grain outlook is for reduced production, larger trade and smaller ending stocks. Foreign corn production was lowered due to declines in South Africa, Ukraine, Mexico, Venezuela and Russia, partly offset by increases for Argentina and Syria. South Africa was down, reflecting lower yield prospects. Mexico was cut based on expectations of lower winter corn area. Ukraine and Russia were reduced based on reported harvest results to-date, while Argentina was raised based on higher expected area.

The soybean outlook was also unchanged as were the season-average soybean and soybean meal price forecasts. Global soybean production was reduced 1.4 million tons on lower production in Brazil and South Africa. Global supply and demand forecasts included lower beginning stocks, lower production, lower crush, higher exports and lower ending stocks compared to last month, according to the WASDE.

The week ending March 2 saw 59,800 dairy cows go to slaughter, down 400 from the previous week and 7,100, or 10.6%, below a year ago. Year-to-date, 516,700 head have been culled, down 89,400, or 14.8%, from a year ago.

In an update from HighGround Dairy’s Betty Berning and her report two weeks ago on the wildfire in Texas, Berning said, “Dairy farmers are reporting sick cattle in the Panhandle. Symptoms vary, but a consistent part of the reports is a drop in milk production ranging, on average, from 10-30 pounds per cow across the herd, according to Dr. Alexis Thompson with the Texas A&M Veterinary Medical Diagnostic Laboratory. A thick, gel-like milk, resembling mastitis, has been observed in the sick cows. Some bounce back after being sick, returning to normal milk output, but some do not come back fully, and some come back very marginally.

“The extent of the problem is still under evaluation. Not every farm in the area is affected, and even among the impacted herds, only a portion of the cows are showing signs of illness, estimated at around 5%-20%. The cause of the ailment is under investigation by Texas A&M and the state veterinarian. Some in the industry have cited a common ailment, winter dysentery, as the likely disease, but tests have been negative.”

Cash cheese prices appeared to reverse direction the second week of March. The cheddar blocks, after losing 9 cents the previous week, fell to $1.4350 per pound Monday, lowest since Jan. 5, then jumped to $1.4725 Thursday, but closed Friday at $1.47, up a penny on the week, though 52.75 cents below a year ago when they gained almost 22 cents and hit $1.9975.

The barrels, after plunging 16.25 cents the previous week, fell to $1.42 Tuesday, also the lowest since Jan. 5, but reversed direction Wednesday after not seeing a gain in 11 consecutive sessions, and closed Friday at $1.4425. That’s down 4.50 cents on the week, 51.75 cents below a year ago and a typical 2.75 cents below the blocks. There were 13 loads of block traded on the week and 23 of barrel.

Dairy Market News reports that cheese demand is edging higher. Cheese plant contacts differ on what’s behind the bearish prices. Eastern region buyers have begun to add to their orders, for both retail and pizzeria cheese. Milk availability is growing. Mid-week spot milk prices ranged $3.50-under to 50 cents-over Class III; however, there were offers as low as $6-under Class. Last year, they ranged $12- to $4-under Class. Increased spot milk access was attributed to a number of factors, according to DMN, most notably: multiple cheese plants are on scheduled downtime, school districts’ current and upcoming spring break has Class I plants pulling less milk, and seasonal upticks in farm milk output.

Western cheese demand remains steady. Cream cheese demand is picking up. Export channels are steady to stronger, and second and third quarter shipments continue to be booked, DMN said. Class III milk is readily available, and vats are running strong to steady schedules, so there is plenty of cheese available.

StoneX blamed low demand for the falling cheese prices. 

“Whether it’s a slowdown in mid-tier foodservice restaurants (crippled by higher costs and fewer workers at that price point), general inflation slowing retail demand for cheese, Ozempic (and similar weight loss drugs) killing appetites, hand-to-mouth buying at the wholesale level due to increased cost of money, or some combination of these and other factors, the demand side of the cheese equation remains lackluster,” StoneX said.

HighGround Dairy’s Eric Meyer warned in the March 8 Cheese Market News of the additional cheese capacity that came online in late 2023 with more to come through the first half of 2025. That could invoke sustained pressure on price, he said. 

“Recent estimates suggest this new production equates to around 6% of present annual cheese output,” Meyer said. “That’s a lot of product that will need to find a home. Second, while the U.S. stock market and Bitcoin keep making all-time highs, cheese consumption trends this past year have not been bright.

“Dairy Management Inc.’s Total Dairy Retail Report stated that national retail cheese volume was virtually flat in 2023 versus the prior year, with growth in reverse each year since 2020. The consumer’s return to restaurants post-COVID has contributed to a portion of that decline, but inflation and, as a result, shrinkflation (smaller package sizes) have also contributed to the retail struggles.”

January’s Dairy Supply and Utilization report added confirmation. Total cheese consumption, at 1.2 billion pounds, was down 2% from a year ago. Domestic disappearance was down 2.9% while exports, thankfully, were up 12.7%.

HighGround Dairy’s Alyssa Badger, speaking in the March 18 Dairy Radio Now broadcast, said cheese consumption was not only down from 2023 levels but from 2022 as well. 

“That weak stateside demand kept the market under a bit of pressure,” Badger said, as CME prices were trading $1.40-$1.50 per pound then.

