Milk availability continues to tighten in the Midwest, according to Dairy Market News. Cheesemakers say several milk handlers have “gone silent on offers.” Spot loads at mid-week were reportedly $1 over Class III or higher. Cheesemakers are growingly concerned about meeting demand, particularly mozzarella and pizza cheesemakers. Excessively available milk throughout the winter and spring kept cheesemakers very busy but that’s not the case currently. 

You’ll recall July milk production was down 0.5% from July 2022 and July’s Dairy Products report shows the result. Cheese production totaled 1.162 billion pounds, down 0.7% from June and down 0.7% from July 2022. Output in the first seven months of 2023 totaled 8.2 billion pounds, up just 0.3% from 2022.

Butter production fell to 157.0 million pounds, down 5.1 million pounds or 3.1% from June, but was up 5.2 million pounds or 3.5% from a year ago. YTD butter stood at 1.3 billion pounds, up 4.0% from a year ago.

Yogurt production totaled 396.2 million pounds, up 4.3% from a year ago. 

Dry whey production totaled 88.2 million pounds, up 2.7 million pounds or 3.1% from June, and up 2.9 million or 3.4% from year ago. YTD whey stands at 554.2 million pounds, up 2.3%. Stocks grew to 86.9 million pounds, up 3.2 million pounds or 3.9% from June and up 14.8 million or 20.6% from a year ago.

Nonfat dry milk output dropped to 134.9 million pounds, down 43.1 million pounds or 24.2% from June and down 30.8 million or 18.6% from a year ago. Stocks fell to 283.3 million pounds, down 15.4 million pounds, or 5.2% from June, and down 49.8 million or 15.0% from a year ago.

Aged cheese is abundant, says StoneX Dairy, but fresh cheese remains tight and the futures market seems to know that. “At some point, presumably, there will be more fresh cheese available, but we don’t appear to be at that place yet.”

Butter climbed to $2.73 per pound Thursday but closed Friday at $2.68, up 2 cents, reversing two weeks of losses, but 49 cents below a year ago, with 49 sales reported for the week.

Grade A nonfat dry milk fell to $1.0575 per pound Tuesday, lowest CME price since Nov. 5, 2020, but rallied Wednesday, jumping 3.25 cents, and closed Friday at $1.10, up 2.50 cents but still 47.50 cents below a year ago, on 21 sales.

Dry whey hit 32 cents per pound Tuesday, highest since May 8, but closed Friday at 30.25 cents, down a quarter-cent on the week, and 15.50 cents below a year ago. There were 11 sales reported for the short week.

Tuesday’s Global Dairy Trade auction saw the weighted average head up for the first time since May 2, up 2.7%, following declines of 7.4% on August 15 and 4.3% on August 1. Traders brought 83.2 million pounds of product to market, up from 74 million on August 15. The average metric ton price crept to $2,888 U.S., up from $2,875 on August 15.

Whole milk powder (WMP) led the gains, jumping 5.3%, after leading the declines on August 15, with a 10.9% drop. Skim milk powder (SMP) was down 1.6%, after dropping 5.2% last time. Anhydrous milkfat was up 2.7%, after dropping 5.3%, and butter was up 1.1%, following a 3.0% decline. Cheddar was off 0.6%, after jumping 5.8% on August 15.

 Analyst Dustin Winston reported “North Asia, which includes China, was back to being the largest purchaser, but volume did move lower in this event from the last. SE Asia volume increased. WMP purchases from SE Asia and the Middle East were a big part of the support in WMP prices,” says Winston.

While China’s depressed economy and purchases are on everyone’s minds, Rabo Bank released its ‘Global Quarterly,’ focusing in part on the milk supply, which is contracting in most key regions like the U.S., European Union, and New Zealand. “That sets us up with a supply side that isn’t necessarily firm,” Fuess stated. “Any sense of a demand recovery, especially if it comes quicker than expected, could mean we have finally reached the bottom on prices.” 

With China becoming the world’s third largest milk producer, global purchases will be reduced, according to Rabo Bank, but China will not be self-sufficient enough and thus remain a big buyer of dairy products, Fuess concluded.

July milk production in New Zealand was another month of decreased output, according to DMN, and yields were smaller in June and July. Things are a little better in Australia however. “Even with poor weather conditions in most regions, which has challenged milk production over the course of the 2022-2023 season, Australia’s milk output ended the season with June up 1.2% however, overall seasonal milk output posted a 5.0% decline, says DMN.

July’s U.S. dairy exports showed a lot of declines from July 2022. Exports totaled 467.8 million pounds, down 10% or 51.8 million pounds, the fourth consecutive month of double-digit losses, according to HighGround Dairy.

Nonfat-skim milk powder exports were up 2.8%, thanks to hefty shipments to Mexico and Vietnam but HGD says “Demand from China and other Southeast Asian nations, the Philippines, Indonesia, and Malaysia fell, which was unsurprising, given the ongoing reports of weak demand in those places and declining prices at recent GDT events.”

Total cheese exports were down 1.2%, the fourth consecutive month of decline but an improvement from the double-digit decreases of April to June. HGD pointed to “feeble demand from South Korea.” 

Butter was down a whopping 61.3% as Canada, Mexico, and South Korea, the top three destinations, purchased less product.

U.S. dry whey exports were down a hefty 42.6%, the most significant year over year percentage drop since July 2009, according to HGD. Volumes were the smallest since October 2019.

Dairy culling maybe slowing. The week ending August 26 saw 59,200 cows go to slaughter, down 600 from the previous week and 800 or 1.3% less than a year ago, first time since the week ending March 4 to be below a year ago. Year to date 2,093,600 head have been culled, up 108,600 or 5.5% from a year ago.

Beef slaughter levels increased a bit over the last few weeks but are still well below year-ago levels, says StoneX. “As a result dairy cow slaughter continues to hold a greater volume of the beef market share compared to last year.”

 “Dairy margins improved the second half of August as a continued recovery in milk prices more than offset a slight increase in projected feed costs,” says the ‘Margin Watch’ from Chicago-based Commodity and Ingredient Hedging LLC.

The report detailed July Milk Production and Cold Storage data, stating that “July saw the first year-over-year decline in milk output so far in 2023 following USDA’s upper revision to June production.” It also reported that the drawdown in July total cheese stocks was the largest year-over-year drop since late 2019 “as inventories have tended to increase between June and July in recent years, making this year’s drop even more noteworthy.” “A return to hot and dry weather across the Western Corn Belt has added risk premium to the soybean meal market,” the MW concluded, “while corn prices have held steady.” 

In politics; the Federal Milk Marketing Order (FMMO) hearing continues and the National Milk Producers Federation says it’s been “much as expected.” “With NMPF’s proposed modernization plan serving as its bedrock, the topics under discussion very much reflect the areas we identified as key areas of improvement to FMMOs.