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U.S. fluid milk consumption continues to decline and it is doubtful that can be reversed


U.S. milk production forecasts for 2022 and 2023 were raised from last month in the October 12 world agricultural supply and demand estimates (WASDE). Cow numbers were raised “reflecting a more rapid pace of expansion in late 2022 and the first half of 2023,” says the WASDE. Output per cow was also raised for the remainder of 2022 and into the first part of 2023. 

2022 production and marketings were estimated at 226.9 and 225.8 billion pounds respectively, up 400 million pounds on both from last month’s estimates. If realized, 2022 production and marketings would still only be up 600 million pounds or 0.27% from 2021. 

2023 production and marketings were estimated at 229.2 and 228.2 billion pounds respectively, up 400 million pounds on production and 500 million on marketings. If realized, 2023 production would be up 2.3 billion pounds or 1% from 2022 and marketings would be up 2.4 billion pounds or 1.1%.

Fat and skim solids imports for 2022 were raised, largely driven by recent trade data and higher expected imports of cheese and other products. The skim imports increase also reflects strong milk protein concentrate and casein imports. Forecasts for 2023 imports for both were raised largely on stronger imports of butter. Exports for both years were raised on expectations of stronger whey, lactose, and butterfat exports. However, export growth in skim milk powder is expected to be slower in 2022, according to the WASDE.

Forecasts for 2022 butter and cheese prices were raised on current strength, but nonfat dry milk and whey was lowered. Class III and class IV milk price forecasts were raised, reflecting the higher butter and cheese prices.

Forecasts for 2023 butter and cheese were raised while the nonfat dry milk price was lowered. The class III price was raised on higher cheese and class IV was raised as the higher butter price more than offsets lower expected nonfat dry milk prices. 

The 2022 class III average was projected at $21.90 per hundredweight, up 25 cents from last month’s estimate, and compares to $17.08 in 2021 and $18.16 in 2020. The 2023 projection was raised a dime to $19.80.

The 2022 class IV average was estimated at $24.60, up 15 cents from a month ago, and compares to $16.09 in 2021 and $13.49 in 2020. The 2023 average was estimated at $21, up 15 cents from last month’s estimate.

Cheese was projected to average $2.1050 per pound in 2022, up from $2.0750 expected a month ago, and compares to $1.6755 in 2021 and $1.9236 in 2020.

The 2023 average is projected at $1.9850, up 1.50 cents from a month ago.

The 2022 butter average was estimated at $2.88 per pound, up three cents from a month ago, and compares to $1.7325 in 2021 and $1.5808 in 2020. The 2023 average was projected at $2.44, up 5.50 cents last month’s estimate.

Nonfat dry milk will average $1.69 per pound in 2022, unchanged from last month’s estimate, and compares to $1.2693 in 2021. The 2023 average was estimated at $1.4950, down a penny from a month ago.

The dry whey average for 2022 was lowered a half cent to 60.50 cents per pound, up from 57.44 cents in 2021, and the 2023 average will drop to 48.50 cents, unchanged from what was expected a month ago.

Checking USDA’s WASDE and crop production reports, the U.S. corn outlook is for reduced supplies, greater feed and residual use, lower exports and corn used for ethanol, and smaller ending stocks. Corn production was forecast at 13.895 billion bushels, down 49 million or 8%, based on a reduction in yield to 171.9 bushels per acre. That’s down 0.6 bushel from the previous forecast and 4.8 bushels below last year. Corn supplies were forecast at 15.32 billion bushels, a decline of 172 million from last month as lower production and beginning stocks are partially offset by higher imports. 

Total planted area, at 88.6 million acres, was unchanged from the previous estimate but down 5% from last year. Area harvested, forecast at 80.8 million acres, was unchanged from the previous forecast but down 5% from last year.

Exports were lowered 125 million bushels reflecting smaller supplies and slow early season demand. Projected feed and residual use were raised 50 million bushels based on indicated disappearance. Corn used for ethanol was lowered 50 million bushels. With supply falling more than use, ending stocks were cut 47 million bushels. The season average corn price was raised five cents to $6.80 per bushel.

