Milk prices are trending downward. Prices for the Class III he peaked at $25.21 in May, fell to $22.52 in July, and will be around $20 in August. The Class IV price will peak at $25.83 in June, drop to $25.79 in July, and be around $24.70 in August.
A modest increase in milk production, inflation and a slowing economy have weakened domestic demand, contributing to the decline. Milk production decreased by 0.9% year-on-year from January to May, in June he decreased by 0.1%, and in July he increased by 0.2%. Inflation and a slowing economy are reducing restaurant traffic and softening cheese and butter sales.
Cheese and whey prices drop Class III
Dairy prices rose modestly after softening in late July and August. Declining cheese and whey prices have lowered Class III prices. The price of a 40-pound cheddar block averaged over $2 a pound from March to July, and in April he hit a high of $2.3399. The block price he started at $1.7850 per pound in August and has moved up and down at $1.82 since today.
Cheddar barrels also averaged over $2 a pound from March to July, reaching a May high of $2.3567. Barrel he started at $1.7959 in August and today he moved up and down at $1.8950.
Dry whey prices averaged $0.5373 per pound in May, fell to $0.4694 in July and have since fallen to $0.44 to $0.45.
Butter maintains Class IV price
Higher butter prices partially offset lower skim milk prices, keeping Class IV prices in line. The average butter price was $2.9546 per pound in June and $2.95 per pound in July. Butter rose to $3.06 a pound in his early August and fell to $2.9350, but this week he was at $3.02.
The average skim milk price was $1.8286 per pound in June, dropping to $1.6984 in July and $1.5325 today. Seasonal decline in milk production and strong holiday butter and cheese sales lead to higher prices for butter and cheese, leading to higher prices for both Class III and IV in October and November There is a possibility.
Stocks of butter are tight. Shares fell 21% year-on-year on July 31 and have fallen 5% since June. But cheese stocks were up 5% year-on-year on July 31, and he’s up 1% since June.
Dairy exports support milk prices
Increased dairy exports have supported milk prices. The export volume in June increased by 9% from last year, and the export volume from January to June increased by 17%, setting a new record. Cheese exports were up 23% and butter exports were up 63% in June.
Declining milk production in Western Europe, New Zealand and Australia and competitive US prices in the global market were the main drivers of the increase.
Milk price outlook
Milk prices could fall on average in 2023. The level of milk production, domestic sales, and dairy exports will determine how much. With last year’s milk production below his year ago, milk production for the rest of the year will increase and continue into next year.
The 0.2% increase in milk production in July was a net result of 67,000 fewer dairy cows, down 0.7% and up 0.9% per cow. The number of cows increased every month from January to May, but in June he decreased by 4,000 and in July he increased by 1,000.
Of the 24 states reporting, only 10 had more dairy cows than a year ago, with 25,000 more cows in Texas and 20,000 more in South Dakota. Here’s how the top five states’ milk production compares to a year ago: California will see an increase of 4,000 +2.2%, Wisconsin an increase of 6,000 -0.3%, Idaho an increase of 2,000 +1.5%, Texas 6.0%, and New York 7,000 fewer cattle. South Dakota led all states with a 13.1% increase in milk production.
Input costs hold back production
Rising feed and other input costs, higher construction material costs, labor shortages and fewer dairy alternatives will limit milk production growth next year. The USDA projects that an increase in average herd size of 15,000 will result in a 1.1% increase in milk production, or 0.2% and 1.0% increase in milk production per cow.
This level of milk production supports milk prices. Uncertainty exists regarding the economy and inflation rates, as both can affect domestic demand. Dairy exports are projected to increase next year.Milk production is expected to show no or very limited growth in Western Europe, but potential for improvement in New Zealand, leaving the United States with export opportunities
US prices should remain competitive in global markets. It is uncertain whether the global economy will slow down and affect exports to China. Milk prices are likely to fall next year, but prices should remain relatively strong. Dairy futures may be a little more optimistic.
Currently, Class III futures start in the $20’s, with the rest held in the $19’s. Class IV futures are in the $20’s through September and then in the $19’s. The USDA is also optimistic. Their forecast is that Class III will average $21.60 this year, $17.08 in 2021, and $19.70 next year. Class IVs are projected to average $23.95 this year, compared to $16.09 in 2021 and $20.35 next year.
But a lot could change as we move into next year.
Klopp is Professor Emeritus of the University of Wisconsin Cooperative Extension at the University of Wisconsin-Madison.