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USDA expects milk production declines and better prices ahead

The USDA is calling for milk production to decline this year and next with producers reducing herd sizes to improve returns.

Will Loux with the U.S. Dairy Export Council tells Brownfield a recent $2 rally in cheese prices is a likely influencer for USDA’s bullish supply and demand report.

“I think you’re likely to see USDA react to that recent price rally and the fact that that price rally gratefully has stuck around for a couple of weeks,” he says.

Loux says lower milk production this year has also been tied to weather issues in the Southwest. He expects demand to improve in the year ahead.

“I look towards 2024 with a lot of optimism that we’ll start to see that recovery on the economic side and then also on the export side, perhaps also as our competitors take a step back that will boost the price,” he says.

The USDA has raised its forecast for 2023 cheese, butter, and whey prices because of price strength but lowered nonfat dried milk prices. USDA is forecasting the Class III and Class IV prices to increase because of higher component prices.

Next year the agency is expecting cheese, butter, and whey prices to be higher because of lower milk production and firm demand. Nonfat dry milk prices were lowered. The Class III price is forecasted higher because of better cheese and whey prices. USDA says higher butter prices should offset lower nonfat dry milk prices enough to raise the Class IV price.

The 2023 all milk price forecast increased 45 cents to $20.40 per hundredweight and prices for 2024 were raised by 95 cents from last month to $20.30.