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Too much milk drives prices lowerToo much milk drives prices lower

Dairy Outlook: USDA says the midyear cheese stockpile is the highest on record.

Fran O'Leary

July 29, 2021

3 Min Read
Two holstein cows in field
MILK PRODUCTION CLIMBING: If USDA’s forecast holds, 2022 U.S. milk production would be 8.4 billion pounds higher than in 2020 and 13.2 billion pounds higher than in 2019.Peter Cade/Getty Images

USDA lowered all dairy product and milk price forecasts for 2021, as well as most dairy product and all milk price forecasts for 2022, from the June forecasts. The changes are due to downward trends in wholesale dairy product prices, stronger international price competition, lower-than-anticipated domestic demand, high stock levels and higher expected imports. The all-milk price forecasts for 2021 and 2022 have been lowered to $18.30 per cwt (down 55 cents) and $18.50 per cwt (down 25 cents), respectively.

The milk production forecast for 2021 has decreased as lower expected yield per cow more than offsets higher expected milk cow numbers. But the 2022 milk production projection has been raised due to higher expected cow numbers. Export forecasts have been raised on a skim-solids milk-equivalent basis for both 2021 and 2022.

If USDA’s forecast holds, it would mean 2022 U.S. milk production will be 8.4 billion pounds higher than 2020 milk production and 13.2 billion pounds higher than 2019 milk production.

Dairy import forecasts on both fat and skim-solids have increased for 2021 and 2022, reflecting stronger exports of whey, skim-nonfat dry milk powder and lactose. Fat bases exports are unchanged from June.

For 2021, cheese, butter, nonfat dry milk and dry whey price forecasts are lowered from June on relatively high stocks and weaker-than-expected demand.

Product price forecasts for 2021 are as follows: $1.65 per pound for cheese, $1.69 per pound for butter, $1.21 per pound for nonfat dry milk and 57 cents per pound for dry whey.

As a result of these lower forecasts, the 2021 Class III price has been lowered to $16.80 per cwt. The 2021 Class IV price forecast has dropped to $15.40 per cwt, and the all-milk price forecast is lowered to $18.30 per cwt. The 2022 Class III price forecast has been reduced to $16.75 per cwt., while the Class IV price has been lowered to $15.75 per cwt. The all-milk price forecast has slipped to $18.50 per cwt.

More cows

This summer’s heat sapped production in the Pacific Northwest in June, and the region has suffered even higher temperatures and greater stress in July. Industry consolidation has reduced output in some Eastern states. But in the rest of the nation, milk output grew. California made a strong showing, with output up 3.1% from a year ago. Second-ranked Wisconsin was not far behind, posting a 2.8% gain. In Texas and Idaho, production climbed 7% and 3.6%, respectively.

For the first time in a year, U.S. dairy producers scaled back the dairy herd in June. But the decline was just 1,000 head. The herd is still massive. Dairy producers collectively milked 9.5 million cows in June. That’s up 153,000 head from last year, and it’s the largest dairy herd since 1993.

USDA’s Dairy Market News cites strong demand for cheese across the nation. The Cold Storage report shows a 23 million-pound decline in cheese stocks from May to June. Still, at 1.435 billion pounds, June 30 cheese inventories were up 1.3% from a year ago, marking the highest midyear cheese stockpile on record.

About the Author(s)

Fran O'Leary

Wisconsin Agriculturist Editor

Even though Fran was born and raised on a farm in Illinois, she has spent most of her life in Wisconsin. She moved to the state when she was 18 years old and later graduated from the University of Wisconsin-Whitewater with a bachelor's degree in journalism.

Fran has 25 years of experience writing, editing and taking pictures. Before becoming editor of the Wisconsin Agriculturist in 2003, she worked at Johnson Hill Press in Fort Atkinson as a writer and editor of farm business publications and at the Janesville Gazette in Janesville as farm editor and feature writer. Later, she signed on as a public relations associate at Bader Rutter in Brookfield, and served as managing editor and farm editor at The Reporter, a daily newspaper in Fond du Lac.

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