DAIRY MARKET REPORT VOLUME 27 | ISSUE 2
2/22/2023
OVERVIEW Milk prices and the Dairy Margin Coverage Program margin both broke four-month streaks of improvement in December, with DMC for the year ending with its lowest calendar-year margin since the current dairy safety net system began nearly a decade ago. U.S. dairy exports, meanwhile, in 2023 saw the third-highest percentage of U.S. milk solids production exported ever for the full year – a noteworthy performance, though still a pace that moderated from its record-setting first quarter export percentage. Stocks of most major dairy products continued to fall in December, as milk and milk solids production growth continues below that of demand growth.
COMMERCIAL USE OF DAIRY PRODUCTS Domestic commercial use of all cheese showed more than one percent year-over-year growth during the fourth quarter. Growth in domestic butter use approached 10 percent at the same time. Growth in overall domestic use was more balanced between the milkfat and skim solids
DOMESTIC COMMERCIAL USE
milk equivalent basis measurements during the quarter. Skim solids use likely includes relatively more low-value products, particularly those that are lactose-based, compared to milkfat use.
OCT-DEC 2023
OCT-DEC 2022
2022-2023 CHANGE
PERCENT CHANGE
(million pounds) Total Fluid Milk Products
11,081
11,138
-57
-0.5%
Yogurt
1,119
1,107
12
1.1%
Butter
613
560
52
9.4%
American-type Cheese
1,399
1,392
6
0.4%
All Other Cheese
2,035
1,997
38
1.9%
Total Cheese
3,434
3,389
45
1.3%
Dry Skim Milk
146
197
-52
-26.2%
All Products (milk equiv., milkfat basis)
57,473
56,543
930
1.6%
All Products (milk equiv., skim solids basis)
45,896
44,961
935
2.1%
All Products (milk equiv., total solids basis)
49,599
48,622
977
2.0%
U.S. DAIRY TRADE U.S. dairy exports during last year’s fourth quarter was second only to 2022’s record year for dairy exports in terms of percentage of U.S. milk solids production exported during any fourth calendar quarter. Fourth quarter 2023 exports moved 16.4 percent of U.S. milk solids production overseas, compared to 17.6 percent of 2022 fourth quarter solids production. Overall, calendar year 2023 ended up the third highest full year by the milk solids percentage exported measure. The year began with the highest ever first quarter by this measure, 16.7 percent, but then stumbled to sixth highest for the second quarter, followed by the fourth
U.S. DAIRY EXPORTS
highest third quarter. Moving up to the second highest fourth quarter therefore indicates steady progress toward regaining the top spot going forward, monthly, quarterly and annually. U.S. imports of dry dairy ingredient products, including whey protein concentrate, lactose, and whole milk powder, were below year-earlier levels during the fourth quarter of 2023. A notable exception was whey protein isolate, for which imports were 46 percent above a year earlier during the quarter.
OCT-DEC 2023
OCT-DEC 2022
2022-2023 CHANGE
PERCENT CHANGE
(metric tons) Butter
5,475
18,975
-13,501
-71%
Anhydrous Milk Fat/Butteroil
1,202
3,705
-2,503
-68%
American-type Cheese
13,586
20,684
-7,098
-34%
Cheddar Cheese
13,487
20,543
-7,056
-34%
All Other Cheese
97,253
89,551
7,702
9%
Total Cheese
110,839
110,235
604
1%
Dry Skim Milk
197,369
206,930
-9,561
-5%
Whole Milk Powder
5,272
8,005
-2,733
-34%
Dry Whey
44,711
60,818
-16,107
-26%
Whey Protein Concentrate/Isolate
58,900
55,815
3,084
6%
Lactose
114,476
110,936
3,540
3%
Percent of U.S. Milk Solids Exported
16.4%
17.6%
-1.2%
-7%
U.S. DAIRY IMPORTS
OCT-DEC 2023
OCT-DEC 2022
2022-2023 CHANGE
PERCENT CHANGE
(metric tons)
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Butter
14,971
13,252
1,720
13%
Cheese
55,279
51,009
4,270
8%
Dry Skim Milk
175
211
-36
-17%
MPC (all protein levels)
10,247
21,821
-11,574
-53%
Casein
14,333
24,618
-10,285
-42%
Percent of U.S. Milk Solids Imported
3.5%
3.9%
-0.4%
-10%
MILK PRODUCTION December U.S. milk production was reported preliminarily as 0.3 percent below December 2022 production, marking six consecutive months of lower milk production compared to the same months a year earlier. Production for all of 2023 was just 0.06 percent above 2022, making it the second consecutive year of scarcely any increase – calendar year
2022 production was 0.08 percent above 2021. The current period of stagnant milk production growth actually goes back six months earlier, as production during the second half of 2021 grew just 0.16 percent over the second half of 2020. Milk solids production was flat during the fourth quarter, but down by 0.6 percent for liquid milk during the period.
