The Agriculture Department lowered its milk production forecasts for the third time in its latest World Agriculture Supply and Demand Estimates (WASDE) report. The 2023 forecast was reduced from last month based on lower milk cow inventories and lower expected milk per cow. The 2024 forecast was also lower due to a reduced cow inventory and output per cow. The WASDE stated that the Jan. 31 cattle report will give an indication of producer intentions for retaining dairy heifers for addition to the breeding herd.

2023 production and marketings were estimated at 226.6 and 225.6 billion pounds respectively, down 300 million pounds on both from a month ago. If realized, both would be up 100 million pounds or 0.04 percent from 2022.

2024 production and marketings were projected at 228.3 and 227.3 billion pounds respectively, down 700,000 pounds on both. If realized, 2024 production would be up 1.7 billion pounds or 0.8 percent from 2023.

Prices for 2024 cheese were lowered due to recent price weakness, while butter, non-fat dry milk and whey prices are expected to be higher. The Class III price forecast was lowered, with lower cheese prices outweighing higher whey prices.

The Class III is projected to average $16.10 in 2024, down 75 cents from last month’s estimate, and compares to $17.02 in 2023 and $21.96 in 2022.

Class IV prices were raised, due to higher butter and nonfat dry milk price forecasts. Look for the 2024 Class IV average at $19.35, up 45 cents from last month’s estimate, and compares to $19.12 in 2023 and $24.47 in 2022.

The corn outlook is for is for greater production, larger food, seed, and industrial use, increased feed and residual use, and higher ending stocks. Corn production was estimated at a record 15.3 billion bushels, up 108 million as an increase in yield to a record 177.3 bushels per acre was partly offset by a decline in harvested area. Corn use was raised 75 million bushels to 14.6 billion. Corn for ethanol was raised 50 million to 5.4 billion. Feed and residual use was raised 25 million bushels to 5.7 billion. Stocks are up 31 million bushels. The season-average corn price was lowered a nickel to $4.80 a bushel.

Soybean production was estimated at 4.2 billion bushels, up 35 million. Harvested area was estimated at 82.4 million acres, down 400,000 from the previous report. Yield was estimated at 50.6 bushels per acre, up 0.7 bushel. With slightly lower beginning stocks, soybean supplies are up 31 million bushels.

The soybean export and crush forecasts were unchanged. With higher supplies and slightly lower residual, ending stocks were projected at 280 million bushels, up 35 million. The U.S. season-average soybean price was projected at $12.75 per bushel, down 15 cents from last month. Soybean meal was projected at $380 per short ton, down $10, according to the WASDE.

The week ending Jan. 6 saw 48,500 dairy cows go to slaughter, up 5,900 head from the previous week, but 15,200 or 23.9 percent below a year ago. Culling continues to fall. As of the week ending Dec. 30, the year-to-year difference was only 0.9 percent. The slaughter rate had approached 8 percent above a year ago in February.

U.S. Dairy margins improved to start 2024 over the first half of January as milk prices held relatively steady while projected feed costs dropped on a bearish USDA report, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.

“The January WASDE featured higher yield and production than expected for both corn and soybeans which along with recent rainfall in Brazil pressured those markets,” the MW stated. “Recent weakness in cheese has enticed more export demand with the outlook favorable for the first half of the year.

“USDA’s semi-annual ‘World Markets and Trade’ report projected global cheese consumption to reach an all-time high of 47.7 billion pounds this year, up 1.2 percent from 2023. Global cheese production is rising even faster than demand with the U.S. pacing the increase as production growth outside of the U.S. is not expected to keep pace with the growth in global consumption, favoring U.S. cheese exports which are competitively priced.

“November cheese exports at 85.1 million pounds were a record for the month, up 4.1 percent year-over-year and the largest volume for any month since June 2022,” the MW reported. “Shipments to Mexico were up 42.2 percent year-over-year to 32.4 million pounds, the largest volume recorded in any month.

“Overall dairy product exports in November of 480.4 million pounds were second to last year’s record 520.7 million, but weak whey demand from China due to their struggling pork sector and slowing economy negatively impacted the total dairy export figure. November whey exports totaled 102.3 million pounds, down 13.4 percent year-over-year with reduced whey exports to China accounting for 97.2 percent of the decline in the total whey category in absolute terms,” the MW concluded.

The Global Dairy Trade auction saw strength for the fourth event in a row this week, though volume slipped for the seventh consecutive session. The weighted average was up 2.3 percent, following a 1.2 percent rise on Jan. 2, 2.3 percent on Dec. 19, and 1.6 percent on Dec. 5.

Traders brought 54.9 million pounds of product brought to market, down from 57.8 million on Jan. 2, lowest since July 4, 2023. The average metric ton price climbed to $3,493 U.S., up from $3,363 on Jan. 2, highest since May 2, 2023.

Butter again led the gains, up 5.8 percent, following a 2.1 percent rise on Jan. 2. Anhydrous milkfat was up 4.3 percent, after inching 0.2 percent higher. Whole milk powder was up 1.7 percent, after jumping 2.5 percent, and skim milk powder was up 1.2 percent, following a 0.9 percent slip. Lactose was up 1.3 percent, following a 5.0 percent plunge.

StoneX says the GDT 80 percent butterfat butter price equates to $2.6135 per pound U.S., up 17.3 cents from the Jan. 2 event, and compares to CME butter which closed Friday at $2.5450. GDT Cheddar, at $1.9127, was up 2.4 cents, and compares to Friday’s CME block Cheddar at $1.4450. GDT skim milk powder averaged $1.1964 per pound, up from $1.1850, and whole milk powder averaged $1.5207 per pound, up from $1.4923. CME Grade A nonfat dry milk closed Friday at $1.1750 per pound.

Analyst Duston Winston reported, “North Asia purchases, which includes China, were weaker than both year-ago levels and last event. Southeast Asian demand fell from over the same period. Total volume was down 19 percent from last year, while purchased volume fell 22 percent from the second event of last year. The Middle East was the only region to experience an increase in purchase volume from both last year and last event.”

Cooperatives Working Together member cooperatives accepted 32 offers of export assistance this week that helped capture sales of 3.9 million pounds of American-type cheese, 6.2 million pounds of whole milk powder, and 231,000 pounds of cream cheese. The product is going to customers in Asia, Central America, the Caribbean, Middle East-North Africa, and South America through July and are the equivalent of 83.6 million pounds of milk on a milkfat basis.