USDA raises dairy wholesale price forecasts, revises down production
The US Department of Agriculture’s Economic Research Service has lowered its 2024 forecasts for average number of milk cows by 5,000 head; milk per cow by 30 pounds; and total milk production by 0.4 billion pounds, in line with recent inventory and production data.
The revisions come after milk production declined in July (down 0.4% YoY), production per cow stalled at +1lb YoY, and the number of milk cows declined by 43,000 head annually.
However, the 2024 and 2025 wholesale-price forecasts for all dairy products have been raised on the back of increased wholesale dairy product prices per pound in August and September. According to the USDA National Dairy Products Sales Report (NDPSR), the price for 40-pound blocks of cheddar increased 16.26 cents; 500-pound cheddar barrels rose by 25.94 cents; butter increased by 6.90 cents, dry whey – by 4.14 cents and nonfat dairy milk – by 4.45 cents per pound.
Higher all-milk prices and lower feed prices also saw the dairy farm margin finally rise above feed costs in July 2024 at $12.33 per cwt, $8.81 per cwt higher on July 2023. Prices for the main feed inputs were lower in July YoY, including corn per bushel (-$1.98), alfalfa per ton (-$63) and soybean meal per short ton (-78.85).
The improved dairy margins are likely to incentivize farmers to increase their herds, according to the report – but the tight supply of heifers would present a challenge in H1 2025. Relative to last month, the forecast for the US dairy herd size in 2025 is unchanged at 9.360 million head.
Import and export activity
Most foreign export prices were also higher from July to August 2024, with butter and skim milk powder to Oceania being the two exceptions. US dairy exports rose in July 2024 YoY, driven by shipments of cheese, skim milk products and dry whey products. Imports also increased for the period, driven by butter, infant formula and casein.
Rising dairy prices are impacting consumption
While overall product and food CPIs have declined in 2024, dairy product CPIs have continued to rise. Coupled with a decline in the foodservice sector – with National Restaurant Association data suggesting a contraction in the restaurant sector in particular – it’s ‘likely’ that demand for dairy products is being impacted, according to the USDA.
