Dairy Market Report - July 2024

DAIRY MARKET REPORT VOLUME 27 | ISSUE 7

7/23/2024

OVERVIEW Fluid milk, yogurt, butter and other than American-type cheese all posted positive annual growth in domestic commercial use during March-May. Significant export growth was posted by all types of cheese and by whey protein concentrate and isolate. However, aggregate domestic use as well as total exports are relatively flat to lower during the period.

U.S. milk production is on the threshold of an entire year of consecutive months below year-ago levels.

However, continued increases in average component composition of producer milk has enabled U.S. dairy farmers to supply available demand for dairy products while keeping inventories of key products relatively stable.

Moreover, the overall supply-demand balance in the industry has moved dairy product and dairy farm prices and margins over feed costs higher in recent months without yet significantly reversing the gradual reduction in retail dairy product prices that has occurred over the past year.

COMMERCIAL USE OF DAIRY PRODUCTS Total U.S. fluid milk sales continued to have a strong year as of May, with three out of those five months showing positive year-over-year gains. Other products showing positive growth in domestic use during March-May

DOMESTIC COMMERCIAL USE

include yogurt, butter and other than American-type cheese. In the aggregate, however, total domestic use on milk equivalent bases was flat to slightly down over a year ago during the period.

MAR-MAY 2024

MAR-MAY 2023

2023-2024 CHANGE

PERCENT CHANGE

(million pounds) Total Fluid Milk Products

10,798

10,745

53

0.5%

Yogurt

1,255

1,191

65

5.4%

Butter

561

541

20

3.7%

American-type Cheese

1,391

1,420

-29

-2.0%

All Other Cheese

2,090

1,947

144

7.4%

Total Cheese

3,482

3,367

115

3.4%

Dry Skim Milk

144

279

-135

-48.3%

All Products (milk equiv., milkfat basis)

55,235

55,236

-1

0.0%

All Products (milk equiv., skim solids basis)

46,440

46,618

-178

-0.4%

All Products (milk equiv., total solids basis)

49,237

49,317

-80

-0.2%

U.S. DAIRY TRADE Total cheese exports contined to achieve historically high levels in May, the fourth consecutive month to exceed the previous monthly record of 8.3 percent of total U.S. cheese production exported set in June 2022. Calendar year 2022 still stands as a high-water mark for total U.S. dairy exports. The last nine months of that year each set records for their respective calendar month for percentages of U.S. milk solids production exported. Apart from cheese, exports of other products have struggled in recent months,

U.S. DAIRY EXPORTS

with the notable exception of whey protein concentrate and isolate, as demand in many dairy-importing countries has weakened and some, particularly China, are making concerted strides to becoming more self-sufficient in dairy production.

Casein imports increased year-over-year during March-May, the first time in more than a year they have done so during three consecutive months.

MAR-MAY 2024

MAR-MAY 2023

2023-2024 CHANGE

PERCENT CHANGE

(metric tons) Butter

7,094

8,823

-1,730

-20%

Anhydrous Milk Fat/Butteroil

1,852

1,682

170

10%

American-type Cheese

25,651

18,541

7,110

38%

Cheddar Cheese

25,505

18,437

7,069

38%

All Other Cheese

118,671

92,664

26,007

28%

Total Cheese

144,321

111,205

33,117

30%

Dry Skim Milk

189,370

224,265

-34,894

-16%

Whole Milk Powder

6,799

7,995

-1,196

-15%

Dry Whey

48,289

52,900

-4,611

-9%

Whey Protein Concentrate/Isolate

65,842

58,437

7,405

13%

Lactose

103,365

118,706

-15,341

-13%

Percent of U.S. Milk Solids Exported

16.4%

17.0%

-0.6%

-4%

U.S. DAIRY IMPORTS

MAR-MAY 2024

MAR-MAY 2023

2023-2024 CHANGE

PERCENT CHANGE

(metric tons)

2

Butter

16,679

15,720

959

6%

Cheese

52,134

45,668

6,466

14%

Dry Skim Milk

161

341

-181

-53%

MPC (all protein levels)

16,683

9,435

7,248

77%

Casein

15,859

14,395

1,464

10%

Percent of U.S. Milk Solids Imported

3.7%

3.1%

0.5%

17%

MILK PRODUCTION USDA preliminarily reported May U.S. milk production at 0.9 percent below May 2023 production, the eleventh consecutive month of below year-ago milk production. At the state level, only 7 of the 24 states for which monthly milk production is reported have increased production in May, only 2 of which, Florida and South Dakota, have done

so by more than 2 percent. The rapid growth in the milk solids content of raw milk in the United States over the last few years has allowed U.S. dairy farms to supply milk solids sufficient to meet total demand for dairy products without producing as much liquid milk as would have been required in prior years.

