Here’s an update on news impacting your dairy as we close out the first full week of December 2023.
- Year-to-date 2023 DMC payments unchanged at $1.27 billion
- USDA reduces dairy export forecast as ag trade deficit grows
- Ag producer sentiment brightens
- GDT index improves to start December
- October dairy products: More cheese
- In case you missed it
Year-to-date 2023 DMC payments unchanged at $1.27 billion
With the Dairy Margin Coverage (DMC) program margin reaching a 10-month high in October, small monthly indemnity payments left the overall program outlay virtually unchanged from the month before.
Read: October DMC margin hits 10-month high at $9.44 per cwt
The October DMC milk income over feed cost margin rose to $9.44 per hundredweight (cwt), limiting indemnity payments of just 6 cents per cwt to dairy operations enrolled in DMC at Tier I insured levels of $9 and above.
With revisions to the previous monthly report, 17,059 dairy operations are enrolled in the 2023 DMC program, representing about 74.5% of operations with established production history. January-October DMC payments averaged $74,453 per dairy operation enrolled in 2023, for a total of about $1.27 billion, based on latest enrollment data as of Dec. 4.
The report does not include enrollment in the Supplemental DMC program, and all 2023 DMC indemnity payments are subject to a 5.7% sequestration deduction.
The November DMC margin and potential indemnity payments will be announced on Dec. 29. Dairy margins were mixed during the first half of November but deteriorated over the second half of the month, according to Commodity & Ingredient Hedging LLC.
As of Dec. 5, the DMC decision tool projected November corn and dairy-quality alfalfa hay prices to dip, offsetting another increase in the price of soybean meal. With the U.S. all-milk price expected to hold at about $21.61 per cwt, the DMC margin would increase to $9.63 per cwt, above any indemnity payment trigger level.
USDA reduces dairy export forecast as ag trade deficit grows
The value of fiscal year (FY) 2024 (Oct. 1, 2023-Sept. 30, 2024) dairy product exports is expected to fall back to 2021 levels, based on the latest USDA quarterly Outlook for U.S. Agricultural Trade report, released Nov. 30.
The value of FY 2024 dairy product exports is forecast at $7.2 billion, down $200 million from the August forecast. If realized, FY 2024 dairy exports would be down from $9.09 billion in FY 2022 and $8.49 billion in FY 2023. The decline is attributed to decreased price competitiveness for U.S. exports of skim milk powder, whey, cheese and butter.
The forecast for FY 2024 U.S. dairy imports is $5.4 billion, up $100 million from the August forecast and above both FY 2023 ($5.28 billion) and FY 2022 ($4.6 billion). FY 2024 cheese imports are expected to hit $1.8 billion, unchanged from the previous forecast but up $110 million from FY 2023’s total and $210 million more than FY 2022. Higher domestic butter prices will also support demand for imported butter from Ireland and New Zealand, according to the report.
The November ag trade forecasts paints a cloudy picture for overall U.S. agricultural trade.
FY 2024 ag exports are now projected at $169.5 billion, down $2.5 billion from FY 2023. FY 2024 ag imports are forecast at $200 billion, up about $4.6 billion from FY 2023 and yielding an ag trade deficit of $30.5 billion. That’s nearly double the $16.7 billion trade deficit in FY 2023.
The U.S. ag trade balance was positive in 2021, with exports ($171.8 billion) topping imports ($163.3 billion).
Ag producer sentiment brightens
Short- and long-term economic outlooks of more agricultural producers brightened somewhat in November, according to the latest Purdue University/CME Group Ag Economy Barometer.
“Farmers’ expectations regarding financial performance have improved, with fewer producers expecting worse performance than a year ago," said James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture.
With a brighter outlook, there’s a potential change in conditions for larger farm investments, with producers citing improved cash flows and larger equipment dealer inventories.
Top concerns for the upcoming year include higher input costs, rising interest rates and lower crop and/or livestock prices.
The Ag Economy Barometer provides a monthly snapshot of farmer sentiment regarding the state of the agricultural economy. The survey collects responses from 400 producers whose annual market value of production is equal to or exceeds $500,000. Minimum targets by enterprise are as follows: 53% corn/soybeans, 14% wheat, 3% cotton, 19% beef cattle, 5% dairy and 6% hogs. Latest survey results, released Nov. 7, reflect ag producer outlooks as of Nov. 13-17.
GDT index improves to start December
A reflection of dairy product prices worldwide, the Global Dairy Trade (GDT) price index increased 1.6% in an auction held Dec. 5. Compared to the previous auction, prices were higher for most individual product categories, led by a 9.7% jump in the price for cheddar cheese. Others posting smaller price increases were butter, lactose, and skim and whole milk powders.
The GDT platform offers dairy products from several global companies: Fonterra (New Zealand), Darigold, Valley Milk and Dairy America (U.S.), Amul (India), Arla (Denmark), Arla Foods Ingredients (Denmark) and Polish Dairy (Poland). The next GDT auction is Dec. 19.
October dairy products: More cheese
October 2023 U.S. milk production was 0.5% lower than the same month a year earlier. How did that convert to dairy product output?
According to the USDA, total cheese output (excluding cottage cheese) was 1.19 billion pounds, 0.8% above October 2022. Italian-type cheese production totaled 506 million pounds, 1.4% above October 2022, while American-type cheese production totaled 474 million pounds, down 0.3%. Butter production was 161 million pounds, 0.9% below October 2022.
Production of dry milk products was down; output of dry whey and whey protein concentrate was up.
In case you missed it
- U.S. Rep. Glenn “GT” Thompson (R-Pennsylvania), chair of the House Ag Committee, announced he was diagnosed with prostate cancer.
