Liquid milk production grew 1.7% in July. While the size of the milking herd grew 1.9%, heat stress and wildfire smoke contributed to a slight decrease in milk output per cow.
Turning toward markets, dairy ingredients are showing signs of strength. Nonfat dry milk prices rose into the $2.10s in late September as domestic use rose and supply remained limited. Dry whey prices are elevated too as more of the whey stream heads into whey protein concentrates. Conversely, even as butter is experiencing healthy domestic demand, growth in production volumes has outpaced domestic use. Cheese prices are also under pressure, feeling the effects of wavering consumer confidence as quick service restaurant foot traffic falls and retail sales ease. Still, exports continue to see double-digit growth, helping maintain some market balance.
For producers, DMC margins declined to $9.93/cwt in July as feed costs rose. Signs of increased economic pressure on producers are growing – feed costs are expected to rise through the end of the year, elevated diesel prices are increasing hauling charges, and borrowing costs are likely to rise due to the increase in bond markets and interest rates.
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