In W44 in the dairy landscape, in its Oct-23 report, the United States Department of Agriculture (USDA) indicated that the United States (US) average milk price surged to USD 21 per hundredweight (cwt) in Sep-23, the highest value since Mar-23. This represents an increase of USD 1.30 compared to Aug-23 but still USD 3.10/cwt lower than the USD 24.10/cwt registered in Sep-22. Across all 24 major dairy states, Sep-23 prices exceeded Aug-23 levels, with USD 1.90/cwt to USD 2/cwt increases in Georgia, Florida, and Virginia. Iowa and Wisconsin showed the smallest month-on-month (MoM) gains at USD 0.60/cwt. States with high Federal Milk Marketing Order (FMMO) Class I fluid milk utilization reported the highest monthly prices, like Florida at USD 24.70/cwt, and Georgia and Virginia at USD 24.20/cwt. Iowa, Kansas, New Mexico, and Wisconsin had monthly price averages below USD 20/cwt.
Furthermore, the Dairy Margin Coverage (DMC) total feed cost for Sep-23 was USD 12.56/cwt of milk sold, a drop of USD 0.68 compared to Aug-23. This decline was attributed to reduced corn prices at USD 5.21 per bushel (-USD 0.52 MoM) and soybean meal prices at USD 411.07 per metric ton or mt(-USD 27.73 MoM). These reductions offset an increase in the average price for dairy-quality alfalfa hay to USD 5.21/bushel (+USD 6 MoM). At USD 8.44/cwt, DMC margin triggers for Tier I indemnity payments were set at USD 8.50/cwt, USD 9/cwt, and USD 9.50/cwt coverage levels. Payments ranged from USD 0.06/cwt to USD 1.06/cwt, subject to a 5.7% sequestration deduction. Experts projected that milk protected at the USD 9.50/cwt level is estimated to receive indemnity payments of about USD 789 for each 1 million pounds (lb) enrolled.
China, a paramount global importer of dairy products, significantly influences international prices by constituting over a quarter of the world's dairy purchases. However, the Chinese government has prioritized achieving self-sufficiency in dairy production. China's milk production has tripled since 2002, with an astounding 30% increase in the past five years, reaching 39.2 million metric tons (mmt) in 2022, and is expected to surpass 41 mmt by the end of 2023. Notably, China's self-sufficiency in milk now stands at a robust 80%, outpacing countries like Spain. This growth is attributed to the government's proactive promotion of large-scale dairy farming, substantial investments in feed supplies, particularly corn, and genetic enhancements that significantly boost milk production per cow. China's dairy sector is also committed to sustainability, pledging to achieve carbon neutrality across the entire production chain by 2050, aligning with global environmental goals.
Cheese demand is trending upward in China, especially in the southern and eastern regions. However, while the northern region of China remains a hub for dairy production, the southern and eastern regions concentrate on consumption. Consequently, the industry faces the challenge of maintaining efficient logistics and supply chains between these regions. Since domestic cheese production is limited, China imports around 150 thousand mt of the product annually, primarily sourced from New Zealand (70% market share), Australia, Italy, and the US. Spain is poised to capitalize on this rising demand by significantly increasing its cheese deliveries to the Chinese market.
Lastly, Peru’s evaporated milk exports reached 11.99 thousand mt, valued at USD 23.14 million in the first nine months of 2023. This represents a 7.5% increase in volume and a 22% rise in value compared to the same period in 2022. The shipments were primarily destined for Chile with USD 6.61 million, the Dominican Republic with USD 5.34 million, Bolivia with USD 2.98 million, the Bahamas with USD 1.88 million, the US with USD 1.24 million, and Puerto Rico with USD 1.23 million.
