First benchmark of 2023 drops $1.07 |

First benchmark of 2023 drops $1.07

By Lee Mielke

The Agriculture Department announced the January 2023 Federal order Class III benchmark milk price at $19.43 per hundredweight, down $1.07 from December and 95 cents below January 2022, lowest Class III price since December 2021.

The January Class IV price is $20.01, down $2.11 from December, $3.08 below a year ago, and the lowest Class IV price since December 2021.

Friday’s Class III futures portend a February price at $17.92; March, $17.73; and April at $18.04, with a peak at $19.96 in October.

It’s not news to dairy farmers that profitability is tightening. The Agriculture Department’s latest Ag Prices report shows the December milk feed price ratio dropped to 1.84, down from 1.93 in November, lowest since September, and compares to 1.96 in December 2021. 

The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk would purchase 1.84 pounds of dairy feed of that blend.

The All Milk Price average fell to $24.70 per hundredweight, down 90 cents from November, but was $3 above December 2021.

California’s price averaged $25.50 per cwt., down 90 cents from November, but $4.10 above a year ago. Wisconsin’s, at $23.30, was down 30 cents from November, but $1.80 above a year ago.

The December national corn price averaged $6.58 per bushel, up 9 cents from November and $1.11 per bushel above December 2021.

Soybeans jumped to $14.40 per bushel, up 40 cents from November, after gaining 50 cents a month ago, and were $1.90 a bushel above December 2021.

Alfalfa hay averaged $269.00 per ton, up $2 from November, after dropping $14 per ton the previous month, and is $52 per ton above a year ago.

Looking at the cow side of the ledger; the December cull price for beef and dairy combined averaged $76.90 per hundredweight (cwt.), down $1.50 from November, after dropping $5.70 the previous month, but is $7.80 above December 2021, and $5.30 above the 2011 base average.

Quarterly milk cow replacements averaged $1,720 per head in January, down $10 from October, but $340 above January 2022. Cows averaged $1,820 per head in California, down $30 from October, but $490 above a year ago. Wisconsin’s average, at $1,810 per head, was down $30 from October, but $340 above January 2022.

Dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Mo., says “The gain in feed costs offset the highest ever December All-Milk price and dropped the income over feed from the previous month. Income over feed costs in December were above the $8 per cwt. level needed for steady to increasing milk production for the 15th month running. Soybeans and alfalfa hay set new all-time record high prices in December and all three commodities were in the top two for December all time. Feed costs were the highest ever for the month of December and the fifth highest all time. The All-Milk price was in the top 20 at the 14th highest recorded,” says Brooks.

For 2022, Brooks says “Milk income over feed costs are $12.21 per cwt., a gain of 4 cents per cwt. versus the previous month’s estimate. In 2022, income over feed was above the level needed to maintain or grow milk production and $4.42 per cwt. above the 2021 level.” 

“Looking at 2023, milk income over feed costs (using Jan. 31 CME settling futures prices for Class III milk, corn, and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $7.63 per cwt., a loss of 55 cents per cwt. versus last month’s estimate. The 2023 income over feed would be close to the level needed to maintain or grow milk production,” Brooks concludes, “but down $4.58 per cwt. from 2022’s level.”

The farm milk spigot slowed a bit in December. The Agriculture Department’s preliminary data has December output at 18.93 billion pounds, up 0.8% from December 2021. The 24-state total, at 18.1 billion pounds, was up 0.9%. Revisions lowered the 50-state November total by 46 million pounds to 18.2 billion, up 1.0% from a year ago, instead of the 1.3% increase originally reported.

Output for the quarter amounted to 56 billion pounds, up 1.0% from a year ago. Cow numbers, at 9.41 million, were down 4,000 from the previous quarter, but 27,000 more than the same period a year ago. Preliminary data puts 2022 milk output at 226.6 billion pounds, up 362 million pounds, or 0.2% from 2021.

December cow numbers totaled 9.4 million, down 8,000 head from the November count which was revised 12,000 head lower. The December herd was up 27,000 head from a year ago but the smallest since February. The 24-state head count was up 38,000 from a year ago and the smallest since June.

Output per cow averaged 2,014 pounds, up 9 or 0.4% from December 2021.

California output, at 3.5 billion pounds, was up 0.3%, after slipping 0.7% in November. Cow numbers were up 5,000 from a year ago and output per cow was unchanged.

Wisconsin output at 2.7 billion pounds, was up 0.6%, following a 1.3% increase in November. December cow numbers were down 5,000 but output per cow was up 20 pounds in the No. 2 milk producer.

Texas, secure in its No. 3 milk producer position, was up 3.3%, thanks to 25,000 more cows offsetting a 15 pound per cow drop.

Florida registered the biggest loss, down 12.7%, on 13,000 fewer cows and 5 pounds less per cow. Idaho was up 1.6% on 9,000 more cows and a 5 pound gain per cow. Michigan was up 1.1%, thanks to a 35 pound gain per cow offsetting the loss of 2,000 cows. Minnesota was off 0.3% on a drop of 5,000 cows, though output per cow was up 15 pounds. New Mexico was down 4.8% on a 13,000 cow drop and a 5 pound loss per cow.  

