By Sarina Sharp, Daily Dairy Report
Milk, Dairy & Grain Markets
U.S. milk output has trailed prior-year volumes for 13 straight months. In Wednesday’s Milk Production report, USDA slashed its initial estimate of June milk output. The agency now reports a 1.7% drop in milk production during the tail end of the flush. The deficit was much narrower in July, with milk output down 0.4% year over year. But the comparison is misleading, as milk production started to retreat last July. Compared to two years ago, U.S. milk output dropped 1.5% in June and 1.4% in July, marking the steepest two-year declines in decades. Higher component levels helped to offset some of this drop, but not all of it. While butterfat output continued to top year-ago volumes, protein and milk solids output trailed the prior year in May, June, and likely in July too. In fact, U.S. nonfat milk solids output in June 2024 was the lowest total for the month since 2020.
Milk production will climb seasonally when cooler temperatures arrive, but there simply aren’t enough cows to power significant growth. USDA revised its estimate of the June milk-cow herd down sharply from last month’s assessment. While the agency’s initial estimate shows a modest uptick in head counts in July, the dairy herd remains much smaller than it was even earlier this year. USDA estimates that 9.325 million cows set foot in U.S. milk parlors in July, down 21,000 head from the recent peak in March and down 43,000 head from July 2023. Dairy producers are reining in cull rates and striving to fill every stall. But the herd is still trending lower and getting older and less efficient to boot.
Milk is tight and likely to remain so. Spot milk traded at steep premiums this week, ranging from $2.25 to $3.00 per cwt. over Class III in the central region. Bottlers are pulling hard on milk supplies for school meal programs, and other processors are running lighter. The lineup at dryers is short, and prices are climbing. CME spot nonfat dry milk (NDM) climbed 2.75ȼ this week to $1.2825 per pound, its highest price since January 2023.
Milk powder prices moved higher at Tuesday’s Global Dairy Trade (GDT) auction. Whole milk powder (WMP) leapt 7.2% to its highest average since October 2022. Skim milk powder (SMP) rebounded 4%. After more than a year of conspicuously light purchases, Chinese buyers were active participants at both the August GDT auctions, hinting at lower milk powder stocks in China. Trade data from July suggests that China still has plenty of SMP, but Chinese imports of WMP perked up a bit. They trailed July 2023 volumes by only 4.6%.
Chinese whey imports topped year-ago volumes by 13.2% in July, their second straight month of year-over-year increases. Improved Chinese interest and formidable domestic demand for high-protein whey products lifted spot whey powder 1.5ȼ this week to 56.5ȼ.
While the powders climbed, the other dairy products faltered. CME spot butter lost a nickel this week and closed at $3.13. Butter inventories shrunk at a faster-than-typical rate in July, but there was still 7.4% more butter on hand at the end of last month than there was the year before. Nonetheless, butter buyers remain anxious. They exchanged more than 100 loads in Chicago last week and snapped up another 54 cars at the spot market this week.
In a typical year, U.S. cheese stocks are about 30 million pounds greater at the end of July than at the end of February, even after some summer drawdowns. But this year, they’re 50 million pounds lower. U.S. cheese inventories began to shrink in March and they haven’t stopped. There were 1.4 billion pounds of cheese in cold storage on July 31, the smallest end-of-month inventory since late 2020. Cheese stocks are 5.8% lower than they were a year ago, and prices are sharply higher.
After last week’s Olympic-worthy uphill sprint, the cheese markets had enough energy left for one last climb. But when they reached the peak at midweek, they didn’t pause to catch their breath. They leapt off the cliff and plummeted. After a dramatic selloff, CME spot Cheddar barrels closed at $2.10 per pound, down 15.5ȼ since last Friday. Blocks tumbled 6.25ȼ to $2.0375.
Class III prices followed cheese up and then back down. When the closing bell rang, prices were not all that far from where they stood last week, with September Class III at $21.76 and October at an impressive $22.19. If these prices hold, the September and October Class III milk checks will be the largest in two years. Class IV futures were much quieter this week, but 2025 contracts gained some ground. Most contracts stand at $21 or $22 per cwt.
Grain Markets
The grain markets faded again, as the trade grew increasingly confident that there are big crops in the fields. Scouts crisscrossed the Corn Belt, taking samples for the annual ProFarmer crop tour. The tour found lush fields in most areas, but spring flooding in Minnesota and parts of South Dakota limited potential in those states. With another week of benign weather in the books, prices drifted lower. December corn closed at $3.9125 per bushel, down a penny from last Friday. November soybeans finished at $9.3725, a nearly 20ȼ retreat. December soybean meal climbed $3 to $304.70 per ton.
These prices are low enough to attract new demand. After a very slow summer, export sales are accelerating. But the United States can afford to export a lot of corn and beans. There will be plenty left over. moved straight south after the report. November soybeans closed at $9.5525, nearly 50ȼ lower than last Friday. December soybean meal fell $8.50 to $301.90 per ton.
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