MILK PRODUCTION
OCT-DEC 2023
OCT-DEC 2022
2022-2023 CHANGE
PERCENT CHANGE
Cows (1,000 head)
9,360
9,404
-44
-0.5%
Per Cow (pounds)
5,936
5,944
-8
-0.1%
Total Milk (million pounds)
55,565
55,897
-332
-0.6%
Total Milk Solids (million pounds)
7,457
7,445
11
0.1%
13.4%
13.3%
0.1%
0.7%
Milk Solids Composition of Milk (percent)
DAIRY PRODUCTS American-type cheese other than cheddar production grew by 4.6 percent over a year ago during the fourth quarter of 2023. Italian cheese other than mozzerella production dropped 0.8 percent over the same period, while cheese
DAIRY PRODUCTS PRODUCTION
other than either American or Italian was up by 4.2 percent. Butter production grew modestly, while most dry dairy product production was significantly lower during the quarter. OCT-DEC 2023
OCT-DEC 2022
Cheese American Types
2022-2023 CHANGE
PERCENT CHANGE
(million pounds) 1,419
1,427
-8
-0.6%
Cheddar
980
1,007
-28
-2.7%
Italian Types
1,502
1,496
6
0.4%
Mozzarella
1,183
1,174
9
0.7%
Total Cheese
3,563
3,539
23
0.7%
524
522
3
0.6%
Nonfat Dry Milk
390
457
-68
-14.9%
Skim Milk Powder
149
178
-30
-16.6%
Dry Whey
212
222
-10
-4.6%
Whey Protein Concentrate
122
121
1
1.0%
Butter Dry Milk Products
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DAIRY PRODUCT INVENTORIES December ending cold storage stocks of American-type cheese rose over a month earlier, for the first time since the previous August. December ending stocks of other-type cheese continued the monthly fall they began in July last year, while butter stocks extended the steady monthly drop
DAIRY PRODUCT INVENTORIES
they initiated last June, during which time they have fallen by 46 percent. Dry skim milk stocks have fallen steadily since the previous February, and dry whey stocks have done so since the previous August.
DEC 2023
NOV 2023
DEC 2022
2022-2023 CHANGE
(million pounds) Butter
200
213
216
-8%
American Cheese
838
828
825
2%
Other Cheese
605
608
620
-2%
Dry Skim Milk
210
214
264
-20%
Dry Whey
69
71
70
0%
DAIRY PRODUCT AND FEDERAL ORDER CLASS PRICES The NDPSR prices for nonfat dry milk and dry whey continued in January to make the gradual, but steady improvements that they began late last summer, driven by corresponding changes in world prices for skim milk powder and dry whey. By contrast, cheddar cheese prices continued to make steady, more substantial drops over the same period. After peaking last fall above $3/lb, monthly butter prices seem to have settled in the low $2.60s range. As a result, January Class II and Class IV prices rose modestly from December, while Class III prices dropped more substantially. The January Consumer Price Index for all items, as well as those for all food and beverages, were all-time high levels, which kept them slightly above the 2 percent year-over-year range that they had been closing in on in recent months. Meanwhile, all the dairy-related CPIs (there are eight) were
DAIRY PRODUCT AND FEDERAL ORDER PRICES
lower in January than the highest respective levels they had attained during the recent inflationary episode, mostly in late 2022, and most were down year-over-year for January as well. The CPI for ice cream and related products was a nearexception, in that it attained all-time high levels continuously from August through December last year, but dropped in January to just below were it was in November, two months earlier. The CPI for butter, which had been the most volatile of all the dairy CPIs during 2022, is showing renewed volatility. It rose from 255.3 (base 1982-84=100) in January 2022 to 322.6 the following January. It then plunged to just below 300 three months later, then bounced around within eight points above 300 but then shot up to 317.4 this January. The recent behavior of the wholesale price of butter does not explain this sudden retail price increase.
