The USDA lowered its 2024 and 2025 milk production forecasts in Friday’s World Agriculture Supply and Demand Estimates report, based on slower growth in milk per cow more than offsetting higher cow numbers.

2024 production and marketings were projected at 226.9 and 225.9 billion pounds respectively, down 400 million pounds on both from last month’s estimate. If realized, both would be up 500 million pounds or 0.2 percent from 2023.

2025 production and marketings were projected at 229.1 and 228.1 billion pounds respectively, down 200 million pounds on both. If realized, both would be up 2.2 billion pounds or 1.0 percent from 2024.

Class III and IV milk prices were also raised. I’ll have more details next week.

Meanwhile, most cash dairy product prices weakened the second week of July. The Cheddar blocks climbed to $1.97 per pound Wednesday, but closed Friday at $1.89, down a penny on the week and 41 cents above a year ago.

The barrels jumped to $1.94 Monday but finished Friday at $1.85, 5.25 cents lower on the week, 45.75 cents above a year ago, and 4 cents below the blocks. The week saw 12 loads of block trade at the CME and 31 of barrel.

Cheese prices remain strong because of good demand but that’s a doubled-edged sword. The July 9 “Daily Dairy Report” stated: “Cheese inventories typically grow in the spring in the United States, but they declined this March, April and May. During those three months, cheese output topped year ago volumes by an average of 10.2 million pounds per month. But demand grew even more quickly. Net exports exceeded 2023 volumes by an average of 21.3 million pounds per month, and domestic cheese consumption outpaced year-ago levels by 14 million pounds.”

The DDR warned however that while domestic cheese demand is likely to remain strong, it won’t offset expected drops in exports due to uncompetitive U.S. prices.

StoneX stated in its July 10 “Early Morning Update: “The market is looking for reasons to be bullish and, finding none other than the bird flu. That is the biggest uncertainty. So far it has not appeared to make a significant impact on the supply side. California and Pennsylvania had lower than expected milk production in the last report so that could be a sign of spreading, but that’s just a guess.”  

Cheesemakers tell Dairy Market News that demand continues to be strong, for the most part, while milk supplies continue to drop. The 4th of July holiday did not bring any notable deals on spot milk. Mid-week prices ranged from Class III to $1-over, while a year ago, they were $11-under Class to the Class level. Some contacts say spot milk will likely be somewhat snug until the Labor Day holiday. Production schedules were steady following the holiday week and “tightening milk supplies and hearty demand are two indicators of near-future market bullishness,” according to DMN.

Western cheese production is mostly steady, however expectations are that farm milk output will see further declines in the coming weeks with hotter summer temperatures taking hold more prevalently across the region. Cheese stocks are reported to be adequate. Retail and food service demand is steady, with international buying steady to lighter as current prices remain less competitive.

Cash butter hit $3.14 per pound Tuesday, the highest in five weeks, but saw its Friday finish at $3.10, down 3.25 cents on the week and 55 cents above a year ago, with 22 loads finding new homes.

Midwest butter makers say cream is starting to price itself out of the churn. Some are looking west for cream, but churns are not at full capacity, according to DMN. Cream is tightening and only expected to tighten further as summer progresses. Retail butter demand is expected to pick up on a weekly basis, while food service demand will likely tick up later in the season. Butter production is shifting to more micro-fixing in light of current cream availability. Butter markets are firm to firming with very few bearish indications moving further into the summer, says DMN.

Western butter output is generally lighter as churn maintenance impacts output. Cream volumes are tightening as well. Some cream sellers note current and forecast temperatures are reducing their willingness to take on spot load requests that require lengthy transportation distances. That said, butter producers convey cream remains sufficient. Domestic demand varies from steady to lighter for both retail and food service sectors, according to DMN.

Grade A nonfat dry milk closed the week at $1.18 per pound, unchanged on the week but 7.50 cents above a year ago, with 14 sales on the board for the week.

The July 10 “Daily Dairy Report” says the powder market has been remarkably stable in recent months as “U.S. exporters shipped 695.7 million tons of NDM and SMP between January and May. This was 12 percent less than in 2023 and represented the lowest export volume for this period since 2019.” The DDR pointed to dramatically lower demand from Mexico as well as Southeast Asia.

Dry whey ended Friday morning at 51 cents per pound, highest since Feb. 23, 2024, up 1.75 cents on the week and 26.25 cents above a year ago. There were three sales made on the week at the CME.

StoneX summed things up well, stating: “Between some tough on-farm financial times over the past year, lack of replacements, and avian flu, dairy producers have their hands full with issues that can limit their ability to make more milk. Really hot weather in certain milk sheds then may, in our view, accentuate those problems. Can these dairy farmers handle the heat? You bet. But this hot weather does not exist in a vacuum, it may have an additive effect on what is already a tight milk production picture. On the other hand, feed prices are coming down and that is helping,” StoneX concludes. “The perception of potential problems is the reality of the markets.”

Dairy cows are staying in the milking string longer. Slaughter for the week ending June 29 totaled 46,500 head, up 1,700 from the previous week, but 12,800 or 21.6 percent below a year ago, the largest shortfall since January. Year to date, 1,388,700 head have been culled, down 232,900 or 14.4 percent from 2023.

2024 is shaping up to be the third best milk price year on record, according to Corey Geiger, former editor of Hoard’s Dairymen Magazine and now lead dairy economist at Co-Bank, a member of the farm credit system.

Speaking in the July 15 “Dairy Radio Now” broadcast, Geiger said milk price is a big driver of credit but we have a unique situation currently because the Class III price, which is primarily made up of cheese and whey, is inverted. Traditionally it’s a little higher than the Class IV price, which represents butter and powder.

The location of where you are producing milk is therefore a factor, he said. The Upper Midwest and Central regions produce more cheese while the West Coast has more butter powder.