U.S. milk production remained below that of a year ago for the sixth consecutive month. The Agriculture Department’s preliminary data for December pegged output at 18.84 billion pounds, down 0.3% from December 2022.The top 24-State total, at 18.1 billion pounds, was off 0.1%. 

The November 50-State total was revised down 24 million pounds from last month’s estimate, which put output down 0.7% from 2022, unchanged from last month’s report. The 24 state revision was down 14 million pounds, down 0.6%.

Cow numbers totaled 9.357 million, down 1,000 from the November count which was revised 2,000 head lower from a month ago, and is down 39,000 head or 0.4% from a year ago. The herd peaked at 9.44 million in March but is currently the smallest since June 2020. The 24-State count was unchanged from November, which was revised up 3,000 head, but was 17,000 below a year ago.

Output per cow in the 50 states averaged 2,014 pounds, up 85 pounds from November and 2 pounds or 0.1% above December 2022. The 24-State output averaged 2,030 pounds, up 85 pounds from November and 1 pound or 0.05% below a year ago. Revisions lowered November output by 3 pounds in both. 

StoneX said the report had no major surprises and that milk production remains somewhat subdued but milk components remain strong. “There are signs of financial pain on U.S. dairy farms, but overall supplies of fresh milk remain adequate. A wider view however, reveals a lack of growth in the U.S. cow herd and, perhaps more importantly, a lack of incentive to change that trend.”

HighGround Dairy says “Growth will come from improved productivity and not a bigger herd. With the smallest herd in over four years coupled with low heifer inventories, it is hard to imagine cow numbers growing much in 2024.”

Dairy cows are staying longer in the herd. The latest Livestock Slaughter report showed an estimated 224,700 head were sent to slaughter under federal inspection in December, down 5,000 from November and 41,600 or 15.6% below a year ago. Culling for 2023 totaled 3.1 million, up 28,700 or 0.9% from 2022. 

The latest Dairy Outlook says the average number of milk cows is projected to further decline in 2024 in response to the relatively low margins experienced throughout 2023. The average 2024 all-milk price is projected lower. As a result, and accounting for the most recent milk cow inventory, the national milking herd is projected to average 9.350 million head, down 10,000 from the previous forecast and output per cow was revised 50 pounds lower. USDA will issue its Cattle report on January 31 and will include milk cow inventory data, along with dairy replacement heifer numbers. 

 December dairy product stocks told a story. The Agriculture Department’s latest Cold Storage report showed December 31 butter holdings at 199.5 million pounds, down 13.1 million pounds or 6.2% from the November inventory, which was revised down 2.8 million pounds from last month’s data. That is the steepest December drawdown since 2004, according to the Daily Dairy Report. Stocks were down 16.8 million pounds or 7.8% from Dec. 2022.

American type cheese stocks climbed to 837.8 million pounds, up 9.4 million pounds or 1.1% from November’s level which was revised up 2.6 million. Stocks were also up 12.5 million pounds or 1.5% from a year ago.

The total cheese inventory stood at 1.44 billion pounds, up 5.9 million pounds or 0.4% from the November total, which was revised up 2.9 million pounds, but was down 2.6 million pounds or 0.2% from a year ago. 

StoneX says U.S. cheese is the cheapest in the world so that should help to clear more exports through December and January.

CME traders had a lot to absorb this week. Class I demand re-entered the market as schools are back in session, says StoneX, and put upward pressure on spot milk prices. “Cheese processing returned to a more consistent schedule. Milk and cream availability have diverged according to the USDA with there being an ample cream supply but a tightening milk supply. USDA is now bringing up the question of milk availability in the second half of 2024 given processing needs. The last time we experienced a non-negative average spot load price in the fourth week of the year was back in 2019,” says StoneX.

CME butter soared on the bullish Cold Storage report, jumping 11 cents Thursday on unfilled bids and 7.25 cents Friday on 2 sales, closing at $2.76 per pound, highest since Nov. 8, 2023, up a whopping 21.50 cents on the week and 48.75 cents above a year ago. Those were the only sales for the week.

The Daily Dairy Report’s Sarina Sharp pointed out in the Jan. 19 Milk Producers Council newsletter that “Dairy producers have boosted components noticeably. Average butterfat in U.S. milk reached an all-time high of 4.28% in November. Despite a 0.6% setback in November milk output, the nation’s milk cows made 1.6% more cream than they did in November 2022,” says Sharp.

Butter makers tell DMN that cream availability is ample and continues to change hands at below the 1.20 multiple in the Upper Midwest, and in some cases below 1.00. Churning rates are at or near peak capacities. Bulk butter demand is unchanging week over week. Inventory levels are steady to light but are expected to increase as handlers continue to offer notable amounts of cream.

Many of dairy’s shakers and movers were at this week’s annual Dairy Forum in Phoenix, put on by the International Dairy Foods Association. HighGround Dairy’s Alyssa Badger reported in the Jan. 29 “Dairy Radio Now” broadcast that her take away was “We have some quiet markets and a lot of uncertainty.”

Usually there’s a lot of business conducted in the halls, she said, but she saw little of that. Most attendees agree that “Milk will be tight in 2024 and if demand doesn’t recover, we’ll probably be stuck in a tight range but, if it does, the path of least resistance will be to the upside for commodities.” 

As to milk prices, Badger said it depends on which class you’re looking at. Butter feeds into Class IV, she said, and it remains to be seen whether we see a third year of a market squeeze but, given existing fundamentals, she expects another year of strong butter prices so Class IV prices will improve.in 2024. 

Class III is fed by cheese primarily which is “under-valued,” she said, but “given the extra capacity coming on line, the upside on cheese is certainly limited.” The limited milk production is due to a consolidation in the herd, a result of poor on farm margins from high feed costs and heavier culling, but all of these factors will serve to “put a floor under milk prices for a lot of the year,” she said.

Prospects aren’t looking bright for dairy imports in China. December marked the sixth consecutive month of losses, down 10% from December 2022. 2023 saw the lowest annual imports since 2018, according to HighGround Dairy, and New Zealand was particularly affected due to the lack of demand for whole milk powder that saw Year-to-date imports the lowest since 2016.

The Federal Milk Marketing Order hearing that started in late summer has resumed. Geoff Vanden Heuvel, Director of Regulatory and Economic Affairs for California’s Milk Producers Council, wrote in the Jan. 19 newsletter; “Most of the witnesses were testifying on behalf of the Milk Innovation Group (MIG) represented by well-known dairy attorney Chip English. MIG’s membership includes about a dozen dairy processors.

Hearing Proposal #20 by MIG is to lower the Class I differential in all 3,108 counties of the U.S. by $1.60 per cwt. VandenHeuvel’s report is detailed and too important to condense. Download it at https://www.milkproducerscouncil.org/