Dairy Prices Expected To Be Higher In 2024; Global Markets To Be Key Factor

Milk prices are expected to be higher in 2024 than in 2023, as modest increases in production, coupled with robust demand for dairy products from both domestic and global markets, support the values of most dairy products, according to Michael McConnell, livestock, dairy and poultry analyist for USDA’s World Agricultural Outlook Board.

Global dairy markets are expected to be an influential factor in the US dairy outlook for 2024, McConnell observed at USDA’s Agricultural Outlook Forum. Overall, global dairy trade is expected to be constrained by lower milk production in several key exporters, notably the European Union and New Zealand.

Lower milk production in these markets is expected to translate into lower exports of several dairy products, in particular butter and nonfat dry milk.
This is expected to support global dairy prices.

The reduced production in the EU and Oceania would provide opportunities for other exporters to meet global demand, with the US positioned to ship product to key markets, McConnell said.

For 2024, fat basis exports are projected to grow at a higher rate than imports, at 10 percent and 1 percent, respectively. This reflects improved price competitiveness for US products given relatively tight supplies among competing exporters, McConnell explained. Skim-solids exports in 2024 are also projected to be 4 percent higher than 2023, although international demand is expected to compete with US domestic use.

The US dairy market began the year with sharply lower beginning stocks of dairy products, both on a fat and skim-solids basis, McConnell noted. At the end of 2023, fat basis stocks were 4 percent lower than the previous year, while skim-solids basis stocks were 15-percent lower.

For skim solids basis products, there was a particularly strong decline in dry whey products and WPC which historically have been more oriented toward export. In 2023, however, these products saw substantial increases in domestic use, in part spurred by the relatively low whey prices through much of the year, McConnell said.

On the fat basis side, butter stocks were 9 percent lower at the end of 2023 compared with the previous year, as growth in domestic use outpaced production during the year, helping support butter prices.
American-style cheese was a notable exception in 2023, as stock levels increased relative to 2022. This may be in part due to the increased cheese production capacity that has occurred over the past decade which has resulted in production outpacing use, McConnell said. In 2023, uncompetitive cheese prices for much of the year resulted in lower exports, and inventories built.

Overall, domestic use increased 2 percent on a fat basis and 3 percent on a skim-solids basis in 2023.

For 2024, domestic use on a fat basis is projected to increase 1 percent.
On a skim-solids basis, domestic use is projected to decline about 1 percent, as domestic use is expected to have to compete with
foreign demand.

Milk Production Prospects
For 2024, US dairy producers are expected to face lower feed costs and relatively improved forage suplies from the past several years, McConnell said. Milk cow inventories have been declining since the beginning of 2023 and growth in milk output per cow continues to be lower than historical trends.

Milk production growth in 2024 is projected to be constrained by the availiability of cows and bred heifers to bring into the domestic milking herd. On Jan. 1, 2024, the dairy herd was 0.4 percent lower than a year earlier. Further, dairy heifer replacements were also 0.4 percent lower and the number of heifers expected to calve in 2024 was down more than 1 percent.

USDA’s projection for the number of milk cows is lower than 2023, but the quarterly projections have inventories during the fourth quarter at the level they are projected to be during the first.

Milk production is projected to rise 0.7 percent in 2024 to a record 228.2 billion pounds. The growth in production is due to higher output per cow, projected to increase 0.9 percent relative to the previous year, taking into account the extra milking day in 2024.

In 2023, growth in milk per cow was just 0.1 percent higher than in 2022.

This was largely due to lower milk production levels in the second half of the year, at least in part due to extremely hot summer conditions in several key milk-producing regions of the US.

The 2024 growth rate is projected higher than 2023, but is lower than the longer-term average, reflecting the recent slowdown in the rate of growth seen in recent years, McConnell said.

While growth in milk output per cow has been slowing, this has been somewhat offset by higher fat test levels seen over the last decade. This likely reflects producers’ shifting productivity focus from total milk production to the production of components contained within milk, McConnell explained. The higher fat and skim-solids contents would dampen the impact of slower growth on a milk-per-cow basis for many processed dairy product markets.
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