The farm milk spigot slowed a bit in December. The USDA’s preliminary data has December output at 18.93 billion pounds, up 0.8 percent from December 2021. The 24-state total, at 18.1 billion pounds, was up 0.9 percent. Revisions lowered the 50-state November total by 46 million pounds to 18.2 billion, up 1.0 percent from a year ago, instead of the 1.3 percent increase originally reported.

Output for the quarter amounted to 56 billion pounds, up 1.0 percent from a year ago. Cow numbers, at 9.41 million, were down 4,000 from the previous quarter, but 27,000 more than the same period a year ago. Preliminary data puts 2022 milk output at 226.6 billion pounds, up 362 million pounds, or 0.2 percent from 2021.

December cow numbers totaled 9.4 million, down 8,000 head from the November count which was revised 12,000 head lower. The December herd was up 27,000 head from a year ago but the smallest since February. The 24-state head count was up 38,000 from a year ago and the smallest since June.

StoneX says “With dairy prices falling and input costs staying a bit more firm, margins are likely squeezed and we expect the dairy herd to decline throughout the majority of 2023.”

The shelves are full of butter again. The latest Cold Storage report shows butter stocks on December 31 at 216.3 million pounds, up 16.5 million pounds or 8.3 percent from November, and 17.2 million or 8.7 percent more than December 2021.

Stocks have been below year ago levels for 16 consecutive months but high prices likely slowed domestic sales and exports, resulting in building inventory.

American type cheese stocks grew to 825.2 million pounds, up 9.1 million pounds or 1.1 percent from November, but were 17.7 million or 2.1 percent below a year ago.

The “other” cheese category inched up to 595.6 million pounds, up 3.1 million or 0.5 percent from November, and were up 18.8 million or 3.3 percent above a year ago.

The total cheese inventory came in at 1.445 billion pounds, up 14.1 million pounds or 1.0 percent from November and 3.4 million or 0.2 percent above a year ago.

After dropping 16.50 cents the previous week, Cheddar block cheese jumped 15.50 cents Monday and hit $1.99 per pound, then fell to $1.9175 Wednesday, lowest price since Sept. 8, 2022, but they closed Friday at $1.96, up 12.50 cents on the week and 17 cents above a year ago.

The barrels were up 9 cents Monday, hitting $1.67, then fell to $1.5725 Wednesday, and closed Friday at 1.5525, lowest since Nov. 29, 2021, 2.75 cents lower on the week, 19 cents below a year ago, and a whopping 40.75 cents below the blocks. There were five sales of block on the week and 34 of barrel.

StoneX says “Supply is plentiful enough for processors to get their hands on whatever milk that they need, but demand has seen better days with both domestic and international interest drying up.”

Midwest cheesemakers continue to report available milk supplies, according to Dairy Market News, though heavily discounted loads were not as numerous. Barrel producers warned that there are going to be extra loads available in the near term. Buyers are not as incentivized to add stocks.

Cheese demand is steady in the west from retail purchasers. Food service is strengthening and some mozzarella producers report increased sales, thanks to pizza purchasing during football playoffs. Exports of cheese are strong, with purchasers in Asia buying loads to ship in second quarter, according to DMN.

Butter saw its Friday finish at $2.2725 per pound, down a nickel on the week and 26.75 cents below a year ago when it plunged 39.50 cents. Sales totaled just 3 loads.

Central butter plants report that cream remains somewhat steady with previous weeks. End users are “looking for deals” but location is clearly playing a part, as southern plants, or those closer to Western sources, say cream is abundant.

Plentiful cream remains readily available in the West. Cream demand is steady to higher. Some report purchasing enough cream to max out production and build more inventory at current prices. Butter output continues strong but second, third, and fourth quarter sales are sluggish with the current spot prices being offered.

Grade A nonfat dry milk closed at $1.1525 per pound, down 2.25 cents, lowest CME price since Mar. 24, 2021, and 65.25 cents below a year ago, on 19 sales.

Dry whey closed at 32.75 cents per pound up 0.25 cents on the week but 51.25 cents below a year ago, with 18 sales reported on the week.

The second Global Dairy Trade Pulse of 2023 saw 2.2 million pounds of Fonterra whole milk powder (WMP) sold, same as on Jan. 10, but at $3,200 per metric ton, up $30, but lagged the Jan. 17 GDT. There were nine less participating bidders and five fewer winning bidders, lowest number of participating and winning bidders since the Pulse began Aug. 9, 2022.

HighGround Dairy says “China’s ongoing economic volatility and struggle with COVID, combined with the current Lunar New Year holiday celebrations, have kept buyers away from the market and buying activity to a minimum.”

China’s December imports looked a little more promising. “After trending below prior year levels since February, skim milk powder (SMP) imports rose above 2021 to mark their highest December volume since 2013,” says HGD, with the increase driven by larger shipments from New Zealand, Belarus and the U.S. SMP imports in 2022 however were the lowest since 2018 and well below 2021.

Cheese imports continued upwards month-over-month, says HGD, but still 15.1 percent below a year ago for the second straight month. Imports from New Zealand were up but down from Australia, Italy, the U.S. and Denmark.

The Jan. 23 Daily Dairy Report says “China kicked off its Lunar New Year celebrations, welcoming the Year of the Rabbit. According to Chinese tradition, the Year of the Rabbit is likely to be calm and contemplative, in contrast to the energy and positivity associated with 2022’s Year of the Tiger.”

The DDR’s Monica Ganley Quarterra wrote in the Jan. 20 Milk Producers Council newsletter, “China announced that its population declined last year for the first time in 60 years, sparking concerns about economic prospects of the world’s largest dairy importer. Furthermore, economists continue to express pessimism about the 2023 outlook with 63 percent of the chief economists surveyed by the World Economic Forum expecting that this year will bring a global recession.”

USDA announced details this week of additional assistance for dairy producers, including a second round of payments through the Pandemic Market Volatility Assistance Program (PMVAP) and a new Organic Dairy Marketing Assistance Program (ODMAP). “The update to PMVAP and the new ODMAP will enable USDA to better support small-and medium-sized operations who weathered the pandemic and now face other challenges,” according to a USDA press release.

The National Milk Producers Federation praised the announcement, stating, “While losses due to the combination of unforeseen market circumstances and an inadequate Class I pricing system have not been fully remedied, USDA and congressional efforts will aid thousands of dairy producers who otherwise would have absorbed losses created by policies that didn’t work for them.”