Similar to many other commodities, Class III milk futures have also been trending higher since the New Year. June 2022 milk futures reached a price pinnacle of $25.60 on April 18; since then, prices have traded in a sideways pattern, with price support coming in at $23.35. Currently, prices are hovering in the mid $24.00 price point, awaiting fresh fundamental news for the next price direction.
Lower supply overall
Since the start of the year, total milk production has slowly been trending lower. The most recent government milk production report said that U.S. milk production in April totaled 19.150 billion pounds, down 1% from the same month last year. In the dairy world, a 1% production drop is a big deal and something to be noted.
Why the lower production? It’s not that the cows are giving less milk. In fact, that report showed that milk production per cow averaged 2,037 pounds, unchanged from the same month last year. Nope – it’s fewer cows. Total milk cows on farms in the U.S. came in at 9.402 million head, which was 97,000 head less than April 2021.
In other words, dairy farms are not expanding even though the price of milk is higher. Yes, the dairy business doesn’t always make sense.
Demand is strong
U.S. dairy exports in March totaled 254,727 metric tons. This is up 1,258 metric tons from March of 2021 and was up 46,191 metric tons from the previous month.
Butter exports led the way again with a jump of 59% year over year with a new highest monthly tonnage since 2014!
Cheese exports were up 13% from March of last year and up 27% from February. Powder and whey exports continue to hang in there but have been beneath 2021 levels.
Domestic demand remains firm as well, the most recent cold storage report showed that monthly butter in cold storage at the end of April 2022 totaled 299.63 million pounds. This is down 23% from the same month last year, but up 8% from March. By comparison, the amount of butter in storage in April 2021 was 390.15 million pounds.
The cold storage report showed that cheese inventories were up slightly, however. Monthly cheese in cold storage at the end of April 2022 totaled 1.480 billion pounds. This was up 2% from the same month last year and up 1% from March. By comparison, the amount of cheese in storage in April 2021 was 1.448 billion pounds.
Overall, industry talk is that export demand is still robust with buyers from Asia purchasing out into 2023, especially with U.S. prices remaining competitive on the global scale. Midwest cheese producers are busy and running heavy production schedules with plenty of milk availability overall. Upcoming production reports will be key for price direction along with balancing feed input prices around the country.
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