JAN 2024
DEC 2023
NDPSR Dairy Product Prices
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JAN 2023
2023-2024 CHANGE
(per pound)
Butter
$2.629
$2.631
$2.460
$0.170
Cheddar Cheese
$1.523
$1.623
$1.977
-$0.454
40-Pound Blocks
$1.526
$1.639
$2.115
-$0.589
500-Pound Barrels
$1.490
$1.581
$1.823
-$0.333
Nonfat Dry Milk
$1.211
$1.192
$1.366
-$0.155
Dry Whey
$0.434
$0.417
$0.427
$0.007
DAIRY PRODUCT AND FEDERAL ORDER PRICES
JAN 2024
Federal Order Class Prices for Milk
DEC 2023
JAN 2023
2023-2024 CHANGE
(per hundredweight)
Class I Base
$18.48
$19.76
$22.41
-$3.93
Class II
$20.04
$19.88
$21.61
-$1.57
Class III
$15.17
$16.04
$19.43
-$4.26
Class IV
$19.39
$19.23
$20.01
-$0.62
Fluid Whole Milk (per gallon)
$3.958
$4.008
$4.204
-$0.246
Lowfat Fluid Milk (per gallon)
$3.650
$3.678
$3.817
-$0.167
Cheddar Cheese (per pound)
$5.724
$5.545
$5.946
-$0.222
Butter (per pound)
$4.659
$4.505
$4.882
-$0.223
Retail Dairy Product Prices
MILK AND FEED PRICES The December margin under the Dairy Margin Coverage (DMC) program bucked the trend, beginning last August, of improving milk prices and margins and slid back to $8.44/ cwt. This was a drop of $1.14/cwt from a month earlier, to match last September’s margin. The renewed margin weakness was due almost entirely to a $1.10/cwt fall in the December all-milk price from November. The December
DMC feed cost rose by 4 cents a hundredweight back to October’s level of $12.16/cwt of milk, with higher corn and premium alfalfa hay prices almost fully offset by a lower soybean meal price. The average margin for all months of 2023 was $6.70/cwt, the lowest average margin under both the DMC and its predecessor Margin Protection Program (MPP) during a calendar year.
NOV 2023
OCT 2023
NOV 2022
2022-2023 CHANGE
$20.60
$21.70
$24.50
-$3.90
Corn (per bushel)
$4.80
$4.66
$6.58
-$1.78
Soybean Meal (per ton)
$441
$464
$463
-$22
Premium Alfalfa Hay (per ton)
$275
$271
$327
-$52
Corn
$5.15
$5.00
$7.06
-$1.91
Soybean Meal
$3.24
$3.41
$3.40
-$0.16
Premium Alfalfa Hay
$3.77
$3.71
$4.48
-$0.71
DMC Feed Cost* (per cwt.)
$12.16
$12.12
$14.94
-$2.79
DMC Margin* (per cwt.)
$8.44
$9.58
$9.76
-$1.31
MILK AND FEED PRICES Producer Prices All Milk (per cwt.) Feed Prices
Feed Prices (per cwt of milk)
*DMC calculations are not revised
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LOOKING AHEAD In its February World Agricultural Supply and Demand (WASDE) report, USDA further reduced its estimate of calendar year 2024 milk production to 0.45 percent over 2023, on a leap-year adjusted, or daily, basis. This would also be just 0.59 percent more than milk production in calendar year 2021, which would be the smallest milk production percentage growth over a three-year span since 1986-1989. WASDE has been up and down in its forecasts of the U.S.
average all-milk price during all of 2024, but with a generally upward trend. Its February estimate was $20.95/cwt, $0.47/ cwt above 2023, but $0.60/cwt below where the futures markets were indicating at the time the February report was released. As of mid-February, the futures were indicating the DMC margin would average at least $4/cwt higher in 2024 than last year, and this outlook had been improving by the week.
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®. Peter Vitaliano, National Milk Producers Federation pvitaliano@nmpf.org www.nmpf.org
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The 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.