Current 2024 US Dairy Outlook

Jason Hartschuh, Extension Field Specialist, Dairy Management and Precision Livestock, Ohio State University Extension

With the first month of 2024 coming to a completion, hopefully you have had time to review your 2023 profit and losses to prepare your farm for 2024. The U.S. all-milk price for 2023 will be about $20.60/cwt, only the fourth time in 20 years that the all-milk price was over $20/cwt. Unfortunately, the inflation-adjusted milk price was also the fourth lowest in the past 20 years, leading to record low milk-to-feed margins and record high dairy margin coverage (DMC) payments. The milk to feed margin in the DMC program was below the $4/cwt coverage level for 2 months in 2023. The cull cow market though was a bright spot for 2023, with the last part of the year having cull cow prices above $100/cwt. While each farm is different, on average dairy farms will have positive profits per cow for 2023.   

2024 promises to be its own interesting year for dairy farmers. Current projections are for cow numbers to be about 9.35 million head, slightly lower than 2023 but about 300 lb/cow more milk.  The January USDA dairy forecast has the all-milk price average for the year slightly below 2023 at $20/cwt. The cull cow and bull calf market should stay strong in 2024, with the average fed cattle market prices projected to be 2% higher in 2024 than it was in 2023. Feed costs are also projected to be lower in 2024. The lower average feed cost though will also lower DMC payments for 2024. The current projection is for the milk-to-feed margin for 2024 to be $10.70/cwt, with at least 2 months below the $9.50 margin. When DMC coverage sign-up opens for 2024, even with the higher projected margins covering the maximum amount of milk, a $9.50 margin in tier one will still be a good risk management strategy. There are a lot of unknowns in both the milk and feed markets; your grain farming neighbors are hoping for corn and soybean prices to go up, which will in turn raise dairy feed costs. While the DMC margin forecast shows a more profitable year for dairy farms than 2023, many farms grow the majority of their feeds, and the projected corn production cost is only about $31/acre lower than it was in 2023. With crop input costs not seeing the same reductions as market prices, some producers are going to find 2024 to be a very slim margin year.

Domestic consumption of dairy products continues to be a bright spot, especially for butter consumption. Domestic demand is shown in Figure 1. While early 2023 fat equivalent milk was below the trend line, the end of 2023 consumption was back to a trend line increase.  The strong demand for butter and milk fat continues to be reflected in the projected Class IV milk price being above Class III. The projected Class IV 2024 forecast is $19.35/cwt, while Class III is only $16.10/cwt. The all-milk price is based on Class III and Class IV milk’s manufactured commodities; in Federal Order 33, approximately 23% of the milk price is based on Class IV milk. This will lead to statistically uniform prices during much of 2024 for Federal Order 33 slightly below Class IV prices. When you work on your 2024 budgets, be sure to consider your actual milk fat and protein production; statistically uniform milk has a fat content of 3.5%, while the average fat content in Federal Order 33 is 4.1%. These additional pounds of milk fat provide a great value, adding about $1.50/cwt to the statistically uniform price for farmers that are producing the average amount of fat in Federal Order 33.

A graph of milk pricesDescription automatically generatedFigure 1. 

The export market is expected to grow in 2024 with higher levels of cheese, butterfat products, and whey products. Figure 2 shows the total volume of U.S. dairy exports for 2022 and 2023; total exports are expected to grow by 0.7% in 2024 compared to 2023. Of the 5 major dairy-exporting countries, only the United States and Australia are projected to see growth in their exports. Total milk production is expected to decline in Argentina, New Zealand, and the European Union. U.S. milk protein, whey, and non-fat dry milk are very competitive currently on the world market, with butter prices falling between EU and New Zealand prices.   

 Figure 2. U.S. Dairy exports for 2022 and 2023, from the U.S. Dairy Export Council.

Even though milk prices are projected to be slightly lower in 2024, there are still opportunities for dairy farm profitability. Using marketing tools to keep the lower feed prices a reality for your purchased feeds, even if grain prices increase, could benefit your operation. Also using tools when profitable Class III or Class IV milk futures are available can help protect your milk check. Figure 3 shows the current milk futures for the year. Both classes are projected to increase during 2024, but Class IV is a much smaller increase. Class III milk futures increase by over $3.00/cwt by the fourth quarter of 2024.

 Figure 3.