The USDA milk production growth forecast for 2022 was unchanged from November in its December WASDE report. Milk output is expected to be up 0.3% YOY at 103bn kgs in 2022 after a 1.3% YOY lift in 2021. Milk production was projected to increase 1.1% in 2023 compared to 2022, to 104.1bn kgs. For 2023, dairy cow numbers were raised along with expectations for higher average yields.

Forecasts for butter and cheese prices were raised for 2022 on recent price strength and expectations of continuing improvement in demand. However, NFDM and dry whey prices were unchanged. Forecasts for butter and cheese prices were raised for 2023, but NFDM and dry whey prices lowered on increased competition on global markets. The 2022 all-milk price forecast was increased from the prior month to US$0.505/l, up from US$0.368/l in 2021 and US$0.361/l in 2020. The 2023 all-milk price is expected to decline 11.5% YOY to US$0.447/l.

In the same report, the USDA left most of its oilseed and grain output and consumption estimates unchanged. Matching consensus trader expectations before the report was released, markets snoozed as historically there have been relatively few surprises from the USDA. We currently project national MPP milk margins to decline 35% by next June from their Oct-22 peak.