Soybean production was forecast at 4.3 billion bushels, down 1% from the previous forecast and down 3% from 2021 on lower yields. Harvested area was unchanged at 86.6 million acres. The soybean yield was projected at 49.8 bushels per acre, down 0.7 bushels from September’s forecast and down 1.9 bushels from 2021. Total planted area, at 87.5 million acres, was unchanged from the previous estimate but up less than 1% from a year ago. Area harvested was forecast at 86.6 million acres, unchanged from the previous forecast but up less than 1% from 2021.

With lower production partly offset by higher beginning stocks, supplies were reduced 31 million bushels. Soybean exports were reduced 40 million bushels to 2.05 billion with increased competition from South America. With lower exports partly offset by increased crush, ending stocks were unchanged from last month at 200 million bushels. The U.S. season average soybean price was forecast at $14 per bushel, down 35 cents. Soybean meal and oil prices were unchanged at $390 per short ton and 69 cents per pound respectively.

HighGround Dairy’s Lucas Fuess said in the October 17 Dairy Radio Now broadcast that the consensus is that U.S. milk output might be a little stronger than normal this fall and into 2023. Milk prices have been “decent” the past few months, he said, though he admitted input costs have also been high, stressing farm margins but “slight profitability has been achieved in most areas.” 

Cow numbers will likely top year ago levels in September, he said, that plus yield gains, spell more milk ahead and we’ll see some of that in the September report which is issued October 20. 

StoneX October 11 early morning update reported that Ukrainian forces destroyed the only bridge connecting previously annexed Crimea with the Russian mainland, angering Russian President Putin and renewing concerns that the war is only escalating.” “That puts Black Sea exports (which are continuing to ramp up) in jeopardy as a key UKR chess piece.” 

The USDA’s latest crop progress report shows 87% of U.S. corn was rated mature, as of the week ending October 9, up from 75% the previous week, 6% behind a year ago and 2% ahead of the five-year average. Harvest is at 31%, up from 20% the previous week, 8% behind a year ago and 1% ahead of the average. 54% was rated good to excellent which is 6% behind a year ago. 

The report also shows 91% of the soybeans dropping leaves, 1% ahead of a year ago and 3% ahead of the five-year average. Harvest is at 44%, up from 22% the previous week, 3% behind a year ago, but 6% ahead of the five-year average. 57% of the beans are rated good to excellent, 2% behind a year ago.

Checking the herd, culling in the week ending October 1, totaled 61,100 dairy cows, down 200 from the previous week but 400 head or 0.66% above a year ago.

The Global Dairy Trade held its sixth Pulse auction on October 11, with 2.2 million pounds of Fonterra whole milk powder being sold, unchanged from the last Pulse, but at $3,425 per metric ton. That’s down $185 or 5.1% from the September 27 Pulse and down $90 or 2.6% from the October 4 Global Dairy Trade. There were 19 winning bidders on the day, up seven from the last Pulse, out of 28 participants. 

Back on the home front, StoneX reported “The consumer price index reportedly increased 0.4% for the month, more than the 0.3% estimated.”

“On a 12-month basis, headline inflation was up 8.2%, off its peak around 9% in June, but still hovering near the highest levels since the early ‘80s.”

The cheddar blocks closed the second Friday of October at $2.05 per pound, up 2.75 cents on the week and 27 cents above a year ago. The barrels finished at $2.1250, down 10 cents, 33.50 cents above a year ago, and the spread fell to 7.50 cents. There were five sales of block at the CME this week and 11 of barrel.

Discounts on spot milk for Midwestern cheesemakers were not as strong this week, according to Dairy Market News. Some were at $1 under class but more were at or just over. Demand is “well rounded,” says Dairy Market News and producers are busy though some plants continue to refuse new orders, just making enough for existing orders. There has been some “production plant issues” but customer needs are being met and if there’s any extra inventory it’s quickly spoken for. Some remain concerned about the prolonged inversion of the barrel over block price however “market tones have not been negatively affected in general.”

Western cheese demand is steady from food service while retail demand is softening due to the higher prices. Strong demand remains for export, thanks to U.S. competitive prices. The Foreign Agricultural Service reported that August cheese exports were up 5% from 2021 and year to date are up 13%. Milk output is improving in the West, says Dairy Market News, but labor shortages and delayed deliveries of supplies continues to prevent full schedules in some plants.

Butter closed Friday at $3.1750 per pound, down 4.25 cents on the week but $1.40 above a year ago. The price has stayed above $3 for 36 consecutive sessions. Only eight loads exchanged hands on the week at the CME.

