DAIRY HAS ENTERED ONE OF THE MOST UNIQUE market moments in over a generation. Feed prices have shifted to a five-year low, and dairy-beef calves are fetching market highs. Those record values have placed a lid on replacement numbers and that, in turn, has capped milk production.
MILK PRODUCTION WAS DOWN FOR THE 13TH STRAIGHT month in July. Milk output fell 0.4% when compared to the same time last year. Meanwhile, cow numbers were down 43,000 head during that span.
USDA LOWERED THE JUNE MILK TOTAL by adjusting production from down 1% in its July report to a steeper drop of 1.7% one month later.
IF TRENDS HOLD, 2023 and 2024 would become the first time in over 50 years that U.S. milk production declined for back-to-back years.
MILK COMPONENT PRODUCTION CONTINUED TO CLIMB despite falling milk output. During the past 13 months, combined butterfat and protein pounds have been up 11 months largely due to higher butterfat and protein percentages found in shipped milk.
SPOT CLASS III MILK PRICES PUSHED PAST $2.63 per cwt. over reported class values. That’s the highest midpoint since February 2019. These positive values for milk over the Class III market baseline of $19.79 in July essentially means that milk supplies are getting tight.
MILK FUTURES MOVED HIGHER due to lower production forecasts. To that end, the bundle of September-to-December Class III contracts traded near a $20 per cwt. average in early June. By late August, those same contracts climbed by over $1.95 to reach a $21.95 average.
CLASS IV CONTRACTS FOLLOWED SUIT. The September-to-December bundle climbed from a $21.50 to $22.40 net during the same window.
ON NEW ZEALAND’S GLOBAL DAIRY TRADE (GDT) platform, the index was up 5.5% in late August, the biggest gain since March 2021. Of the seven dairy products traded, all but Cheddar cheese showed positive movement. Whole milk powder gained the most ground at 7.7%.
FONTERRA, NEW ZEALAND’S LARGEST DAIRY CO-OP, announced a 50-cent raise in their farm gate milk forecast for the coming season. The projected midpoint for payout is $8.50 per kilogram of milk solids.
FEED COSTS HAVE SHOWN STARK IMPROVEMENT since the beginning of the year. Overall, soybeans have dropped 26% and corn 22%.
WITH A DEARTH OF REPLACEMENTS, dairy farmers have pulled way back on culling, sending 293,700 fewer head to slaughter since January. That total climbs to 431,500 head dating back to September 2023.