Butter usage, at 175.8 million pounds, was the exact opposite, Badger said, up 8.5%, driven by a 15.7 million pound, 10.5% increase in domestic demand and reminiscent of the demand bubble of 2022. It also accounted for 97% of total butter consumption, as butter exports were down 33.3% from a year ago.

“Butter stocks are not as aggressively thin as they were in January 2022, but the elevated use and general nervousness about tight milk and fat supplies have kept prices trending at similar levels for this time of year,” Badger said.

Nonfat dry milk utilization fell to 190.9 million pounds, down 7.7%, lowest January volume since 2020, according to Badger, who blamed struggling international demand. Exports dropped 14%, in large part due to a 22% decline in shipments to Mexico alone, which supported exports in 2023. Domestic use was up 9%.

Whey disappearance amounted to 79.8 million pounds, up 2.6%, with domestic use up 2.5% and exports up 2.8%. Whey protein concentrate disappearance was up for the 11th month over the last 12, according to Badger. 

“Stocks narrowed in January, and prices continued climbing,” Badger said.

CME butter climbed to $2.8475 per pound Thursday but closed Friday at $2.8225, up 2 cents on the week and 42.25 cents above a year ago. There were eight sales reported on the week at the CME.

Butter production is somewhat steady with previous weeks, DMN said, but churning has slowed as more plants increase microfixing (thawing 68-pound blocks and cutting them into 1 pound blocks or quarter-pound sticks). Cream remains available, and most butter plants have cream intakes locked in for the month. Cream demand from other manufacturers is trending seasonally higher.

Western butter makers are running strong to steady production, DMN said. Some are working to make inventory goals ahead of summer maintenance projects along with meeting remaining first quarter demand. Processors say cream yields in milk and cream demand are strengthening. Cream availability is tighter, but there are no shortages. Domestic butter usage is strong, and earlier spring holidays are encouraging more consistent demand, although food service demand is weakening. Canadian purchasers are showing stronger interest, but demand is more moderate elsewhere, according to DMN.

Grade A nonfat dry milk saw its Friday finish at $1.1625 per pound, down 0.75 cents on the week and a quarter-cent below a year ago, with 11 sales reported.

Dry whey climbed to a Friday close at 44.50 cents per pound, up 3.50 cents on the week on unfilled bids, but that’s 2.25 cents below a year ago.

Tuesday’s GDT Pulse saw 4.4 million pounds of product sold, up from 4.28 million Feb. 27, with 100% of the total offered sold. There was 544,536 pounds more instant whole milk powder and 105,820 pounds more regular whole milk powder sold versus the last Pulse, with 22,000 more pounds of skim milk powder on offer sold in this auction.

The Consortium for Common Food Names reports that U.S cheesemakers did well at this year’s World Championship Cheese Contest, winning 84 best in class finishes in Madison, Wisconsin. A total of 25 countries participated in what is billed as the world’s premier cheese, butter and yogurt competition. The Wisconsin Cheese Makers Association has hosted the biennial contest since 1957.

Schuman Cheese’s Lake Country Dairy processors in Turtle Lake, Wisconsin, won both best of class and second award in the parmesan division, beating out an Italian competitor, and won top billing for its Cello Artisan extra aged asiago, ahead of a Danish entry. Additionally, Lactalis Belmont from Belmont, Wisconsin, won top brie over a French processor, and U.S. cheesemakers swept the Havarti category, beating two Danish contestants.

“The results are especially notable due to the European Union’s ongoing campaign to confiscate these cheese terms as geographical indications that can only be used by European producers,” said Jaime Castaneda, executive director of the consortium. “While the EU would like to think that its producers own the exclusive right to make and sell parmesan, Havarti, asiago and other types of cheeses, it’s clear that U.S. and other cheesemakers can match their quality and then some.

“Just like in 2017, in the United Kingdom, when an American parmesan won out over all other parmesan entries, including every Parmigiano Reggiano contestant, this year’s World Cheese Awards showed the strength of U.S. cheeses when unleashed to compete on a level playing field. We’re thrilled to see American cheesemakers get the recognition that they deserve, and we look forward to continuing to fight for them and their rights to sell their award-winning cheeses all around the world.”

In politics, Green Bay-based American Dairy Coalition called on U.S. Secretary of Agriculture Tom Vilsack and AMS Dairy Programs Deputy Administrator Dana Coale this week to grant the American Farm Bureau Federation’s official request for an emergency decision to return the Class I skim price formula to the higher of.

“The AFBF request was read into the record on the last day of the Federal Milk Marketing Order hearing Jan. 30 by Farm Bureau economist Danny Munch,” ADC said. “Nearly five years of the ‘average of’ method has resulted in net losses to farmers of $1.1 billion in Class I revenue, alone, which is predicted to exceed $1.6 billion by the end of 2024.”

More than 30 state, regional and national dairy organizations, state farm bureaus and cooperatives as well as nearly 200 individual dairy producers and allied industry service providers have signed the ADC letter along with ADC president Walt Moore, a Pennsylvania dairy farmer. Signatories cover 33 states from coast to coast.

“This is an emergency,” ADC said. “The 2022 Ag Census showed a staggering 40% drop in the number of U.S. dairy farms in five years. The move away from the higher of is contributing to dairy margin losses and negatively impacting dairy farm families and the rural communities that rely on them.”

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