By Lee Mielke

The USDA raised its 2022 milk production estimate for the second month in a row in its World Agricultural Supply and Demand Estimates report (WASDE), citing higher milk cow inventories more than offsetting slower growth in milk per cow. It also gave us our first view of 2023 projections.

2022 production and marketings were estimated at 226.7 and 225.6 billion pounds respectively, up 400 million pounds on production and 300 million on marketings. If realized output would be up 400 million pounds or 0.2 percent from 2021.

2023 production and marketings were estimated at 229.5 and 228.4 billion pounds respectively. If realized, 2023 production would be up 2.8 billion pounds or 1.2 percent from 2022. The increase will be driven by gains in milk per cow, says the WASDE, with the milk cow herd expected to average close to 2022 levels.

Price forecasts for 2022 cheese and butter were raised from the previous month, based on tighter stocks and firm demand. Non-fat dry milk prices were raised fractionally while whey prices were lowered, as U.S. prices are expected to become competitive with international prices.

The 2022 cheese price average was projected at $2.1750 per pound, up 2.50 cents from last month’s estimate, and compares to the 2021 average of $1.6755. The 2023 average was estimated at $2.04 per pound.

Butter was projected at $2.65 per pound for 2022, up a penny from a month ago, and compares to $1.7325 in 2021. The 2023 average was estimated at $2.35.

Nonfat dry milk is projected to average $1.7150 per pound for 2022 and $1.58 for 2023. Dry whey was projected to average 65.50 cents per pound in 2022 and 52 cents per pound in 2023.

The 2022 Class III milk price average is projected at $22.75 per hundredweight, unchanged from a month ago, compares to $17.08 in 2021, and was estimated to average $20.50 in 2023.

The Class IV is expected to average $23.80 in 2022, down 25 cents from a month ago, and compares to $16.09 in 2021. The 2023 average is at $21.40.

The USDA’s latest Crop Progress report shows that only 22 percent of the U.S. corn crop was in the ground, as of the week ending May 8, up from 14 percent the previous week, but a widening 42 percent behind a year ago and 28 percent behind the most recent five-year average. The report says 5 percent of the corn has emerged, down from 18 percent a year ago, and 10 percent behind the five-year average.

Soybean plantings are only at 12 percent, up from 8 percent the previous week but 27 percent behind a year ago, and 12 percent behind the five-year average.

The May 12 Daily Dairy Report says, “Weather has been improving across much of the Corn Belt, which should have allowed farmers the opportunity to get back into their fields this week.” Planting is not the only challenge, according to the DDR. “Purdue University reported that 26 percent of farmers surveyed were having difficulty purchasing fertilizer and 30 percent were having trouble buying herbicides.”

CME block Cheddar sunk to $2.2625 per pound Tuesday, lowest since March 31, but rallied Wednesday and closed “Friday the 13th” at $2.3075, down 4.25 cents on the week, third week of decline, but 58.25 cents above a year ago.

The barrels rolled to $2.34 per pound Tuesday but finished at $2.3950, up 1.50 cents on the week, 66.50 cents above a year ago, and 8.75 cents above the blocks. Sales numbered 14 blocks and only 2 barrels on the week at the CME.

Spot milk trading was busier at Midwest cheese plants this week, according to Dairy Market News. Class I intakes have slowed as schools begin to curb orders, and seasonal milking patterns are putting more milk into the market. The previous week’s market was particularly busy, and although this week was slower, at midweek, discounts and overages remained in the same ballpark as a week ago. Milk availability growth is timely, as cheese demand, particularly in the upper Midwest, remains somewhat strong. In some cases, loads made available by one customer’s cancellation or slowdown moved to another customer, reports DMN. StoneX informs us that component production has been on the rise thanks to the cool weather lending itself to cattle comfort.

Food service butter demand remains steady while retail orders are in a seasonally quieter phase, says DMN. Plant managers continue to say they are using this time to churn in preparation for fall demand. Cream is less available, regionally. Some plants were looking west for similarly priced loads when compared to previous weeks, but local handlers are slowing offers, as busier churning and ice cream production has begun to thin the pool. Market tones are uncertain, says DMN, as global butterfat values have begun to shift lower after a sustained bullish run starting since the summer of 2021.

Western contacts report that cream markets are steady. Cream inventories are available, though ice cream makers are buying cream in anticipation of warmer weather. Contacts report they are running busy schedules, trying to build inventory, but labor shortages and delayed deliveries of production supplies also continues to prevent running at capacity. Retail demand is declining due to the higher prices, while food service demand is steady, according to DMN.

Grade A nonfat dry milk fell to $1.7225 Wednesday but closed Friday at $1.73, down a penny on the week and 43 cents above a year ago, on six sales.

Dry whey closed Friday at 53.25 cents per pound, down 5.25 cents on the week and 10.75 cents below a year ago, on nine sales reported on the week at the CME.

Domestic consumption of cheese and dairy exports in March remained strong, according to StoneX May 6 Early Morning Update. Domestic disappearance on cheese in March was 5 percent above year ago and year to date was up 4.8 percent.

“American cheese exports have been a driving force in the first quarter and up 44 percent year to date,” says StoneX, “while Australia’s exports for March were reported to be up 15.5 percent from last year.”

Speaking in the May 16 Dairy Radio Now broadcast, broker Dave Kurzawski said overall U.S. commercial disappearance, on a milk equivalent basis, was down about 0.7 percent in March, led in large part by butter and high value protein powder.

Butter was down 10.7 percent, he said, but with the high prices that butter and cheese are at, “It almost doesn’t matter what the disappearance numbers say, as these are bullish markets though they do feel like they’re coming off a bit.”

“Many underestimated the ability of the market to go up,” Kurzawski said, “And maybe underestimated inflation, the story that got start in 2021 but probably had too little coverage.” Nerves were triggered as the market started to go higher, he said, “then got really nervous when Putin went into Ukraine and that sent a surge for all commodity prices, including dairy. Our nerves are dulled now. Buyers have calmed down, and may step back a bit from aggressive buying.”

He predicted the May17 GDT would be down again, following the 8.5 percent plunge on May 3.