Despite a slowdown in milk production across the U.S., cheese prices have
declined steadily beginning in April and continuing in May - dropping Class III
milk prices.
Milk production January through March was 1.0% higher than a year ago. April
production was just 0.3% higher. While the number of milk cows were 26,00
higher than a year ago, or up 0.3%, milk per cow was unchanged from a year ago.
The number of milk cows increased month to month January through March but fell
16,000 in April.
Each of the five leading dairy states had April production higher than a year
ago except California which experienced a 1.9% decline. California had the same
number of cows as a year ago but excess rain and flooding reduced milk per cow
by 1.9%.
Milk production was up just 0.1% in Wisconsin from 5,000 fewer cows. Milk
production in Idaho was up 2.7% from 16,000 more cows. Texas had 5,000 more
cows with milk production up 1.3%. New York had 10,000 more cows with milk
production up 2.4%. Increases in milk production for some other states: 7.7%
for South Dakota, 5.0% for Kansas, 2.9% for Iowa and 2.6% for Michigan.
Each state had more cows than a year ago. Some states experiencing lower milk
production were Florida down 4.0%, Virginia down 4.0%, New Mexico down 3.1%,
Utah down 2.7% and Arizona down 2.5%. Each of these states had fewer cows than
a year ago.
Cheese prices decline steadily
Cheese prices have also experienced a steady fall, declining steadily starting
in April and continuing in May. On the CME, cheddar barrels averaged $1.8175
per pound in March and $1.5921 in April. As of May 19, barrels were just $1.47
per pound.
The 40-pound cheddar blocks averaged $1.9372 per pound in March and $1.7574 in
April. As of May 19, blocks were just $1.530 per pound. Dry whey prices have
also fallen, averaging $0.4449 per pound in March and $0.3709 in April and as
of May 19 just $0.2650 per pound. These lower prices will drop the Class III
price which was $18.52 in April to around $16.30 in May.
The latest stock report showed total March 31 cheese stocks at the same level
as a year ago but still at a relatively high level. While March total cheese
production was just 0.2% higher than a year ago, cheddar cheese production was
up 3.6%.
Cheese sales are up some from a year ago. Cheese exports were up year-to-date
for 18 straight months but fell below year ago levels by 0.4% in both February
and March. Increased competition from European cheese and economic uncertainty
has impacted cheese exports. But year-to-date cheese exports were still 4.0%
higher than a year ago.
March exports of other dairy products compared to a year ago were: butter down
36%; nonfat dry milk/skim powder down 3.0%; and dry whey products up 8%. On a
milk solids equivalent basis, the volume of March exports was 0.4% lower than a
year ago, the first decline in a year. Year-to-date exports were still 5%
higher than a year ago.
Looking ahead
Looking ahead, the Class III price could stay in the $16’s for both June and
July. Class III prices are then likely to increase for the rest of the year.
The increase in milk production over the previous year should stay well below
1%. USDA forecast the number of milk cows to average for the year just 0.1%
higher than a year ago with the increase in milk per cow just 0.8% resulting in
0.9% more milk production than 2022.
While milk production slows in the summer, the opening of schools in August
will help increase beverage milk sales. The building of butter and cheese
stocks starts in late fall for the seasonal increased sales Thanksgiving
through Christmas. All of this will push the Class III price higher.