The Daily Dairy Report’s Sarina Sharp warned on the October 7 milk producers council newsletter however that “In just a few weeks grocers will be done stocking up for the holiday baking season and prices are expected to plummet.”

Cream availability continues to grow for churning in the Midwest. Cream orders have been refilled in the hurricane effected areas and locally sourced cream is becoming easier to get. Butter demand is strong, despite record prices. Retail customers are getting ahead of holiday demand. Churning rates have increased and concern remains that stocks could be short by the end of fourth quarter. 

Western cream volumes are also becoming more available. Demand is lighter from ice cream makers, but other class II makers have increased purchases in recent weeks. Butter makers in the region are utilizing available cream to run active schedules though some churns did not operate this week due to scheduled maintenance. Spot butter inventories remain tight, says Dairy Market News. 

Grade A nonfat dry milk closed Friday at $1.49 per pound, down a nickel on the week, lowest since August 10 and 4.25 cents below a year ago on five sales. 

CME dry whey finished the week at 44.25 cents per pound, two cents higher, but 16 cents below a year ago. There were two sales reported for the week.

Meanwhile, the Dairy and Food Market Analyst warns that the third largest railroad union voted down the proposed contract and asks, “What if railroads strike? Will that disrupt trucking too? Will we be able to get our products through West Coast ports? Our view, there’s nothing bullish about log jammed logistics, but duration does matter. A one-day strike is certainly different from a weeklong strike that would gum up the ports,” the Dairy and Food Market Analyst stated.

As I have sadly reported monthly for some time, U.S. fluid milk consumption continues to decline and it is doubtful that can be reversed although Coke’s lactose-free, ultra-filtered FairLife milk is making a gallant attempt.

Contrary to what the plant-based fluid and food producers would have you believe the popularity of dairy is as high as ever if not more so. The International Dairy Foods association, citing new data from the USDA’s Economic Research Service says, “2021 per capita consumption of dairy grew by 12.4 pounds per person over the previous year, continuing a near 50-year growth trend that started in 1975 when USDA began tracking annual consumption of milk, cheese, butter and everything else in the dairy case.” 

“The average American consumed 667 pounds of dairy on a milkfat basis in 2021 versus 539 pounds in 1975 when data was first established. Among the products showing strong growth are American type cheese, up 0.5 pounds, butter up 0.2 pounds and yogurt adding 0.7 pounds. Yogurt consumption grew at its strongest rate in a decade and American type cheese consumption was the second biggest increase over the past 20 years,” according to the IDFA.

The October 6 daily dairy report points out that dairy consumption fell in the late 1980s and 1990s during the “low fat craze,” but that soon faded though it saw “a brief pause during the Great Recession.”

Pizza and cheese snacks drive cheese popularity. Annual per capita cheese consumption has jumped 16% over the past decade, according to the daily dairy report with butter consumption up 20% “more than making up for changing tastes elsewhere in the dairy case.”

The National Milk Producers Federation admits dairy product consumption does shift over time but “the overall trajectory is positive.” “Despite more and more competition from nondairy competitors, despite an increasingly demanding consumer and despite disruptions that range from diet fads to pandemics. Consumers continue to find dairy increasingly useful, preferable and important.”

Interestingly, dairy is the most popular product in plant-based foods. The October 7 Dairy Industry SmartBrief says “Plant -based dairy products is the top category for the $7.4 billion plant-based food market making up $2.6 billion in sales, according to the Plant Based Food Association.

Laura Perkins, vice president of purchasing for Natural Grocers says, "Part of this can be attributed to an increased consumer population seeking alternatives for environmental, animal welfare or nutritional intolerances.”

Dairy Market News farm milk production is trending steady to higher across much of the United States. Favorable weather and cooler temperatures in some regions have aided cow comfort and have helped support milk flows. That said, the disruption caused by Hurricane Ian is forcing milk handlers to juggle milk collections and deliveries. In parts of Florida, farm milk pickups and retail restocking have been limited in some areas. The storms in the Southeast also shifted some hauling routes, keeping a lot of fluid milk and cream from moving out of the Midwest and Mid-Atlantic states into Southeastern facilities. As processors come back online, milk handlers are working to refill those pipelines. Demand for condensed skim milk is strong and contacts say availability is generally limited. Cream supplies have become more available in recent weeks, partly due to the storms in the Southeastern region and partly due to slowing ice cream production.

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.