Benchmark falls 16 cents
The benchmark Federal order milk price is heading back down. The Agriculture Department announced the February Class III price at $20.18 per hundredweight, down 16 cents from January, but is still $4.10 above Feb. 2024. The last trade late Friday, March 7, afternoon on Class III futures had March at $18.38; April, $17.25; and May at $17.62, peaking again in September at $18.45.
The Class IV price is $19.90, down 83 cents from January but 5 cents above a year ago.
Dairy margins remained flat over the last half of February as a continued drop in milk prices coupled with a sharp selloff in the corn market were largely offsetting, says the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC. The MW detailed the January Milk Production and Cold Storage reports and warned that the retaliatory tariffs from China, Mexico and Canada will “keep pressure on Class III milk.”
An increase in the All Milk Price nudged the January milk feed price higher for the first time since September 2024. The USDA’s latest Ag Prices report shows the ratio at 2.82, up from 2.73 in December, and compares to 1.98 in Jan. 2023.
The All Milk Price ended three months of decline and averaged $24.10 per (hundredweight) cwt., with a 4.46% butterfat test, up 80 cents from December, which also had a 4.46 test, and compares to $20.10 in Jan. 2024, with a 4.35% test.
The national corn price averaged $4.29 per bushel, up 6 cents from December, but 45 cents per bushel below a year ago. Soybeans averaged $10 per bushel, up 21 cents from December, but $2.80 below a year ago. Alfalfa hay averaged $161 per ton, down $3 from December, and $41 below a year ago.
The January average cull price for beef and dairy combined was at $126 per cwt., up $5 from December, $23 above Jan. 2023, and $54.40 above the 2011 base average.
Milk production margins moved higher for the first time since September to remain at historically high levels and were 78 cents per cwt. above January, according to dairy economist Bill Brooks of Stoneheart Consulting in Dearborn, Mo.
“Income over feed costs in January were above $15 per cwt. after a one month hiatus and above the $8 per cwt. level needed for steady to higher milk production for the 15th month in a row. Input prices were mostly higher in January with two of the three input commodities inside of top 10 for January all-time. Feed costs were the eighth highest ever for the month of January and increased 2 cents per cwt. from December.” The ratio was above the five-year average for the 11th month in a row, according to Brooks.
The Trump tariff “tit-for-tat” war between the U.S., China, Mexico and Canada and will impact scores of U.S. products, including dairy. China and Canada responded immediately with retaliatory tariffs and Mexico was expected to announce similar action Sunday. It was announced Thursday, March 6, however, that Trump would pause the tariffs for one month on products covered by the U.S., Mexico, and Canada free trade agreement, the USMCA.
The March 5 Daily Dairy Report warned of the tariffs; “This is wrenching news for the U.S. dairy industry, which relies heavily on exports to keep domestic markets balanced. Last year, exports accounted for 16.4% of total U.S. milk production, and the dairy industry’s three largest export markets, Mexico, Canada and China, accounted for more than half of all dairy exports by volume and value. Mexico, the largest market for U.S. dairy overall, is also the leading buyer of U.S. nonfat dry milk (NDM) and cheese, accounting for 52.4% and 37.7% of NDM and cheese exports, respectively, in 2024. The country is also the second largest market for butter and milkfat behind Canada.”
Speaking in the March 10 Dairy Radio Now broadcast, StoneX broker Dave Kurzawski said tariffs was one of the main topics at this week’s annual Outlook conference in Nashville, but “There is no definitive answer,” as to how they will be implemented and for how long, or will some be rolled back, as they were on the automotive side of things. The uncertainty leads the markets to volatility, he said, but right now people are taking a “shoot first and ask questions later attitude, with more of a bearish tilt as they believe this will negatively impact our trade and our prices but we just don’t know yet.
Dairy exports to China are primarily dry whey, permeate and lactose which initially were not being hit with retaliatory tariffs. Cheese and powder are included but U.S. exports to China are very low, according to Kurzawski.
He also said fat and cream availability was another big topic at the conference. He said “Whey protein had a banner year in 2024 and remains on strong footing but there’s a lot of cream out there and that was one of the bearish aspects of the conference.”
Meanwhile; leaders from the National Milk Producers Federation and Dairy Export Council urged Mexico and Canada to “take U.S. concerns seriously.” NMPF’s Gregg Doud stated “Mexico and Canada are valuable trading partners that American agriculture depends on, and trade with those countries is critical to the well-being of dairy farmers. Let’s focus on getting the concerns ironed out quickly so we can focus on bolstering these critical trade relationships. Then, let’s put those tariff tools to work, driving change with the trading partner that’s brushed off U.S. concerns for far too long, the European Union.”
The Agriculture Department’s latest preliminary data shows January milk production hit 19.1 billion pounds, up 0.1% from Jan. 2024, following a 0.5% decline in December. Output in the top 24 states totaled 18.3 billion, up 0.2%, after slipping 0.4% in December. December output was revised down 3 million pounds in the 50 states and was unchanged in the 24-State data.
January cow numbers, at 9.37 million, were up 10,000 head from December and 41,000 more than a year ago. The December count was revised up 4,000 head. The 24-State count, at 8.9 million, was up 9,000 from December, and 54,000 above a year ago. The December count was revised up 5,000 head.
January output per cow in the 50 states averaged 2,040 pounds, down 7 pounds or 0.3% from a year ago. The December average was revised down 1 pound. The 24-State January average, at 2,054 pounds, was down 8 pounds or 0.4%. The December average was revised down 2 pounds from last month’s report.