New York was up 2.8%, adding 10,000 cows to its milking string. Output per cow was up 25 pounds. Oregon was off 0.5%, on a loss of 2,000 cows, though output per cow was up 15 pounds. Pennsylvania inched up 0.1% on a 20 pound gain per cow, however cow numbers were down 5,000 head.

Georgia had the biggest gain, up 10.8% on 9,000 more cows. South Dakota was up 8.9%, thanks to 16,000 more cows offsetting a 10 pound loss per cow. Washington State was down 3.3% on 7,000 fewer cows and a 15 pound drop per cow.

StoneX says “With dairy prices falling and input costs staying a bit more firm margins are likely squeezed and we expect the dairy herd to decline throughout the majority of 2023.”

The shelves are full of butter again. The latest Cold Storage report shows butter stocks on Dec. 31 at 216.3 million pounds, up 16.5 million pounds or 8.3% from November, and 17.2 million or 8.7% more than December 2021.

Stocks have been below year ago levels for 16 consecutive months but high prices likely slowed domestic sales and exports, resulting in building inventory.

American type cheese stocks grew to 825.2 million pounds, up 9.1 million pounds or 1.1% from November, but were 17.7 million or 2.1% below a year ago.

The “other” cheese category inched up to 595.6 million pounds, up 3.1 million or 0.5% from November, and were up 18.8 million or 3.3% above a year ago.

The total cheese inventory came in at 1.445 billion pounds, up 14.1 million pounds or 1.0% from November and 3.4 million or 0.2% above a year ago.

USDA has announced details of additional assistance for dairy producers, including a second round of payments through the Pandemic Market Volatility Assistance Program and a new Organic Dairy Marketing Assistance Program. “The update to PMVAP and the new ODMAP will enable USDA to better support small-and medium-sized operations who weathered the pandemic and now face other challenges,” according to a USDA press release.

The National Milk Producers Federation praised the announcement stating; “While losses due to the combination of unforeseen market circumstances and an inadequate Class I pricing system have not been fully remedied, USDA and congressional efforts will aid thousands of dairy producers who otherwise would have absorbed losses created by policies that didn’t work for them.”

Cash dairy prices in Chicago started February a little stronger, except for the Cheddar blocks which lost 9.50 cents on the week, closing at $1.8650 per pound. That’s 3.50 cents below a year ago when they jumped 11 cents.

The barrels finished the week at $1.63 per pound, 7.75 cents higher on the week, 26.50 cents below a year ago when they jumped 15.25 cents, but the spread was lowered to 23.50 cents. The week saw seven cars of block sold and 27 of barrel.

Cheese demand varies, according to Dairy Market News. Some plants are running widely available milk to fulfill strong orders while others are not. Barrel cheesemakers say there is concern about inventory growth, as demand has seasonally slowed. Production is busy, but for various reasons more plant downtime has been reported in the upper Midwest. Milk is widely available and spot prices reached $10 under Class III, which has been the case all year. Cheese market tones are in search of some stability, says DMN.

The Jan. 30 Daily Dairy Report points out that Midwest milk production is growing substantially and dairy processors are overwhelmed.

Demand for cheese is steady to lighter in the West. Retail sales are unchanged, though some report lighter food service sales. Export demand is softening, as sellers in Europe are, reportedly, offering cheese for lower prices. Sales are steady in Asian markets for second and third quarter. Barrel inventories are larger than blocks and likely contributing to the large block-barrel price spread.

StoneX stated in its Jan. 30 Early Morning Update; “European cheese prices continued to fall last week while U.S. and Oceania prices were rather steady relative to that. This will inevitably make U.S. cheese much less competitive in the export market given the low EU cheese prices which could lead to U.S. milk supplies shifting from mozzarella cheese, which we export the most of, to Cheddar which could put further pressure on spot cheese prices. Oversupply of milk has been an issue in Europe but with margins expected to move back to average to lower type levels, we could see that change into the summer months.”

CME butter closed Friday, Feb. 3, at $2.3750 per pound, up 10.25 cents on the week but 12.50 cents below a year ago. There were 43 loads that exchanged hands on the week, highest weekly volume since the last two weeks of August, 2022.

Central butter plants tell DMN that cream remains widely available. Butter inventories have grown since late 2022. Butter production is very busy. Food service demand for butter, or lack thereof, has some contacts suggesting potentially further butter price, and market, bearishness.

Readily available cream remains in the West. Cream demand continues steady to higher with strong butter production ongoing. Butter inventories keep working towards balancing with demand. Contract sales interest for second, third, and fourth quarter stays light going into February. Spot butter demand is steady.

Grade A nonfat dry milk saw the first positive move in 14 sessions, jumping 4.75 cents Wednesday and closed Friday at $1.2450 per pound, up 9.25 cents on the week but 58.75 cents below a year ago. Twelve cars found new homes on the week.

Dry whey saw its Friday finish at 41.50 cents per pound, up 8.75 cents on the week, highest in four weeks, but 44.25 cents below a year ago, with six trades.

More Like This, Tap A Topic