European dairy commodity prices have fallen and it appears the U.S. market is following
Things look a little better globally. The second Global Dairy Trade event of 2023 saw its weighted average slip just 0.1% following a 2.8% drop on January 3 and 3.8% on December 20. Traders brought 70.3 million pounds of product to market, down from the 73.8 million on December 20. The average metric ton price inched up to $3,393 U.S., up from $3,365.00 on January 3.Cheddar buoyed the market, up 4.0%, after falling 2.7% on January 3. Whole milk powder inched 0.1% higher, after falling 1.4% last time. Skim milk powder was down 0.3%, after dropping 4.3%. Anhydrous milkfat led the declines, down 0.9%, following a 5.1% drop and butter was off 0.6%, after dropping 2.8%.StoneX Dairy Group says the GDT 80% butterfat butter price equates to $1.9687 per pound U.S., down 1.4 cents, after losing 5.5 cents last time, and compares to CME butter which closed Friday at $2.3225. GDT Cheddar, at $2.2097, was up 8.2 cents, and compares to Friday’s CME block cheddar at $1.8350. GDT skim milk powder averaged $1.2891 per pound, up from $1.2874, and whole milk powder averaged $1.4598 per pound, up from $1.4552. CME grade A nonfat dry milk closed Friday at $1.1750 per pound.Buyers in North Asia, which includes China, were a lot less engaged in this event, according to Dustin Winston, as volume purchased fell from both the last event and last year. Southeast Asia, the Middle East, and South/Central America were the only regions whose purchases exceeded year ago levels.HighGround Dairy says “Unless there’s massive buying from China post-Lunar New Year, it believes that whole milk powder remains in a quiet state with little volatility ahead. The current freight differential between the U.S. and E.U. makes European sourced skim milk powder more attractive and buyers of U.S. product remain in wait and see mode. China’s butter volume dropped to its lowest levels in three months and the contract 2 price is at lows not seen since July 2021.”StoneX points out, “For now the expected rebound in demand from China is somewhat more satisﬁed by strong domestic production rather than their usual thirst for external sourced product. It is still largely cheaper to import dairy, but it doesn’t advance their agenda. While domestic milk production is strong in China, domestic demand still suﬀers from COVID. And proﬁt margins are weaker heading into 2023.”Chinese imports in December were actually much better than expected, according to StoneX, up 14.5% from last year. “Exports out of the major exporters to China were down 30% during November. Since most of that product lands in China during December, we were expecting Chinese imports to be down at least 20%. But comparing this December-January to previous December-January periods is tricky.”“China has a free trade agreement with New Zealand that allows a limited amount of dairy products into China at a reduced tariﬀ rate on a ﬁrst-come basis. So, in the past we’ve seen New Zealand shipments to China surge in November and December, but then sit in customs and not clear through until January to take advantage of the reduced tariﬀ. However, the volume of product eligible for this reduced tariﬀ is reportedly zero in 2023, which means there is no incentive to clear the product through customs in January versus December,” says StoneX.“Chinese importers didn’t sit on product in December like they have in the past, they just pulled it all through customs. That is how we end up with exports to China down 30% and oﬃcial Chinese imports up 14.5%, or at least we think that is what is going on here. If we’re right, January imports could be down 30% to 40% from last year (since a lot of product cleared in December and wasn’t held over into January,” StoneX concludes.One more bit of GDT news; Charlie Hyland has been appointed as Independent Chair of the GDT Board of Directors, eﬀective February 1. Hyland is head of Europe, Middle East and Asia Dairy and Food at StoneX.U.S. dairy exports continue via the Cooperatives Working Together (CWT) program. Member cooperatives accepted 30 offers of export assistance this week that helped them capture sales contracts for 3.2 million pounds of American type cheese and 311,000 pounds of cream cheese.The product is going to customers in Asia, Middle East-north Africa and Oceania and will be delivered through July. The sales are the equivalent of 32 million pounds of milk on a milkfat basis.Looking to the last 12 months, CWT assisted sales were the equivalent of 1.193 billion pounds of milk on a milkfat basis, according to the CWT.CME dairy prices headed lower in the shortened Martin Luther King Day holiday week. The cheddar blocks closed Friday at $1.8350 per pound, down 16.50 cents on the week, lowest since September 6, 2022, but 2.75 cents above a year ago.The barrels finished at $1.58, 12.75 cents lower on the week, lowest since November 29, 2021, 23.25 cents below a year ago and 25.5 cents below the blocks, which may be reflecting actual supply and demand. Sales totaled five cars of block and 12 of barrel on the week, as the annual IDFA Dairy Forum kicked oﬀ in Orlando.“The cheese demand spectrum has widened from week two,” says Dairy Market News. Some processors continue to say demand remains quiet, while others, namely retail cheddar and Italian pizza style cheesemakers, say orders have picked up some. Milk availability has not changed and spot prices were as low as $10 under class again this week, fourth week in a row. Cheese output is therefore plentiful though some plants say upcoming scheduled maintenance could keep even more downward pressure on available milk. Market tones are a little uncertain, says Dairy Market News, but there is plenty of processing going on.Demand for cheese is unchanged in western retail markets, though some report strengthening food service sales. Football playoffs are contributing to increased demand for mozzarella from pizza makers in the region. Export demand remains steady, though lower international prices may lighten that demand going forward. Sales to Asian markets are strong. Milk is plentiful in the region and cheesemakers are busy, though labor shortages and continued delayed deliveries of supplies is keeping some plants from operating full schedules.Butter fell to a Friday finish at $2.3225 per pound, lowest since December 27, 2021, down 10.25 cents on the week, and 61.25 cents below a year ago when it jumped 21 cents. There was only one sale on the week at the CME.Cream is still readily available, reports Dairy Market News, though cream prices rose somewhat midweek. Churning