The final Class III benchmark milk price of 2023 headed south. The Agriculture Department announced the Federal order Class III price at $ 16.04 per hundredweight, down $1.11 from November, $4.46 below December 2022, and the lowest Class III since July. That put the 2023 Class III average at $17.02, down from $21.96 in 2022 and compares to $17.08 in 2021.

Blame cheese prices for the Class III fall, says Rabo Bank’s Lucas Fuess. Speaking in the Jan. 8 Dairy Radio Now broadcast, Fuess said cheese prices fell below $1.40 per pound Christmas Week and remain well below long term averages. He attributed that to an adequate supply and muted demand.

First quarter will be the low point as demand recovers, he said, and the lower milk supply will help as well. Milk output is down in the U.S. and globally, down significantly in October in Europe, and Fuess expects that to remain the case in the first half of 2024. New Zealand output may be higher on a solids basis, he said, but not extraordinarily. “We wait for global demand to return,” he concluded. “There is hope that 2024 will turn out to be a better year than 2023.”

Dairy Market News reports that cheese demand is somewhat steady in the Midwest. Retail Cheddar ordering remains at seasonal levels. There are extra loads but inventories are not “disconcerting.” Milk availability reached seasonal highs into Christmas Week and early New Year’s Week. Spot prices were still as low as $8-under Class. This time last year was near the beginning of a long $10-under Class stretch that lasted into the summer months. Contacts do have some concerns, but most expect milk prices to move nearer to Class III “as the holidays grow more distant in the rearview mirror,” says DMN.

Cash butter climbed to $2.6850 per pound Tuesday, highest since Nov. 15, 2023, but it closed Friday at $2.5750, down 9 cents on the week and 19.25 cents above a year ago. There were 11 sales logged on the week.

Cream availability is still near holiday quantities for churning in the Midwest and Class II and Class III demand for cream remains sluggish. Butter makers are getting offers at multiples around 1.00 to 1.10. Plants are running at or near capacity and plan to hold that pace for a while. Some ran into some maintenance backups Christmas Week which put even more pressure on cream handlers in the region. Butter demand is quiet but meeting seasonal expectations. Contract bulk butter prices for 2024 remain in similar territory to 2023 values, says DMN.

Grade A nonfat dry milk closed Friday at $1.1725 per pound, up a quarter-cent on the week but 12.50 cents below a year ago, with 19 sales on the week.

 Dry whey finished 2.75 cents higher on the week Friday, closing at 41.25 cents per pound, highest since Nov. 15, 2023, 2.25 cents above a year ago, with only 2 sales on the week.

The week ending December 23 had 55,800 dairy cows go to slaughter, down 900 from the previous week and 1,200 or 2.1% below a year ago. Year to date, 3,033,300 head had been sent to slaughter, up 39,100 or 1.3% from a year ago. 

Falling corn and hay prices and another small gain in the All Milk Price moved the milk feed price ratio higher for the fifth month in a row. The USDA’s latest Ag Prices report put the October ratio at 2.12, up from 2.03 in October and 1.92 in November 2022, the highest since January 2022.

The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. One pound of milk would purchase 2.12 pounds of dairy feed of that blend.

The All Milk Price average increased for the fourth month in a row, hitting $21.70 per hundredweight, up 10 cents from October, but $3.70 below November 2022.

Looking at the cow side of the ledger; the November cull price for beef and dairy combined slipped to an average $104 per cwt., down $4 from October, $25.60 above November 2022, and $32.40 above the 2011 base average.

Milk production margins were the highest of 2023 by 51 cents over October, according to dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Missouri. He adds that “Income over feed costs in November were above the $8 per cwt. level needed for steady to higher milk production for the third time since January. Input prices were lower, but all three commodities were in the top five for November all time. Feed costs were the fifth highest ever for the month of November,” says Brooks.

“Milk income over feed costs for 2023, using Dec. 29 CME settling futures prices for Class III milk, corn, and soybeans plus the Stoneheart forecast for alfalfa hay, are expected to be $8.07 per cwt., up 11 cents per cwt. versus last month’s estimate. 2023 income over feed would be below the level needed to maintain or grow milk production, and down $3.84 per cwt. from 2022’s level.” 

Milk income over feed costs for 2024 are expected to be $12.03 per cwt., a gain of $3.96 versus the 2023 estimate. Income over feed in 2024 is 17 cents per cwt. higher than last month and would be above the level needed to maintain or grow milk production,” according to Brooks.

 Meanwhile, “Dairy margins were flat over the last half of December with little feature in either the milk or feed markets that have languished near recent lows,” according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.

The MW pointed out that “Milk production has been declining in the EU as rising costs, increased environmental regulations and lower milk prices have led many producers to cease operations. October milk output declined 1.7% year-over-year in the EU and UK, and combined output across the 5 main global dairy exporters declined 1.2% which represented the third consecutive month of lower year-over-year declines and the largest drop since May 2022,” the MW stated and concluded with details of the latest Cold Storage report. 

“Fonterra’s contract 2 benchmark WMP and SMP prices were both up 2.2% from the previous Pulse auction,” reports StoneX. “This is the 6th week of continuously higher WMP price while SMP remains in the $2,500-$2,600 range that it has been in since mid-November. We would argue that the higher prices, particularly for WMP, are supportive for dairy prices around the world from a trend perspective, but the range bound (and relatively cheap) SMP won’t spark much strength in U.S./EU prices.”

“North Asia purchases, which includes China, were weaker than both year-ago levels and last event. Southeast Asian demand fell from last year, but was stronger than last Event. Total volume available on the auction was down nearly 6,000 MT from last year’s level, but volume actually sold was down 7,000 MT. Typically smaller purchasing regions like Europe, Africa and the Middle East picked up some of the volume not purchased by Asian regions,” StoneX stated.

 The USDA will reconvene the national public hearing to consider proposals seeking to amend uniform milk pricing formulas in all 11 Federal milk marketing orders on Jan. 16. If the hearing is not completed by Jan. 19, it will reconvene Jan. 29, and held each weekday. If not completed by Feb. 2, the hearing will reconvene at a later date, says the USDA. The process began Aug. 23, 2023, and is being held in Carmel, Indiana.