Benchmark Ends 2022 falling 51 cents

By Lee Mielke

The U.S. Agriculture Department announced the last Federal order Class III benchmark milk price of 2022 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, though that doesn’t mean much in view of the rising prices to operate and feed the cows.

The 2022 average is $21.96, up from $17.08 in 2021 and $18.16 in 2020, a penny off of USDA’s latest projection. The department projects a 2023 average at $19.80.

January 6 Class III futures settlements portended a January price at $19.31; February $18.59; March, $18.44; and April at $18.65.

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

Woes continue in fluid milk consumption. The Agriculture Department’s latest data reports October sales of U.S. packaged fluid products at 3.68 billion pounds, down 2.3% from Oct. 2021.

Conventional product sales totaled 3.4 billion pounds, down 2.5% from a year ago. Organic products, at 237 million pounds, were up 2.0%, and represented a typical 6.4% of total sales for the month.
Whole milk sales totaled 1.3 billion pounds, up 4.2% from a year ago, up 1.4% year to date, and represented 34.1% of total milk sales YTD.

Skim milk sales, at 188 million pounds, were down 8.3% from a year ago and down 8.5% YTD.

Total packaged fluid sales for the 10 months amounted to 35.8 billion pounds, down 2.2% from 2021. Conventional product sales totaled 33.4 billion pounds, down 2.3%. Organic products, at 2.4 billion, were down 0.9%, and represented 6.7% of total milk sales for the period.

The figures represent consumption in federal milk marketing order areas, which account for approximately 92% of total fluid milk sales in the U.S.

U.S. farm milk output remains above a year ago but not gushing, likely due to high feed prices and other rising input costs. The preliminary data shows November output at 18.25 billion pounds, up 1.3% from Nov. 2021, the fifth month in a row to top year ago output. 

The 24-state total, at 17.48 billion pounds, was up 1.4%. Revisions lowered the 50-State October total by 16 million pounds to 18.8 billion, up 1.1% from a year ago, instead of the 1.2% increase originally reported.

November cow numbers totaled 9.42 million, up 1,000 head from the October head count which was revised 1,000 head higher. November’s herd was up 38,000 head from a year ago, 53,000 more than in January, and the largest since Aug. 2021. The 24-state count was up 48,000 head from a year ago and up 62,000 from January.

Output per cow averaged 1,937 pounds, up 17 pounds or 0.9% from Nov. 2021.

California put 3.3 billion pounds in the tank, down 18 million pounds or 0.5% from a year ago. Cow numbers were up 4,000 but output per cow was down 15 pounds. Wisconsin produced 2.58 billion pounds, up 32 million or 1.3% from a year ago. Cow numbers were down 6,000 but output per cow was up 35 pounds.

Idaho was up 2.3% with 12,000 more cows and a 35 pound gain per cow. Michigan was up 1.6%, thanks to a 55 pound gain per cow offsetting the loss of 4,000 cows. Minnesota inched 0.9% higher, thanks to a 45 pound per cow gain offsetting a 7,000-cow drop. New Mexico was down 4.3% on a 13,000 cow drop. Output per cow was unchanged. 

New York was up 3.2%, thanks to a 55 pound gain per cow and 3,000 more cows. Oregon was off 0.5%, on a 5 pound drop per cow. Cow numbers were unchanged. Pennsylvania was unchanged. Output per cow was up 10 pounds but there were 3,000 fewer cows milked. 

South Dakota was up 10.8%, thanks to 19,000 more cows and a 10 pound gain per cow. Texas was up 6.3% on 30,000 more cows and a 30 pound gain per cow. Washington state was down 2.0% on 6,000 fewer cows. Output per cow was up 5 pounds.

CME cheese prices plunged in the shortened first week of 2023. The Cheddar blocks lost 13.75 cents the first day of trading, then fell to $1.9725 per pound Wednesday, lowest since Nov. 1, 2022, but rallied, jumping 7.50 cents Friday to close at $2.0550, down 8 cents on the week but 6 cents above a year ago.

The barrels fell to $1.7150 Wednesday, lowest since Dec. 21, 2022, but closed Friday at $1.7250, 13.25 cents lower on the week, 14 cents below a year ago when they jumped 15.50 cents, and are 33 cents below the blocks. Sales totaled five cars of block on the week and 11 of barrel.

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.”

