2023 unlikely to be as kind to milk producers as 2022

Bob Cropp

November milk production was 1.3% higher than a year ago, the fourth straight month of production more than 1% higher than a year ago. Milk cow numbers increased from January to May by 52,000, then declined from June to August by 6,000 only to increase again by 7,000 September to November.

November cows were 38,000 above a year ago, an increase of 0.4%. Milk per cow in November was 0.9% higher than a year ago. Milk production for the year will be about 0.3% higher than 2021 due to the average number of cows down 0.4% and milk per cow 0.7% higher.

November milk production compared to a year ago for the five leading dairy states was as follow: California down 0.5% due to 4,000 more cows but lower milk per cow; Wisconsin up 1.3% due to 6,000 fewer cows but more milk per cow; Idaho up 2.3% due to 12,000 more cows and more milk per cow; Texas up 6.3% due to 30,000 more cows and more milk per cow; and New York up 3.2% due to 4,000 fewer cows but more milk per cow.

Milk production was up 1.6% in Michigan due to 4,000 fewer cows but more milk per cow. Milk production in Minnesota was up just 0.9% due to 7,000 fewer cows but more milk per cow. Milk production in Pennsylvania was unchanged with more milk per cow offsetting 3,000 fewer cows.

States reporting relatively high increases in milk production were Georgia 13.1% with 10,000 more cows, South Dakota 10.8% with 19,000 more cows, Iowa 7.1% with 14,000 more cows and Kansas 4.9% with 7,000 more cows. But two states experienced relatively large decreases in milk production, Florida 10.8% with 11,000 fewer cows and New Mexico 4.3% with 13,000 fewer cows.

Production exerts downward pressure on milk prices

Stronger milk production has put some downward pressure on milk prices. December Class III will be near $20.50 compared to $21.01 for November. December Class IV will be near $20.20 compared to $23.30 for November. Dairy product prices have weakened.

Cheddar barrels averaged $1.9454 per pound for November but have weakened in December to now $1.735. Forty-pound cheddar blocks averaged $2.1186 per pound for November, have ranged in from $2.06 to $2.1125 but are now $2.00.

Dry whey has been mostly $0.44 to $0.45 per pound but is now $0.41. Butter averaged $2.8634 per pound for November, was $2.90 early December and is now $2.700. Nonfat dry milk averaged $1.4056 per pound for November and is now $1.36.

2022 good year for milk prices

It has been a good year for milk prices. Class III will average near $21.95 compared to $17.08 for 2021, an increase of $4.87. Class IV will average near $24.50 compared to $16.09 for 2021, an increase of $8.41. The forecast for 2023 is still for lower milk prices. USDA has forecasted the Class III price to average $19.80, $2.15 lower than 2022 and Class IV to average $20.10, $4.40 lower than 2021. We could easily see Class III dropping to the $18’s first half of the year and getting back to the $19’s for the second half. But so much can change as we move through the year.

Modest increase in cow numbers predicted

Milk production is likely to be higher in 2023. Normally dairy producers respond to higher milk prices by expanding the herd and feeding for more milk per cow. But feed prices will remain high and lower milk prices in 2023 with tighten margins.

USDA is forecasting a very modest increase in the average number of milk cows, just 10,000 more, an increase of 0.1%. Milk per cow is forecasted to increase by 1.0% resulting in an increase in total milk production of 1.1%. But cow numbers could very well increase by more than this milk per cow could be higher.

Exports a bright spot in 2022

Dairy exports have been a positive factor for milk prices in 2022. The latest export data showed October exports on a milk solids equivalent basis was 9% higher than a year ago. This marked the seventh consecutive month of growth.

Exports of nonfat dry milk/skim milk powder were up 10%, dry whey up 17%, butterfat up 43% and cheese up 4%. Cheese exports have now increased above year ago levels for sixteen straight months. Except for butter U.S. dairy product prices have been competitive on the world market.

In addition, milk production in Oceania and Western Europe has been lower. World prices have weakened but so have U.S. prices keeping U.S. prices competitive. But milk production in Western Europe and New Zealand is starting to increase. USDA is still forecasting some increase in dairy exports for 2023.

With still the possibility of a recession in 2023 there remains uncertainty as to the growth in domestic milk and dairy product sales. So, it will be interesting see how milk prices turn out in 2023. As of now it looks like a good year for dairy producers but not as good as 2022.

Bob Cropp

Cropp is Professor Emeritus at the University of Wisconsin Cooperative Extension, University of Wisconsin-Madison.