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The 2021 Class III milk price forecast was raised on higher cheese and whey prices


Preliminary data had October milk output at 18.5 billion pounds, down 0.5% from Oct. 2020. The latest Dairy Products report shows where the milk went, or didn’t.

Cheese output totaled 1.147 billion pounds, up 1.1% from September and 0.9% above October 2020. Year to date (YTD) output hit 11.3 billion pounds, up 3.1% from the same period in 2020. 

Wisconsin produced 288.7 million pounds of the October total, up 0.3% from September but 2.7% below a year ago. California output, at 205.6 million pounds, was up 2.1% from September and 2.7% above a year ago. Idaho produced 85.1 million pounds, up 2.1% from September but 0.9% below a year ago. 

Italian style cheese totaled 489.8 million pounds, up 0.8% from September and 3.5% above a year ago. American type cheese, at 457.5 million pounds, was up 2.0% from September but 0.6% below a year ago. Mozzarella totaled 377.8 million pounds, up 1.7% from a year ago.

Cheddar, the cheese traded at the CME, totaled 320.7 million pounds, up 12.2 million pounds or 4% from September but 4.7 million pounds or 1.4% below a year ago. YTD Cheddar stands at 3.3 billion pounds, up 3.3% from 2020.

Churns gave us 159.4 million pounds of butter, up 16 million pounds or 11.2% from September, but 2.6 million pounds or 1.6% below a year ago, as less milk was produced in the month and more went to the vat than the churn. YTD butter output stands at 1.7 billion pounds, down 2.2% from 2020. 

Yogurt output totaled 375 million pounds, down 3.0% from a year ago.

Dry whey totaled 78.2 million pounds, up 8 million pounds or 11.4% from September, and 3.1 million pounds or 4.0% above a year ago. YTD dry whey was at 768.9 million pounds, down 4.0% from a year ago. Stocks fell to 58.1 million pounds, down 5.2 million or 8.2% from September and 11 million pounds or 15.9% below those a year ago.

Less milk meant less powder. Nonfat dry milk output totaled 124.7 million pounds, up 5.5 million pounds or 4.6% from September but down 16.6 million or 11.7% below a year ago. Powder YTD totaled 1.7 billion pounds, up 3.9%. Stocks fell to 221.8 million pounds, down 42.5 million pounds or 16.1% from September and were down 13.7 million pounds or 5.9% below those a year ago.

Skim milk powder production amounted to 58.3 million pounds, down 4.9 million pounds or 7.7% from September and down 5 million pounds or 7.9% below a year ago. YTD SMP, at 467.7 million pounds, is down 19.3% from 2020.

The Agriculture Department lowered its estimate for both 2021 and 2022 milk production in the latest World Agricultural Supply and Demand Estimates (WASDE) report, sixth month in a row, again citing lower expected dairy cow numbers and slower growth in milk per cow.

2021 production and marketings were estimated at 226.2 and 225.2 billion pounds respectively, down 200 million pounds on production from last month’s estimates and 100 million pounds lower on marketings. If realized, 2021 production would still be up 3.0 billion pounds or 1.3% from 2020. 

2022 production and marketings were estimated at 227.7 and 226.6 billion pounds respectively, down 400 million pounds on both. If realized, 2022 production would be up 1.5 billion pounds or 0.7% from 2021. 

Butter, cheese, and whey price forecasts for 2021 were raised from last month based on current prices and strength in demand. The nonfat dry milk (NDM) price forecast was unchanged.

The 2021 Class III milk price forecast was raised on higher cheese and whey prices and projected to average $17.05 per hundredweight, up a dime from last month’s estimate and compares to $18.16 in 2020 and $16.96 in 2019. The 2022 average was put at $18.15, up 40 cents from what was expected last month.

The 2021 Class IV forecast was raised on the higher butter price and should average $16.05, up a nickel from last month and compares to $13.49 in 2020 and $16.30 in 2019. The 2022 average was projected at $19, up 30 cents. Cheese, butter, NDM, and whey price forecasts for 2022 were raised on lower expected milk supplies, according to the WASDE.

This month’s corn supply and use outlook was unchanged from last month. The projected season-average farm price remains at $5.45 per bushel.