Western cheese demand is steady to lighter from food service and retail and International demand is mixed. Lower prices from global suppliers is contributing to the lighter demand, while some report strong sales to Asian markets. Milk remains available for cheesemakers and some are purchasing it below Class prices. Schedules are busy, says DMN, but some plants continue to report delayed deliveries of supplies and labor shortages.

Spot butter, after holding Christmas Week and most New Year’s Week at $2.38 per pound, inched up a quarter-cent Friday to close at $2.3825, 36 cents below a year ago. There were no sales on the week.
Cream is reportedly widely available from within and outside the Midwest. Multiples are a little steeper in some cases, but still discounted when compared to off-holiday seasons. Butter output, with the widely accessible cream, is busy and plants are running at capacity when staffing and hauling cooperates. Butter demand lightened some late in the year and the first week of 2023, says DMN, and “Market sentiment has clearly settled down from the fall’s bullish stint. Contacts say market timbre is uncertain at the moment. There are a number of factors involved, but strong production pushes and plentiful cream supplies are not expected to firm market tones, as demand has quieted in recent weeks.”

Demand for cream in the West is being outpaced by ample cream availability to start the year. Cream is being used internally by some butter producers as opposed to selling it at start of the year prices. Cream delivery delays are due to transportation issues but butter output is strong and outpacing demand.

StoneX says “With near term demand for physical butter and nonfat dry milk appearing mostly satiated, we continue to believe that demand for fat will continue to be strong in January. It’s retail demand that is the problem as prices for a pound of butter hit $6, $7, $8 or more depending on the retailer and brand. Anecdotal conversations point to relatively weak immediate demand for NFDM, but the prospect of buy side interest down the road a bit seems to be improving.” 

Grade A nonfat dry milk was not helped by the week’s GDT and closed Friday at $1.2975 per pound, down 3.75 cents, lowest since Aug. 27, 2021, and 37 cents below a year ago. There were four sales reported on the week.

Dry whey held steady for three sessions but finished the week at 39 cents per pound, down 2.50 cents, and 36.75 cents below a year ago, with two sales reported.

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 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.

The MW reported highlights from the Milk Production and Cold Storage reports, crediting the increase in milk output to a combination of increased efficiency from a larger milking herd.

“The Cold Storage report reflected a seasonal decline in dairy product stocks during the month, although the drawdown was not as large as in previous months as high prices are beginning to negatively impact demand, the MW concluded.

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. 

The All Milk Price average slipped to $25.60 per cwt., down 30 cents from October, but was $4.90 above November 2021.

California’s price averaged $26.40 per cwt., down 20 cents from October, but $6 above a year ago. Wisconsin’s, at $23.60, was down 80 cents from October, but $3 above a year ago.

The November national corn price averaged $6.49 per bushel, down a penny from October, after falling 59 cents the previous month, but is still $1.23 per bushel above November 2021.

Soybeans crept up $14 per bushel, up 50 cents from October, after dropping 60 cents a month ago, and were $1.90 per bushel above November 2021.

Alfalfa hay dropped $14 per ton from October, after jumping $4 a month ago and hit a record high. The November average fell to $267.00 per ton, still $54 per ton above a year ago.

The November cull price for beef and dairy combined averaged $78.40 per cwt., down another $5.70 from October, after dropping $7.10 the previous month, but is $9.20 above Nov. 2021, and $6.80 above the 2011 base average.

Dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Mo., says “Income over feed costs in November were above the $8 per cwt. level needed for steady to increasing milk production for the 14th month running.” 

“Alfalfa hay prices set a new all-time record high price in November and all three commodities were in the top two for November all time high prices. Feed costs were the highest ever for the month of November and the ninth highest all time. The All-Milk price was able to stay in the top 10 at the eighth highest recorded, according to Brooks.

“For 2022, milk income over feed costs (using Dec. 30 CME settling futures prices for Class III milk, corn, and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $12.17 per cwt., a gain of 48 cents per cwt. versus the previous month’s estimate. 2022 income over feed would be above the level needed to maintain or grow milk production and $4.38 per cwt above the 2021 level,” writes Brooks.

“Looking at 2023, milk income over feed costs (using Dec. 30 CME settling futures prices for Class III milk, corn, and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $8.18 per cwt., a loss of 59 cents per cwt. versus last month’s estimate. 2023 income over feed would be above the level needed to maintain or grow milk production,” Brooks warned, “but down $3.99 per cwt. from 2022’s estimate.”

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