By Sarina Sharp, Daily Dairy Report
Milk, Dairy & Grain Markets
To the dismay of hamburger consumers across the nation, dairy producers sent just 2.76 million cows to slaughter in 2024. That was the lowest annual total since 2008. With cull rates at a 16-year low, the industry was able to stabilize the dairy herd, but growth was fleeting. There were 9.351 million milk cows in the final month of 2024, just 3,000 more than in December 2023 and 9,000 fewer than there were in November. Dairy producers will do all they can to add milk in 2025, and they’ll likely best the very low volumes of 2024. But the heifer shortage will continue to restrain more rapid growth in milk production.
Milk output topped year-ago volumes in most of the major dairy states. Production was up 0.1% in America’s Dairyland, and third-ranked Texas’ milk output jumped 7.5% year over year. Production climbed 3.5% in Idaho, 0.7% in New York, and 1.4% in Michigan. But in California, production plummeted 6.8% as the bird flu continued to ravage herds in the nation’s top dairy state. January milk output will likely be much better. The California Department of Food and Agriculture reports that just 47 herds have reported new infections over the past 30 days, a steep decline from mid-December, when new infections peaked at over 300 herds. USDA’s Dairy Market News reports that California milk production has rebounded in January compared to November and December, although receipts are still “below expectations” and lower than they were in January 2024.
All told, U.S. milk production fell 0.5% year over year in 2024. But that’s only part of the story. Thanks to high component levels, 2024 butterfat production jumped 1.9%, and protein output grew 0.5%. Production of nonfat solids fell 0.1% from 2023, while output of other milk solids dipped 0.4%.
That was more than enough butterfat to keep the larder full, especially after record-breaking imports of Irish butter boosted U.S. supplies. After the typical holiday drawdown in November, butter stocks grew in December, reaching 222.4 million pounds, up 11.4% from December 2023. That marks the highest end-of-year butter inventory since 2020, when pandemic shutdowns throttled foodservice demand and butter stocks ballooned. Setting aside 2020 as an anomaly, last month’s inventory was the largest December butter stockpile since 1993, at the height of the low-fat craze. But consumers are no longer trying to avoid dairy fats. Domestic butter consumption leapt 6% in 2023 and another 7% in 2024. Nonetheless, U.S. butter supplies are ample, prompting the steep decline in butter values in late 2024. Now, prices are holding steady. CME spot butter finished right where it started this week at $2.53 per pound.
The cheese markets continued to whipsaw back and forth as the market transitions from tight stocks in 2024 to greater output – and the potential for tariffs to disrupt trade – in 2025. Stocks grew from November to December, but, at 1.35 billion pounds, they were still 7% smaller than the year before. After a Monday rout and a late-week rally, CME spot Cheddar blocks fell 5.75ȼ to $1.8325 per pound. Barrels followed a similar path with a more tepid Thursday rebound. They closed at $1.82, down 7ȼ since last Friday.
High prices are curing high prices in the whey market. Most whey powder buyers are living hand to mouth and hoping that greater cheese output will eventually lead to an uptick in dry whey output and a downtick in prices. USDA’s Dairy Market News reports that “sentiment has shifted from bullish to quiet.” Spot whey powder fell 4ȼ this week to 69.75ȼ, a two-month low. Demand for high-protein whey products remains formidable, and whey powder output is slow for now. That suggests that additional downside may be limited until whey powder production begins to climb.
Milk powder prices moved higher at this week’s Global Dairy Trade (GDT) auction, led by a 5% jump in whole milk powder (WMP) values. GDT WMP values haven’t been this high since July 2022, hinting at better demand for China’s preferred dairy import. Skim milk powder (SMP) prices rebounded 2% and landed in the middle of their recent trading range.
China’s appetite for foreign dairy appears to be perking up. The world’s foremost dairy buyer brought in more than twice as much WMP and 42% more SMP than it did in December 2023. Chinese imports of most other dairy products also topped December 2023 by wide margins, including whey powder (+12%), whey protein concentrates (+84%), butter (+39%), and cheese (+17%). But it was relatively easy to best the very low volumes of December 2023. The recent drop in Chinese milk output and uptick in imports inspires hope that Chinese buyers will return to the global marketplace. But the trade remains concerned about demand in a nation plagued with a real estate crisis and poor consumer spending.
With both GDT and Chinese milk powder imports on the rise, it would be reasonable to expect U.S. milk powder prices to climb. But they didn’t. CME spot nonfat dry milk fell 2.5ȼ this week to $1.3475. The independent streak likely reflects concerns – or at least uncertainty – about U.S. trade prospects. A rebound in production might also be a factor. Dairy Market News reports that milk powder output has been higher in January than it was in the fourth quarter of 2024, likely because California milk output is starting to recover from the worst of the avian influenza. But demand from Mexican and domestic buyers has not impressed.
With both cheese and whey on the back foot, Class III futures took a big step backward this week. The February contract closed at $19.37 per cwt., 81ȼ in the red. Most Class IV contracts lost a nickel or so. February Class IV closed at $20.60.
Grain Markets
March corn futures moved back and forth but finished steady with last Friday at $4.8575 per bushel. March soybeans added another 20ȼ and reached $10.55. Soybean meal futures jumped $6.60 to $304 per ton. It’s drier than farmers would like in Argentina and southern Brazil, but there are rains on the way, and conditions in central Brazil are excellent. Competition for exports continues to heat up. On Thursday, Argentine President Milei announced a temporary cut to corn and soy export tariff rates beginning next week.
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