Soybean supply and use projections were also unchanged. Based on a review of EPA's proposed rule for 2020-2022 renewable fuel obligation targets, soybean oil used for biofuel was unchanged at 11 billion pounds. Season-average soybean and soybean oil price forecasts were unchanged at $12.10 per bushel and 65.0 cents per pound, respectively. The soybean meal price forecast was increased $5.00 to $330.00 per short ton.

There were 48,200 dairy cows that were sent to slaughter Thanksgiving Week, down 11,000 from the previous week but 3,000 head or 6.6% above a year ago.

Butter and milkfat pushed the Dec. 7 Global Dairy Trade auction higher, rising for the fourth consecutive event. The weighted average was up 1.4%, following the 1.9% advance Nov. 16 and 4.3% on Nov. 2. 

Butter again led the gains, up 4.6%, following the 3.5% rise on Nov. 16 and 4.7% on Nov. 2. Anhydrous milkfat was up 3.0%, after gaining 1.3% on Nov. 16 and 4.2% Nov. 2. Skim milk powder was up 1.3%, after a 1.4% rise, and whole milk powder inched up 0.6%, after jumping 1.9% last time. GDT Cheddar was up 1.0%, after jumping 2.2% in the last event.

StoneX Dairy Group says the GDT 80% butterfat butter price equates to $2.5627 per pound U.S., up 11.4 cents, after gaining 8.2 cents last time and 10.6 cents the time before that. CME butter closed Friday at a bargain $2.1225. GDT Cheddar, at $2.3676, was up 2.6 cents after gains of 4.8 cents on Nov. 16 and 28.7 cents on Nov. 2. Friday’s CME block Cheddar was at $1.8650. GDT skim milk powder averaged $1.6877 per pound, up from $1.6676. Whole milk powder averaged $1.8178 per pound, up from $1.8086. CME Grade A nonfat dry milk closed Friday at $1.6250 per pound.

October U.S. dairy exports were “decently impressive,” said HighGround Dairy’s Lucas Fuess in the Dec. 13 Dairy Radio Now broadcast, topping year ago levels for the ninth consecutive month, up 2.1%, and helped clear domestic stocks.

Cheese totaled 78.5 million pounds, up a whopping 43.7% from October 2020. Cheese shipments were the strongest on record for the month with Mexico, accounting for 22% market share, according to HighGround Dairy, and up 61% from a year ago. Notable gains were also made to South Korea and Australia. 

Butter exports totaled 9.8 million pounds, up 91.3%. Nonfat dry milk-skim milk powder fell to 147.4 million pounds, down 12.3%, though year to date exports are up 10.6%. Exports of dry whey totaled 41.7 million pounds, down 21.5%. Year ago levels on both were high and tough to beat, according to Fuess 

China remained the second largest destination, according to HGD, however exports were down 32% from 2020. Demand for whey declined, mostly to China, down 56% from last year. Nonfat dry milk exports to China were down 32%.

The global market holds good promise and the Dec. 3 Dairy and Food Market Analyst (DFMA) cites the lack of global milk supplies and the potential market share gains from American exporters. Shipping delays are also improving.

Unfortunately, domestic demand may slip, according to the DFMA. “Data from restaurant analytics firm Open Table shows a significant slowing in restaurant traffic around the globe. In the 7 days before the omicron news restaurant traffic in the US had been within 1% of pre-coronavirus levels, but has moved to be down 10% in the latest week. In other countries Open Table shows the same trend.” 

Cheddar block cheese started the week falling to $1.8425 per pound but closed Friday at $1.8650, up 0.75 cents on the week, highest since Nov. 18, and 24.75 cents above a year ago. 

The barrels climbed to $1.6925 Wednesday, highest since Nov. 1, but finished at $1.68, 7.75 cents higher, 23.75 cents above a year ago, and 18.50 cents below the blocks. 6 cars of block were sold and 8 barrel.

Midwest cheesemakers tell Dairy Market News that spot milk offers were quiet this week, as milk prices shifted higher. Multiple plants were closed for maintenance while others were busy. Staffing shortages remain but have improved. Cheese demand is meeting seasonal expectations but some plants are not likely to catch up on orders until the onset of 2022. Market tones remain uncertain, but slowly gaining momentum as barrel prices edge closer to blocks.