Milk output for all of 2024 was reported at 226 billion pounds, down 0.2% from 2023. Revisions to 2023 production decreased the annual total by 53 million pounds. Revised 2024 production was up 14 million pounds from last month’s estimate. Annual milk production has increased 8.3% from 2015, says USDA.
Cow numbers in 2024 totaled 9.34 million, down 42,000 from 2023. The average number of milk cows was revised up 3,000 head for 2024. The average has increased 0.2% from 2015. Production per cow averaged 24,178 pounds, up 61 from 2023. That average has increased 8.1% from 2015, according to the USDA.
Lots of eyes were on the California which continues its battle with bird flu. Variants in several states are keeping the war going. January output in the nation’s No. 1 milk producer was down a whopping 203 million pounds or 5.7% from a year ago. December output was revised down 43 million pounds, resulting in an 8.0% decline from a year ago instead of the 6.8% reported.
Wisconsin’s January output was down 17 million pounds or 0.6% from a year ago, on 5,000 fewer cows, and output per cow being down 5 pounds.
Idaho output was up a hefty 88 million pounds or 6.4% from a year ago, thanks to 27,000 more cows and a 45 pound gain per cow. Idaho’s December output was revised up 35 million pounds, a 6.1% increase from Dec. 2023, instead of the 3.5% originally reported.
Michigan was up 0.7% on 1,000 more cows and a 10 pound gain per cow.
Minnesota was off 0.2%, on a loss of 9,000 cows, though output per cow was up 35 pounds. New Mexico was down 1.2% on 3,000 fewer cows. Output per cow was unchanged. New York was up 2.0% on a 40 pound increase per cow, while cow numbers were unchanged.
Oregon was up 2.0% on 1,000 more cows and a 20 pound gain per cow. Pennsylvania was up 0.8% on a 15 pound gain per cow. Cow numbers were unchanged.
South Dakota was up 6.5% on a 60 pound gain per cow and 7,000 more cows. Texas tied South Dakota for the biggest percentage gain this month, also up 6.5%, but due to 40,000 more cows and a 5 pound gain per cow.
Washington State was down 2.9%, on a 35 pound drop per cow and 3,000 fewer cows.
StoneX says both fat and protein content nationwide were well above a year ago, which puts component adjusted production up 2.2%.
The U.S. therefore has plenty of butter and cheese. USDA’s latest Cold Storage report shows Jan. 31 butter stocks totaled 270.3 million pounds, up a whopping 56 million or 26.1% from December, and up 22.7 million pounds or 9.2% from Jan. 2024. December stocks were revised down 8.1 million pounds.
The American type cheese inventory inched up to 777.6 million pounds, up 6.5 million or 0.8% from December’s level, but was down 62.2 million pounds or 7.4% from a year ago. The December total was revised 1.4 million pounds lower.
The “other” cheese category climbed to 573.0 million pounds, up 13.6 million pounds or 2.4% from the December level, but was down 21.9 million or 3.7% from a year ago. December’s level was revised up by 435,000 pounds.
The total cheese inventory hit 1.37 billion pounds, up 19.9 million pounds or 1.5% from December, but down 82.4 million pounds or 5.7% from a year ago as competitive U.S. prices attracted plenty of global buyers for our cheese.
StoneX says the report suggests that butter demand was better than thought for December and probably January as well. It adds “This was the biggest cheese decline we’ve seen in January in at least two decades and would argue for CME block close to $2 per pound, even though they averaged $1.88 for the month.”
Cash block Cheddar, after plunging 12.50 cents the previous week and closing at $1.7750, dropped to $1.6050 per pound Tuesday, lowest CME price since April 15, 2024, but it rallied to close the first Friday of March at $1.6225, down 15.25 cents on the week, but still 16.25 cents above a year ago.
The barrels sunk to $1.63 Friday, March 7, 15 cents lower, lowest since Dec. 2, 2024, 14.25 cents above a year ago, and an inverted half-cent above the blocks. Sales totaled 41 loads of block on the week, highest since April 2024, and 11 of barrel.
Midwest cheesemakers reported slower sales this week to Dairy Market News. Food service demand particularly has been slowing. Cheese inventories are on the uptick, however there are reports of some being oversold. Milk availability remains close or near balanced.
Demand for Class III milk from western cheese manufacturers is strong and the seasonally strengthening milk output is providing plenty. Cheese production is steady to stronger. Demand is lighter to steady domestically and mixed from international buyers, says DMN.
CME butter fell to $2.25 per pound Tuesday, lowest since Dec. 22, 2021, but it finished Friday at $2.31, 3.50 cents lower on the week, and 49.25 cents below a year ago. There were 37 sales on the week, with 27 on Thursday alone.
“The bears are in clear control of Central butter markets,” says DMN. Traders say recent demand upticks may slow as market prices continue to hit turbulence. Butter availability is growing and churning is very active.
Cream availability is wide open and while the low end of the multiple range ticked higher, there remains an abundance of milkfat in the region. As Class II and III manufacturing picks up seasonally, cream will tighten but not in the near term.
Cream remains readily available in the West. Churns are generally at-or-near capacity building stock for later seasonal demand. Demand is steady domestically and international buying has been very strong for first quarter.
Grade A nonfat dry milk closed Friday. March 7, at $1.1550, down 4.50 cents on the week, lowest since May 10, 2024, and 1.50 cents below a year ago, on 15 sales.
Dry whey saw its Friday finish at 49 cents per pound, down 2 cents on the week, lowest since July 8, 2024, but 8 cents above a year ago, on six sales this week.
