The USDA left its 2022 milk production forecast unchanged in the Dec. 9 World Agricultural Supply and Demand Estimates report (WASDE), but raised the 2023 estimate slightly, citing higher expected cow numbers and slightly more rapid growth in output per cow.

2022 production and marketings were estimated at 227.0 and 225.9 billion pounds respectively, unchanged on both from last month’s estimates. If realized, 2022 production and marketings would only be up 700 million pounds or 0.31 percent from 2021.

2023 production and marketings were estimated at 229.5 and 228.5 billion pounds respectively, up 300 million pounds on production and up 400 million on marketings. If realized, 2023 production would be up 2.5 billion pounds or 1.1 percent from 2022, and marketings would be up 2.6 billion or 1.2 percent.

The 2022 Class III milk price average was projected at $21.95 per hundredweight (cwt.), up 15 cents from last month’s estimate, and compares to $17.08 in 2021 and $18.16 in 2020. The 2023 average was estimated at $19.80, up 15 cents from last month’s projection.

The 2022 Class IV average is projected at $24.50 per cwt., up 20 cents from a month ago, and compares to $16.09 in 2021 and $13.49 in 2020. The 2023 estimate is estimated at $20.10, down 25 cents from a month ago.

The Dairy and Food Market Analyst (DFMA) says Southwest and Western breakeven milk prices are around $23.50 per cwt for first quarter 2023, meaning “dairies in these regions are looking to a very tough start to the New Year.”

You’ll recall that October milk production was up 1.2 percent from 2021. The latest Dairy Products report indicates the extra milk went primarily to cheese, especially cheddar and mozzarella.

Total cheese output hit 1.167 billion pounds, highest since May, up 2.4 percent from September output, which was revised 1 million pounds higher, and was up 1.4 percent from Oct. 2021. Output year to date (YTD) was at 11.6 billion pounds, up 1.7 percent from a year ago. Thankfully, the October Cold Storage report showed a significant decline in cheese stocks which is indicative of firm demand.

Italian cheese totaled 495.4 million pounds, up 0.3 percent from September and 1.4 percent above a year ago. YTD Italian stands at 4.9 billion pounds, up 2.9 percent. American type cheese totaled 466.5 million pounds, up 5.6 percent from September and 1.3 percent above a year ago. YTD output, at 4.6 billion pounds is down 0.5 percent.

Mozzarella output amounted to 386.8 million pounds, up 2.2 percent from a year ago, with YTD at 3.9 billion pounds, up 3.8 percent. Cheddar production, the cheese traded at the CME, jumped to 334.3 million pounds, up a hefty 33 million pounds or 11.0 percent from September’s count, which was revised down 3.4 million pounds, and was up 9.4 million pounds or 2.9 percent from October 2021. YTD Cheddar is at 3.2 billion, still down 1.4 percent from a year ago.

Butter output jumped to 161.0 million pounds, up 20.2 million pounds or 14.3 percent from September, but down 3.3 million pounds or 2.0 percent from a year ago, the third month in a row to fall short of the previous year. YTD butter stands at 1.7 billion pounds, down 2.2 percent from a year ago.

Yogurt totaled 403.9 million pounds, up 4.6 percent from a year ago, with YTD output at 3.9 billion pounds, down 2.4 percent.

Dry whey production slipped to 77.3 million pounds, down 800,000 pounds or 0.9 percent from September, but 2.4 million or 3.3 percent above a year ago, thanks to robust cheese production. YTD whey was at 800.5 million pounds, up 2.4 percent. Stocks inched up to 67.8 million pounds, up 1 million pounds or 1.5 percent from September and 9.8 million or 16.9 percent from 2021.

Nonfat dry milk, at 124.2 million pounds, was up 700,000 pounds or 0.6 percent from September and 3.5 million or 2.9 from above a year ago. YTD powder was at 1.6 billion pounds, down 3.4 percent. Stocks dropped to 247.5 million pounds, down 25.7 million or 9.4 percent from September but up 27.5 million or 12.5 percent from a year ago.

Skim milk powder output slipped to 56.2 million pounds, down 2.3 million pounds or 3.9 percent from September, and 21.4 million or 27.6 percent below a year ago. YTD SMP was at 446.9 million pounds, down 24.2 percent from 2021. October was also the third consecutive month nonfat and skim milk powder output was below a year ago.

StoneX Dairy Group says the report was a bit bullish overall as most of the data was below expectations. Cheese perhaps was the exception, so slightly bearish for cheese, but bullish for butter, nonfat dry milk and skim milk powder.

“Unaccounted for fat production continues to run well above expectations,” says StoneX. “We thought we would see a decrease in the unaccounted for fat in this report, but that didn’t happen. If it did, production levels would likely have been higher as expected for fat-based products. The only product that had volume climbing above our expectations was yogurt.”

Recovery is coming slowly to the Global Dairy Trade. The second to last event of 2022 saw the weighted average inch 0.6 percent higher, following a 2.4 percent jump on Nov. 15, which followed a 3.9 percent decline Nov. 1, 4.6 percent on Oct. 18, and 3.5 percent on Oct.4.

Traders brought 65.2 million pounds of product to market, up from 63.9 million on Nov. 15. The average metric ton price slipped to $3,610.00 U.S., down from $3,623.00 last time.

Buttermilk powder led the gains, up 4.7 percent, after not trading in the last event. Cheddar was up 1.8 percent, after falling 1.3 percent. Anhydrous milkfat was also up 1.8 percent, after a 2.7 percent rise, though butter was down 1.9 percent, after slipping 0.8 percent last time. Lactose was also down 0.8 percent, and, after leading the gains last time. The powders saw smaller gains Tuesday. Skim milk powder was up 1.7 percent after jumping 3.1 percent, and whole milk powder inched up 0.1 percent, after rising 3.1 percent last time.

StoneX says the GDT 80 percent butterfat butter price equates to $2.0909 per pound U.S., down 4.6 cents from Nov. 15, and compares to CME butter which closed Friday at $2.8125. GDT Cheddar, at $2.1890, was up 3.6 cents, and compares to Friday’s CME block Cheddar at $2.0950. GDT skim milk powder averaged $1.4072 per pound, up from $1.3864. Whole milk powder averaged $1.5424 per pound, up from $1.5410. CME Grade A nonfat dry milk closed Friday at $1.3650.

China remains the big factor in the poorer performing GDT and we have attributed that to the country’s COVID lockdowns, but changes may be a foot. StoneX broker Dave Kurzawski reported in the Dec. 12 Dairy Radio Now broadcast that that one of his colleagues from their Singapore office spent some time in China, talking with farmers, processors, and even government officials.

Many cities and areas there will no longer require negative COVID tests before using public transportation and “Chinese officials have had a big change in their rhetoric around COVID, now comparing it to the common cold.”