Western retail cheese demand is steady, food service reportedly trending higher, and international demand remains strong. Port congestion and a shortage of truck drivers continues. Milk is available allowing busy cheese production.

Butter climbed to $2.06 per pound Tuesday, then backtracked some, but jumped 7.50 cents Friday to close at $2.1225, up 12 cents on the week, highest since Oct. 17, 2019, and 64.25 cents above a year ago. There were 31 sales reported.

Central butter makers report post-Thanksgiving cream availability remained somewhat hearty in the region and from the West. Freight options from Western sources are limited with few signs the situation will level out in the near future. Butter demand is seasonally strong, and now that cream has become more available, churning is more active, says DMN.

Western cream inventories are steady with enough available but demand is strong. Some purchasers in other regions are looking for cream in the West but loads are reportedly facing delays due to a shortage of truck drivers. Domestic butter demand is steady to higher in both retail and food service markets. Export demand remains strong. Butter producers are running below capacity due to delays to production supplies and a shortage of labor, according to DMN.

Grade A nonfat dry milk closed Friday at $1.6250 per pound, 6.25 cents higher on the week, highest since Aug. 4, 2014, and 49.75 cents above a year ago, on 19 sales for the week.

Whey finished at 71.25 cents per pound, up 1.50 cents on the week on unfilled bids, highest price ever since it started trading at the CME on Mar. 12, 2018, topping 70.25 cents a pound on April 20, 2021 and 24.50 cents above a year ago

Back on the farm, dairy margins were steady to mixed the second half of November, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC., as “Milk prices and projected feed costs largely traded sideways but held firm.” 

The MW stated; “USDA Cold Storage data provided some color around recent strength in Class IV milk prices relative to Class III, citing the latest butter and cheese data which I recently reported. It added that “Strong global demand and production declines in both New Zealand and the EU are helping support U.S. dairy product prices.” 

Corn continues to hold firm with worries over soaring fertilizer prices and dry weather in South America providing support while attractive projected returns from crops such as spring wheat, oats and cotton will force new-crop corn to compete on price for acreage in the upcoming planting season,” the MW concluded.

Signup opened for the Dairy Margin Coverage (DMC) program this week and the program was expanded to allow producers better protect their operations by enrolling supplemental production. Signup runs through Feb. 18. 

National Milk Producers Federation president and CEO, Jim Mulhern says “Signing up for DMC, which offers cost-effective margin protection for small and medium-sized producers as well as inexpensive catastrophic coverage for larger dairies, is a no-brainer for 2022, especially considering the improvements we fought for in Congress and advocated for at USDA. This year illustrated just how valuable this program is for those producers that can take advantage of it, and DMC will once again be an essential part of many farmers’ risk management.”

Meanwhile, the House, by a 364 to 60 vote, passed the Ocean Shipping Reform Act (OSRA) of 2021. First introduced in August, the bill revises provisions related to ocean shipping policies and is designed to support growth and development of U.S. exports and promote reciprocal trade in the foreign commerce.

“If passed by the Senate and signed into law, the legislation will help alleviate delays and disruptions at U.S. ports that have cost the U.S. dairy industry well over $1 billion this year,” says NMPF. “American dairy exporters since late 2020 have faced unprecedented challenges in securing shipping container accommodations on ocean vessels while contending with record-high fees and shipping access volatility, mostly driven by foreign-owned ocean carriers.”

The passage also drew praise from the International Dairy Foods Association. Michael Dykes, D.V.M., President and CEO, stated; “Unlike 20 years ago when we exported very little, the U.S. dairy industry today is the third-largest dairy exporting nation in the world, selling 16% of our annual milk production to trading partners around the world. The OSRA will provide long-term solutions for the myriad issues congesting U.S. ports and slowing U.S. dairy exports.”

Lee Mielke is a graduate of Brown Institute in Minneapolis, MN. He’s formerly the voice of the radio show “DairyLine,” and his column appears in agricultural papers across the U.S. Contact him at lkmielke@juno.com.