Benchmark jumps $1.72
The first benchmark milk price of 2025 headed higher following three consecutive declines. The January Federal Order Class III price was announced by the USDA at $20.34 per hundredweight, up $1.72 from December, $5.17 above January 2024, and the highest Class III price since Oct. 2024.
The Friday, Feb. 7, futures settlements portend a February price at $20.11; March, $19.44; and April at $19.22. USDA’s latest World Agricultural Supply and Demand Estimates report forecasts a 2025 average at $19.70, up from $18.89 in 2024.
The January Class IV price is $20.73, down a penny from December, but $1.34 above a year ago. USDA projects a $20.80 Class IV average for 2025, up from $20.75 in 2024.
President Trump implemented threatened tariffs on Feb.1, 25% on all imports from Mexico. Most imports from Canada were at 25%, though energy imports were at 10%, and 10% on goods from China. Mexico and Canada announced retaliatory tariffs as did China.
The Canadian dollar and Mexican Peso dropped in value however cooler heads prevailed Monday and Mexico agreed to send troops to the border to help achieve Trump’s demand to lower the inflow of migrants as well as illegal drugs like fentanyl. An understanding was also achieved with Canada, prompting Trump to delay the tariffs for 30 days.
The Feb. 4, Daily Dairy Report stated “In 2023, the United States exported $1.09 billion worth of dairy products to Canada out of roughly $8 billion in total dairy exports, while Canada exported $293.3 million in dairy products to the U.S.”
The DDR added “A White House memorandum issued Jan. 20 directs stakeholders to begin studying the impacts of the United States Mexico-Canada Agreement on U.S. industries, particularly agriculture. Last week, Howard Lutnick, Trump’s pick to lead the Commerce Department, said Canada was treating U.S. dairy producers unfairly, implying the U.S. would seek more access to Canada’s dairy market when USMCA comes up for review next year.”
U.S. milk production is slowly recovering though it remained below a year ago for the second month in a row in December, primarily due to the impact of bird flu in California.
NPR reported this week that USDA’s Animal and Plant Health Inspection Service discovered a variant of the H5N1 bird flu dairy cows in Nevada. It has also led to several instances of severe illness in humans.
The Agriculture Department’s preliminary data put December output at 18.7 billion pounds, down 0.5% from December 2023, following a 0.4% drop in November. Output in the top 24 states totaled 18 billion pounds, down 0.4%, after slipping 0.3% in November.
November output was revised up a hefty 110 million pounds from last month’s estimate, resulting in a 0.4% decline instead of the 1% drop originally reported. Revisions added 89 million pounds to the 24 state count, resulting in November output being down 0.3% instead of a 0.8% decline.
December cow numbers fell to 9.351 million, down 9,000 head from November, though the November count was lowered 5,000. The December herd was only up 3,000 from a year ago and was 28,000 more than in January. The 24-State December count, at 8.91 million, was down 8,000 from November, which was revised 4,000 head lower, but numbered 17,000 more than a year ago.
December output per cow in the 50 states averaged 2,005 pounds, down 10 pounds or 0.5% from a year ago. The November average was revised up 12 pounds. The 24-State December average, at 2,020 pounds, was down 11 pounds or 0.5% from a year ago. The November average was revised up 11 pounds from last month’s report.
California fared a little better than thought in November and December, considering its ongoing battle with bird flu. November output, while down a hefty 259 million pounds from a year ago, was revised up 42 million from last month’s report, and resulted in a 7.9% drop for the Golden State, instead of the 9.2% reported.
December output was down 233 million pounds or 6.8% from a year ago, due to a 135 pound drop per cow while cow numbers were down 1,000 head. Output per cow was down 150 pounds in November.
Wisconsin’s December output hit 2.69 billion pounds, up 2 million or 0.1% from a year ago, on 5,000 fewer cows, and output per cow up 10 pounds.
Idaho was up 3.5%, thanks to 17,000 more cows and a 20 pound gain per cow. Michigan was up 1.4%, Minnesota was off 0.7%, New Mexico was down 3.3%, and New York was up 0.7%. Oregon showed the biggest percentage decline in the country, down 8.2% on 9,000 fewer cows, and a 15 pound drop per cow.
Pennsylvania was unchanged across the board. South Dakota was up 6.4%, and Texas again had the biggest gain in the U.S. up 7.5%, thanks to 40,000 more cows and 25 pounds more per cow. Washington State was down 2.1% on a 30 pound drop per cow and 2,000 fewer cows.
Dairy processors met the last week of January in San Antonio, Texas, for the International Dairy Foods Association’s annual Dairy Forum. One of the key takeaways of the forum was the strong demand for high value whey protein, according to StoneX broker Dave Kurzawski in the Feb. 3 “Dairy Radio Now” broadcast. The bearish side is fat and butter, he said, and while not widely spoken about at the forum, the downside risk is for the butter market.
He blamed the shortfall in U.S. milk output to California’s battle with bird flu where milk production was down 6.8%, while output elsewhere in the country was up about 1%. He also reported that organic milk is extremely tight right now and one of the reasons may be a switch by consumers away from plant-based beverages to animal-based milk the past 12 months, particularly to organic product.
USDA’s latest fluid milk sales data showed November organic sales were up 7.7% and up 6.9% year to date, and represented 7.1% of total sales.
The quest to meet that rising demand won’t come quickly. Kurzawski explained that few conventional farmers want to make the switch to organic and, even if they did, it could take several years to do so. He said he thinks those consumers will embrace conventional milk again, which he believes is just as healthy and satisfying as organic. “It’s a first step in the right direction,” he concluded.
As I have written in the past, consumers need to read the ingredients on the labels of the plant-based products and ask themselves if that is what they want to put into their bodies, when compared to natural, nutrient-laden milk from the cow.
Checking the markets; Class III and Cheese futures initially traded sharply lower Monday, Feb. 3, in response to the tariff spat and cash dairy prices took notice but the tariff postponements caused the markets to return to the main fundamentals.
CME block Cheddar dropped to $1.8625 per pound Monday, rallied to $1.90 Tuesday, then closed Friday, Feb. 7, at $1.86, down 1.75 cents on the week, but 29 cents above a year ago.
The barrels closed Friday at $1.78, down 3 cents on the week, lowest since Dec. 27, 2024, but 20.25 cents above a year ago, and a widened 8 cents below the blocks. CME sales totaled 17 loads of block on the week and seven of barrel.
Cheese demand has strengthened in the Midwest, according to Dairy Market News, with a pickup in nearly all styles, and a handful of processors were oversold. StoneX reported however that component levels in the Midwest have “declined a bit for the first time in quite a while.”
Cheese production was mixed in the West. Some manufacturers reported lighter schedules, others were either steady or busier. Retail cheese demand is steady to strong while food service is steady, according to DMN.
Cash butter continued its descent, falling to a $2.38 per pound Friday finish, losing 5.25 cents on the week, lowest CME price since June 26, 2023, and 31 cents below a year ago. There were 14 sales logged on the week.
Central butter makers cite plentiful cream availability and are turning down offers daily. Butter demand is subdued but not outside the seasonal norm, said DMN.
Cream is readily available in the West and multiples are lower. Sellers note that demand is lighter or steady, with some hesitation from buyers.
Grade A nonfat dry milk closed the week at $1.33, down 1.50 cents but still 13 cents above a year ago, on 12 sales for the week.
Dry whey finished Friday at 58.75 cents per pound, down 5.25 cents on the week, lowest since Sept. 23, 2024, but 6.75 cents above a year ago on two sales.
