“ENTERING 2023, DAIRY PRODUCERS ARE FACING the prospects of continued relatively high feed costs and uncertainty in forage supplies,” shared Shayle Shagam at USDA’s 99th Agricultural Outlook Forum. “Feed prices and tight supplies of forage will make 2023 a challenging year for the sector,” continued the USDA livestock and dairy economist.
“DAIRY PRICES WILL EASE after the 2022 peak,” shared USDA’s Chief Economist Seth Meyer. “The 2023 All-Milk price is forecast to decline to $20.70 per cwt,” added Shagam. “Although a $4.86 decline from 2022, it would be the second-highest price since 2014. The Class III price is expected to decline to $17.90 and Class IV will average $18.25 per cwt.”
USDA WAS MORE BEARISH than the CME markets. In late February, March-to-June Class III futures contracts averaged $18.15 per cwt. and climbed to a $19.80 net for July to December. Class IV showed more strength, with March-to-June contracts yielding a $19.20 average and the final six months of the year trading near $20.15 per cwt.
DAIRY PRODUCT PRICES FUEL the Class III and Class IV values. “For 2023, cheese prices are forecast to average $1.86 per pound, and butter will average $2.33 per pound,” described Shagam. “Although these are 25 cents and 54 cents per pound below last year, they would be the second-highest prices since 2020 and 2017, respectively.”
DOMESTIC COMMERCIAL USE ON A FAT BASIS is expected to rise less than 1% in 2023. “A further increase in fat-basis stocks is expected as demand may fail to keep pace with the increase in supplies,” said Shagam.
U.S. DAIRY EXPORTS EXCELLED AGAIN IN 2022, with record shipments further cementing its role as a key demand driver for U.S. milk.
“FOR THE THIRD CONSECUTIVE YEAR, the U.S. dairy industry set a record for the volume of dairy products exported on a milk solids basis,” shared William Loux with the National Milk Producers Federation and the U.S. Dairy Export Council. “The current record surpassed 2.4 million metric tons — the equivalent of over 40 billion pounds of raw milk, or 18% of the U.S. milk supply,” he continued.
“PERHAPS MORE IMPRESSIVE, for the fifth time in the last six years, U.S. exports grew by more than domestic milk production,” he added.
GIVEN CONCERNS ON MARGINS AND DEMAND, dairy cow numbers could fall below year-ago levels during the second quarter and decline more rapidly in the second half of the year. “For 2023, the dairy herd is expected to average 9.39 million head, 0.3% below 2022 and the lowest level since 2019,” shared USDA’s Shagam in late February.
DAIRY COW SLAUGHTER IN JANUARY was the highest for the month since 2020. “It is expected to remain at or above historical levels during much of the year,” shared Shagam of the ongoing economic conditions.
DEMAND FOR BEEF WILL REMAIN STRONG even though cattle inventory contracted for the fourth consecutive year in 2022. “The 5-Area steer price for 2023 is forecast to average a record $159 per cwt., approximately $15 per cwt. above 2022’s average price and eclipsing the previous record set in 2014,” said USDA’s Justin Choe.
FEED CONCENTRATE PRICES COULD BEGIN TO FALL at the close of the upcoming crop season. The season-average corn price is forecast to be down $1.10 to $5.60 per bushel, predicted USDA economists. Soybean meal could drop to $410 per ton with more product coming on the market.
IN 2022, MILK PER COW LAGGED historical trends. Although recovering in the second half of 2022, for the year, milk per cow averaged 0.6% above 2021 levels on a daily basis. This was the slowest growth rate since 2016. Turn to pages 133 to 136 for more dairy statistics.