has been busy. Butter demand is “meeting seasonal expectations.” Plant management is focused on spring holiday inventory readiness, says Dairy Market News. Market tones are holding somewhat firm.The West continues to see plenty of cream which was outpacing demand in some cases. Butter production remains strong. Unsalted butter stocks remain tighter than salted as availability continues to work towards balancing with demand. Butter demand is unchanged. Some contacts report first quarter sales being covered, but a lagging start to second, third and fourth quarter sales as hesitation remains for booking into the remaining quarters of 2023, says Dairy Market News.Grade A nonfat dry milk fell to the lowest level it has seen since March 26, 2021, closing Friday at $1.1750 per pound, down eight cents on the week and 64 cents below a year ago. There were 20 loads that exchanged hands on the week.Powder prices in Europe have also been under a tremendous amount of pressure, according to StoneX, as they deal with increasing production and weak demand which has caused concerns over inventory levels.”Dry whey closed Friday at 32.50 cents per pound, 0.75 cents lower on the week, lowest CME price since Auguse 13, 2020, and 47.50 cents below a year ago. There were 16 sales reported for the week at the CME.The February federal order class I base milk price was announced by the USDA at $20.78 per hundredweight, down $1.63 from January, 86 cents below February 2022, and the lowest class I price in 12 months. It equates to $1.79 per gallon, down from $1.86 a year ago.Part of the reason the class I is falling is because fluid milk sales continue to flounder. The United States Department of Agriculture’s latest data shows November sales of packaged fluid products at 3.69 billion pounds, down 2.9% from November 2021.Conventional product sales totaled 3.5 billion pounds, down 2.7% from a year ago. Organic products, at 230 million pounds, were down 4.9% and represented a typical 6.2% of total sales for the month.Whole milk sales totaled 1.3 billion pounds, up 1.5% from a year ago, up 1.4% year to date and represented 34.1% of total milk sales year to date.Skim milk sales, at 187 million pounds, were down 8.7% from a year ago and down 8.5% year to date.Total packaged fluid sales for the 11 months amounted to 39.5 billion pounds, down 2.3% from 2021. Conventional product sales totaled 36.9 billion pounds, down 2.4%. Organic products, at 2.6 billion, were down 1.2%, and represented 6.6% of total milk sales for the period.The figures represent consumption in federal milk marketing order areas which account for approximately 92% of total fluid milk sales in the U.S.Checking other demand data, November U.S. total cheese disappearance hit 1.197 billion pounds, up just 0.4% from November 2021, and it was only up that much because of exports. Domestic utilization fell below the previous year for the first time since July 2022, according to HighGround Dairy, off 0.4%, while exports, at 82.6 million pounds, were up 12.8%.Butter utilization totaled 219 million pounds, down 6.1%, with domestic use down 11.3%. Exports, at 18.6 million pounds, were up 158.3%, highest since March 2014, according to HighGround Dairy. Year to date butter utilization was down 6.7% domestically, while exports were up 52.7%.Nonfat dry milk utilization, at 191.8 million pounds, remained below a year ago for the sixth consecutive month, down 10.7% from a year ago, due to weak domestic demand which was down 33.1%, and had been poor throughout 2022. Exports totaled 155.2 million pounds, down 3% from a year ago, and down 7.2% year to date.Dry whey exports amounted to 70.2 million pounds, down 5.3% from a year ago, with domestic use down 28.3%, and exports totaling 43.8 million were up 17.4%.Speaking in the January 23 Dairy Radio Now broadcast, HighGround Dairy’s Eric Meyer, referenced the above data and the falling CME product prices, levels not seen in months or years in some cases. He also warned of milk production growth in the northern hemisphere, specifically Europe, where he said output has turned positive the last few months.He said we are still absent November data for a couple countries but “We expect a number that’s going to be close to 2% year over year growth. They’re having a significantly warmer winter season that’s leading to decent milk production growth,” he explained, “So European dairy commodity prices have fallen and it appears that the U.S. market is following,” he concluded.Down on the farm, dairy culling in the U.S. was up in December but slightly below December 2021, according to the USDA’s latest livestock slaughter report.An estimated 266,300 head were sent to slaughter under federal inspection, up 15,400 head from November but 1,500 or 0.6% above December 2021. Culling for the year totaled 3.05 million head, down 59,100 or 1.9% from a year ago.Meanwhile, the United States Department of Agriculture’s monthly Livestock, Dairy, and Poultry Outlook, issued January 19, says, “Based on expectations of lower milk prices and steady to higher feed costs, the number of milk cows is projected lower in 2023 at 9,405 million head, down 15,000 from last month’s report.The USDA cattle report, which will be issued January 31, is expected to provide a better sign of future changes in the dairy herd size, according to the Outlook. The average yield per cow projection for 2023 was unchanged at 24,370 pounds.Dairy export projections for 2023 were increased as domestic prices for dairy product are expected to be competitive compared to international prices.The Outlook mirrored milk price and production projections in the January 12 world agricultural supply and demand estimates report, which I previously reported.Last but not least, the January 13 daily dairy report says “A state of emergency has been declared for California as successive, intense storms batter the nation’s largest dairy state. The bomb cyclone slamming the state has brought gale force winds and widespread flooding that have caused vast property damage, evacuations and the loss of human life.”“Not even two weeks into the new year, some areas of the state have already received over half their annual rainfall. The weather crisis has put California in the unusual position of simultaneously being under a state of emergency for both drought and flooding,” according to the daily dairy report.Lee Mielke is a graduate of Brown Institute in Minneapolis, Minnesota. He’s formerly the voice of the radio show “DairyLine,” and his column appears in agricultural papers across the U.S. Contact him at firstname.lastname@example.org.