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Dairy heifer numbers down for sixth straight year
Mielke Market Weekly
By Lee Mielke
The first Federal order Class III milk price of 2024 starts with an 87-cent plunge. The USDA announced the January benchmark at $15.17 per hundredweight, $4.26 below January 2023 and the lowest Class III since July 2023.
Late Friday morning Class III futures were portending a turnaround in February, at $16.18. March was trading at $17.33; April, $17.55; May, $17.81; and June at $18.19, with a peak at $18.63 in September.
The Class IV price is $19.39, up 16 cents from December, but 62 cents below a year ago.
The Agriculture Department issued its greatly anticipated cattle report this week and dairy heifer numbers were down for the sixth year in a row. Heifers expected to calve were only down 1.1 percent from last year, says StoneX, “Not a record decline despite a growing belief that a systemic heifer supply problem exists.”
USDA did revise last year’s heifer supply from a 2 percent decline to a 7 percent decline, says StoneX, “Which goes a long way to explain how the herd continued to drop in the second half of 2023 despite very strong slaughter. The drop in 2023 was a record large drop (although data only goes back to 2003). “This report gives us a nice overview but will likely have little impact to dairy market trading as is perennially the case.”
The week ending Jan. 20 saw 51,100 dairy cows go to slaughter, down 4,900 head from the previous week, but 19,700 or 27.8 percent below a year ago. Year to date, 155,600 cows have been culled, down 48,800 or 23.9 percent from a year ago.
Checking the CME, Cheddar block cheese climbed to $1.6675 per pound Thursday, highest since Nov. 7, 2023, but closed the first Friday of February at $1.65, up 11.25 cents on the week, 17 cents higher than its Jan. 2 standing, but 21.50 cents below that week a year ago.
Sales totaled 29 loads of block on the week and 81 for the month of January, down from 93 in December. Barrel sales totaled 24 for the week and 113 for January, down from 161 in December.
Milk availability for Midwest cheese processors continues to edge tighter, says Dairy Market News. Spot milk prices at mid-week were at Class to $1-over. A year ago, the range was $10 to $3-under Class. One factor in the current milk balance is active cheese production. Some plants are running an extra day per week, says DMN. Retail and food service Cheddar producers said demand was lower this week, while others say sales are busier.
Retail cheese demand is steady to stronger in the West. Food service demand is strengthening following weather-related power outages and transportation issues. International demand has strengthened. Class III spot loads are readily available, despite some tighter volumes. Class III milk demand from cheese makers is stronger, according to DMN.
Fueled by the bullish December Cold Storage report, cash butter shot up to $2.8025 per pound Monday, highest since Nov. 7, 2023, but the closing bell on Friday saw the price at $2.7450, down 1.50 cents on the week, 6 cents higher on the month, and 37 cents above a year ago. There were 8 sales on the week and 63 for the month, up from 30 in December.
Midwest butter makers report a widely available cream supply. Upper Midwest processors suggest bids at multiples at and around 1.15 will keep churns full. Farther south, loads were moving to plants at .9 to 1.10. Contacts expect cream availability to maintain a similar pattern through February. Butter demand is holding steady. Expectations are more bullish than bearish regarding late-winter and early-spring demand. Contacts expect milkfat components to settle and then decrease, seasonally, says DMN.
Cream volumes are slightly tighter in a few parts in the West, but spot loads are readily available. Butter output is steady to stronger, with many working to build inventory for second quarter. Distributors indicate, aside from Canadian purchasers, export demand is moderate to lighter, according to DMN.
Grade A nonfat dry milk climbed to $1.23 per pound Tuesday, highest since Oct. 23, 2023, but saw its Friday finish at $1.2250, still a half-cent higher on the week, 5.25 cents higher on the month, but 2 cents below a year ago. Sales for the week totaled nine loads and 63 for January, up from 44 in December.
Dry whey climbed to Friday’s close at 50.75 cents per pound, a level not seen since June 21, 2022, up 6.50 cents on the week, up 12.25 cents on the month, and 9.25 cents above a year ago. There were three sales on the week and 19 for the month of January, down from 20 in December.
The Daily Dairy Report credited “Formidable demand for high-protein whey products” for the price strength. “Every penny increase in whey value has added six cents to Class III prices,” says the DDR. “So the rally has boosted dairy producers’ potential Class III revenue by more than 70 cents per cwt.”
Meanwhile, a drop in the All Milk Price with higher corn and soybean prices reversed five consecutive gains in the milk feed price ratio. The USDA’s latest Ag Prices report shows December at 2.00, down from 2.12 in November and the lowest in three months, but compares to 1.83 in Dec. 2022.
The index is based on the current milk price in relationship to feed prices for a ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. One pound of milk would purchase just 2 pounds of dairy feed of that blend.
The All Milk Price average ended four months of gain, dropping to $20.60 per cwt., with a 4.35 percent butterfat test. That’s down $1.10 from November, and $3.90 below December 2022, which had a 4.27 percent test.
California’s average at $20.90 per cwt., was down 90 cents from November, and $3 below a year ago. Wisconsin’s, at $19, was down 80 cents from November and $4.70 below a year ago.
Looking at the cow side of the ledger; the December cull price for beef and dairy combined slipped to an average $101 per cwt., down $3 from November, $24.10 above December 2022, and $29.40 above the 2011 base average.
Income over feed costs in December were above the $8 per cwt. level needed for steady to higher milk production for the fourth time since January, according to dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Missouri. He adds that input prices were higher and all three commodities were in the top six for December all time. Feed costs were the fifth highest ever for December and the sixty-fifth highest of all time.
“Dairy producer profitability for 2022 in the form of milk income over feed costs, was $11.91 per cwt. The profitability was $4.12 above 2021 and $2.50 higher than the 2017-21 average,” says Brooks. “In 2022, the increase in milk income over feed costs was a result of the milk price increasing more than feed prices rose. Income over feed in 2022 was above the level needed to maintain or grow milk production.”