The last Federal order Class III benchmark milk price of 2022 was announced at $20.50 per hundredweight, down 51 cents from November but $2.14 above December 2021. It is the highest December Class III price since 2007. The 2022 average is $21.96, up from $17.08 in 2021 and $18.16 in 2020, a penny off USDA’s latest projection. The department projects a 2023 average at $19.80.

Late Friday morning Class III futures portended a January price at $19.28; February $18.40; and March at $18.34, with a $19.90 peak in October.

The Class IV price is $22.12, down $1.18 from November, $2.24 above a year ago, and the lowest Class IV since December 2021. Its 2022 average is $24.47, up from $16.09 in 2021 and $13.49 in 2020. USDA projects $20.10 in 2023.

The first Global Dairy Trade event of 2023 saw its weighted average drop 2.8 percent, following the 3.8 percent plunge on Dec. 20, and 0.6 percent gain on Dec. 6. Traders brought 73.8 million pounds of product to market, up from 63.4 million on Dec. 20, and the most since Nov. 3, 2020. The average metric ton price fell to $3,365.00 U.S., down from $3,493.00 last time.

Buttermilk powder provided the biggest pull on the average, down 12.9 percent, after not trading on Dec. 20. Anhydrous milkfat was down 5.1 percent, after falling 2.2 percent last time, and butter was down 2.8 percent, following a 2.6 percent descent. Skim milk powder was down 4.3 percent, following a 4.8 percent plunge, and whole milk powder was off 1.4 percent, after dropping 4.0 percent. GDT Cheddar was down 2.7 percent, after slipping 0.7 percent last time.

StoneX Dairy Group says the GDT 80 percent butterfat butter price equates to $1.9822 per pound U.S., down 5.5 cents, after losing 5.4 cents last time, and compares to CME butter which closed Friday at $2.3825. GDT Cheddar, at $2.1274, was down 5.0 cents, and compares to Friday’s CME block Cheddar at $2.0550. GDT skim milk powder averaged $1.2874 per pound, down from $1.3447 (5.7 cents), and whole milk powder averaged $1.4552 per pound, down from $1.4723 (1.7 cents). CME Grade A nonfat dry milk closed Friday at $1.2975 per pound.

StoneX’s Dustin Winston says “Total supply on offer increased 4,000 metric tons in this event, and with a corresponding increase in purchase quantity of nearly 5,000 MT it is hard to say that demand is down. More likely, it seems that market buyers are unwilling to pay up for volume as they are not in such a dire need for product. Purchase volume for every region except SE Asia.”

Nui Market’s Ron O’Brien says global markets enter 2023 “on the defensive.” Speaking in the Jan. 9 Dairy Radio Now broadcast, O’Brien said buyers have the leverage, mostly due to pressure from the Southern Hemisphere’s flush inventory which remains on offer.

He expects “lackluster demand out of Asia and increasing supplies in Oceania to continue to pressure CME spot and front month futures lower. Where the back months are higher than the front months must play out to inspire spot demand to carry forward, specifically for butter and nonfat dry milk.

“Inflation fears and supply chain nightmares are beginning to recede,” he said, “but it’s a double edged sword for dairies as end users are now interested in less safety stock and are re-evaluating future budgets due to demand destruction.

“Basis risk continues to plague margins on all sides of the market,” according to O’Brien. “Output prices based on CME spot markets and input prices based on Federal order milk markets continue to diverge. Wide variances in CME futures market settlements and actual milk checks. Historical variances in the block-barrel spread. And worse enough corn-basis variances of as much as $2 to $3 when prices are already near $7.”

Meanwhile, U.S. dairy exports remained strong in November. USDA’s latest data shows cheese exports totaled 82.7 million pounds, up 12.9 percent from a year ago.

Butter, at 18.6 million pounds, was up 160 percent, with shipments to Canada at an all-time high, although unit value was incredibly low, according to HighGround Dairy, “suggesting some sort of blended fat, alternative item or mislabeled product.” Butter demand from Bahrain also remained strong.

Nonfat/skim milk powder exports totaled 155.2 million pounds, down 3 percent. Dry whey, at 43.8 million pounds, was up 17.4 percent.

HighGround Dairy says this was the highest November volume on record, with the largest gains to Mexico, primarily on nonfat dry milk, and then China.

Dairy margins weakened further over the last half of December as milk prices continued to drop while projected feed costs moved higher, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC. “A build in milk production during November along with Cold Storage data from USDA both pressured milk prices,” according to the MW.

Midwest cheesemakers are running busy schedules, according to Dairy Market News, as spot milk prices remained as low as they were during the holiday weeks. Cheese demand varied, with some cheesemakers saying demand slackened in recent weeks, while others say it is steady week to week. Cheese availability has grown. Late in the year, contacts suggested extra cheese was mostly spoken for, but now stocks are, in some cases, growing, says DMN.

StoneX reported that the greatest discounts on spot milk loads were around $10 under Class, “but it is unlikely that offers are able to stay that low.”

Dairy farmers saw a slight improvement in one of the measures of profitability. The November milk feed price ratio inched higher for the third month in a row. The latest Ag Prices report shows the November ratio at 1.93, up from 1.92 in October, and compares to 1.92 in Nov. 2021.

In politics, dairy farmers will be slighted by the U.S. EPA, according to the National Milk Producers Federation (NMPF) President and CEO Jim Mulhern. “NMPF is disappointed that once again dairy farmers, who every day strive to be leaders in environmental stewardship, may need to live under a WOTUS rule that is cumbersome, unclear and overly complicated,” he said. “Because the EPA’s most recent iteration fails to resolve what is now a 50-year struggle to define what constitutes a water body subject to federal regulation under the Clean Water Act, our members will face continued uncertainty as they attempt to comprehend and comply with unclear regulations.

“NMPF was pleased with the Navigable Waters Protection Rule (NWPR) and disappointed when it was revoked. NMPF is also disappointed that EPA failed to listen to numerous agriculture stakeholders that called on the agency to stay rulemaking on a new WOTUS rule until the Supreme Court ruled on the Sackett case, expected this spring.”

NMPF cautioned that “EPA’s latest iteration is not a complete return to the unworkable rule adopted in 2015. EPA’s listed exemptions at least try to address some of agriculture’s concerns over lack of clarity. Even so, EPA is reintroducing considerable ambiguity in this version of the rule as it attempts to determine what is a ‘Water of the US’ as seen in the treatment of ditches, ephemeral streams and groundwater, all of which were largely categorically out under the NWPR. NMPF fully anticipates continued litigation as a result of this rule.”