OVERVIEW
U.S. dairy exports posted a February record, 17.3 percent of U.S. milk solids production equivalent, even as domestic commercial use of milk in all products showed its first monthly drop since January 2023. The yearover-year deficit in U.S. milk production continued to grow, with February production down over a year ago by 1.3 percent, adjusted for leap year. For the last nine months, the U.S. milking cow herd has been smaller than a year earlier, with the contrast increasing each month, from a drop of 12,000 head year-over-year in June 2023 to an 89,000-head decline in February.
Monthly NDPSR and federal order Class prices showed mostly modest gains from February to March, while the U.S. average all-milk price rose by $0.50 per cwt from a month earlier to February’s $20.60 per cwt. The February DMC margin gained almost a dollar per hundredweight on this price move, to $9.44 per cwt, as a $0.46 per cwt drop in the DMC feed cost accompanied the higher price.
COMMERCIAL USE OF DAIRY PRODUCTS
Overall U.S. dairy consumption growth was basically stagnant during December 2023-February 2024, measured on a leap-year adjusted basis. Consumption was particularly weak for cheese, weighed down by
losses in American-types, and for yogurt. Losses in fluid milk were more moderate than in most recent periods. Butter, by contrast, grew by a low double-digit percentage.
*Adjusted for Leap Year
U.S. DAIRY TRADE
Following several months of volumes that fell short of previous years, U.S. dairy exports posted a strong showing in February. Exports were equivalent to 17.3 percent of U.S. milk solids production that month, a record for the month of February by this measure, which just edged out the prior February record from 2018. Particularly large sales volumes
for cheese and all products of the whey complex except lactose fueled the gains.
Recent patterns of year-over-year higher butter imports, together with significantly lower concentrated milk protein imports, continued during the December-February period.
MILK PRODUCTION
The year-over-year deficit in U.S. milk production continued to grow in February, with production down over a year ago by 1.3 percent, on a leap year-adjusted basis. Only seven of the 24 monthly-reporting states, representing just over one-quarter of the February production in those 24 states, increased their production over a year ago, by a collective 1.5 percent, again adjusted for leap year. Five of those 7 states were in the Corn Belt or the Upper Midwest.
The remaining 17 states lost 2 percent of their collective production, adjusted for leap year.
The U.S. milking cow herd has been dropping below a year earlier each month since last June. Meanwhile, milk and milk component production grew over a year earlier during December-February by rates varying from -0.9 percent for liquid milk, to flat, for total milk solids, and to +1.3 percent for milkfat.
DAIRY PRODUCTS
Total cheese production was slightly below a year earlier on a leap year-adjusted basis during December through February, as continued drops in American-type cheese, especially cheddar, more than offset higher production of other types. Butter production grew by more than 4 percent, drawn clearly by the product’s high price relative
to other products (see Dairy Product and Federal Order Prices, below). The fact that nonfat dry milk production was down signifiantly during the same period would suggest that butter production pulled heavily on cream from other product manufacturing, particularly fluid milk processing, in addition to raw milk to achieve this growth.
*Adjusted for Leap Year
DAIRY PRODUCT INVENTORIES
Monthly stocks of butter, American-type cheese, all other type cheese and dry skim milk show seasonal patterns, with peaks in the spring and troughs in the end-of-year holiday season. Within these patterns, the linear trends over the past four years have been flat for American-type cheese, declining for all other cheese and, to a slightly lesser extent,
for butter and dry skim milk. Stocks of the whey complex products are less obviously seasonal, but their linear trends have been flat for dry whey but increasing for whey protein concentrate and lactose through mid-2023 and then falling rapidly below that trend subsequently.
DAIRY PRODUCT AND FEDERAL ORDER CLASS PRICES
Monthly increases in the NDPSR dairy product prices were minimal to non-existent from February to March except for barrel cheese, which is having a somewhat extended and uncharacteristic moment of mostly positive price differentials to blocks. Class III and IV prices eaked out modest gains during this time as a result.
Retail prices dropped from February to March for all BLS-reported dairy products except processed cheese.
The consumer price indices for all items and for food and beverages reached new all-time highs well above 300 (1982-84=100). By contrast, all reported dairy CPIs have fallen in recent months and, except for butter, reached maximum levels that were still well below 300 during their inflationary spurt that occurred mostly in 2022. The March dairy CPIs were down by 1.6 to 5.7 percent from those respective maximum levels.
MILK AND FEED PRICES
The February margin under the Dairy Margin Coverage (DMC) program rose by $0.96/cwt from a month earlier to $9.44/cwt, triggering a payment of $0.06/cwt for coverage at the $9.50/cwt maximum Tier 1 level. The rise was due
almost equally to a $0.50/cwt increase in the February U.S. average All-milk price, to $20.60/cwt, and a $0.46/cwt drop in the DMC feed cost formula, mostly as a result of a lower corn price.
*DMC calculations are not revised
LOOKING AHEAD
USDA continues to lower its monthly forecasts of 2024 annual U.S. milk production in its April World Agricultural Supply and Demand Estimates (WASDE) report, this time by a full one billion pounds, to 226.3 billion pounds. This is less than annual production in both 2023 and 2022, even without adjustment for this leap year. Adjusting for leap year, this would be -0.2 percent less than 2021 national annual production. This small a change in annual milk production over a three-year interval would be extremely unusual for the modern dairy industry. During the almost half-century since 1975, U.S. total annual milk production grew from three years earlier by an average rate of 4.3 percent, with a minimum of 0.5 percent and a maximum of 9.9 percent.
Compared to its March estimates, the April WASDE report raised its price forecast for butter during 2024 from a month earlier, “on observed prices and continued strength in demand,” while lowering its forecasts for this year’s annual prices of cheddar cheese, nonfat dry milk and dry
whey. Accordingly, this widened the April WASDE forecast of the difference between annual Class III and Class IV prices, from just under $3 per cwt to $4.20 per cwt, indicating that Class III milk will be heavily pooled and Class IV milk heavily depooled in federal orders again this year.
The April WASDE forecast of the 2024 average U.S. national all-milk price was reduced from a month earlier by $0.35 per cwt to $20.90 per cwt, which was just $0.50 per cwt higher than its April estimate of the 2024 average Class IV price. At the same time, the CME futures were indicating a 2024 average U.S. all-milk price of $21.20 per cwt, also just a bit more than $0.50 per cwt higher than the futures were projecting the 2024 average Class IV price.
Mid-April futures-based forecasts continued to indicate that DMC margins might drop modestly below the $9.50/cwt maximum Tier 1 coverage level during the spring months but would rise above this level during the remainder of the current calendar year.
Dairy Management Inc.™ and state, regional, and international organizations work together to drive demand for dairy products on behalf of America’s dairy farmers, through the programs of the American Dairy Association®, the National Dairy Council ® , and the U.S. Dairy Export Council ®
PeterThe National Milk Producers Federation (NMPF) develops and carries out policies that advance dairy producers and the cooperatives they own. NMPF’s member cooperatives produce more than two-thirds of U.S. milk, making NMPF dairy’s voice on Capitol Hill and with government agencies.