MAR-MAY 2024

MAR-MAY 2023

2023-2024 CHANGE

PERCENT CHANGE

Cows (1,000 head)

9,348

9,422

-74

-0.8%

Per Cow (pounds)

6,253

6,248

5

0.1%

Total Milk (million pounds)

58,456

58,867

-411

-0.7%

Total Milk Solids (million pounds)

7,777

7,743

33

0.4%

Total Skim Milk Solids (million pounds)

5,304

5,318

-14

-0.3%

Total Milkfat (million pounds)

2,473

2,425

47

1.9%

Milk Solids Composition of Milk (percent)

13.3%

13.2%

0.1%

1.1%

Skim Solids Composition of Milk (percent)

9.1%

9.0%

0.0%

0.4%

Milkfat Composition of Milk (percent)

4.2%

4.1%

0.1%

2.7%

MILK PRODUCTION Milk Production

DAIRY PRODUCTS Total cheese production was again essentially stable from a year ago during March-May, while changes in Americantype and Italian-type cheese production became even

DAIRY PRODUCTS PRODUCTION

more divergent. Dry product production was all lower for the major types, especially for dry skim milk products.

MAR-MAY 2024

MAR-MAY 2023

Cheese American Types

2023-2024 CHANGE

PERCENT CHANGE

(million pounds) 1,445

1,515

-70

-4.6%

Cheddar

987

1,072

-85

-8.0%

Italian Types

1,529

1,455

74

5.1%

Mozzarella

1,217

1,140

77

6.8%

Total Cheese

3,625

3,594

31

0.9%

622

600

23

3.8%

Nonfat Dry Milk

529

604

-75

-12.5%

Skim Milk Powder

106

141

-35

-24.8%

Dry Whey

238

239

-1

-0.4%

Whey Protein Concentrate

126

129

-3

-2.3%

Butter Dry Milk Products

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DAIRY PRODUCT INVENTORIES Seasonal peaks in butter inventories occurred during May or June in recent years. May inventories this year were above the peak levels reached in 2022 and 2023 and may be this year’s peak as well. Total cheese inventories at the end of

DAIRY PRODUCT INVENTORIES

May were essentially unchanged from the month before, and those for dry skim milk, dry whey and whey protein concentrate were not significantly changed for the month.

MAY 2024

APR 2024

MAY 2023

2023-2024 CHANGE

(million pounds) Butter

380

362

368

3%

American Cheese

821

826

857

-4%

Other Cheese

622

618

641

-3%

Dry Skim Milk

293

288

307

-4%

Dry Whey

64

73

78

-17%

Whey Protein Concentrate

55

52

90

-39%

DAIRY PRODUCT AND FEDERAL ORDER CLASS PRICES Stronger cheese prices continued to boost the Class III price by another $1.32/cwt from May to June, following the $3.05/cwt monthly jump the month before, narrowing the Class IV – Class III gap further down to $1.21/cwt in June.

All the monthly product prices used in the federal order component price formulas posted gains for the month, as did all the Class prices.

The Consumer Price Indices (CPIs), which are indexed versions of actual prices, for all items and for all food and beverages again achieved record levels in June, while the

DAIRY PRODUCT AND FEDERAL ORDER PRICES

June CPI for all dairy products was 1.5 percent below the record level it achieved in early 2023. The more specific CPIs for fluid milk and cheese in June were below the record levels they reached in late 2022 by 3.6 percent and 4.0 percent, respectively. The more widely reported yearover-year (YOY) inflation rates for all items, for all food and beverages, and for all dairy products were 3 percent, 2.2 percent and -0.1 percent, respectively, in June. The corresponding YOY percentages for fluid milk and cheese were, respectively, -1 percent and -2.1 percent.

JUN 2024

MAY 2024

NDPSR Dairy Product Prices

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JUN 2023

2023-2024 CHANGE

(per pound)

Butter

$3.098

$3.032

$2.451

$0.647

Cheddar Cheese

$1.996

$1.871

$1.572

$0.424

40-Pound Blocks

$1.915

$1.806

$1.557

$0.359

500-Pound Barrels

$2.035

$1.895

$1.556

$0.478

Nonfat Dry Milk

$1.177

$1.142

$1.167

$0.010

Dry Whey

$0.425

$0.411

$0.322

$0.103

DAIRY PRODUCT AND FEDERAL ORDER PRICES

JUN 2024

Federal Order Class Prices for Milk

MAY 2024

JUN 2023

2023-2024 CHANGE

(per hundredweight)

Class I Base

$20.08

$18.46

$18.01

$2.07

Class II

$21.60

$21.50

$18.83

$2.77

Class III

$19.87

$18.55

$14.91

$4.96

Class IV

$21.08

$20.50

$18.26

$2.82

Fluid Whole Milk (per gallon)

$3.956

$3.864

$3.985

-$0.029

Lowfat Fluid Milk (per gallon)

$3.703

$3.543

$3.682

$0.021

Cheddar Cheese (per pound)

$5.537

$5.551

$5.681

-$0.144

Butter (per pound)

$4.696

$4.589

$4.452

$0.244

Retail Dairy Product Prices

MILK AND FEED PRICES Feed prices in May sharply reversed a generally falling trend of recent months to gain $0.58/cwt on a milk basis from a month before, as measured by the DMC feed cost formula.

All three formula components contributed measurably to the boost. But May milk prices broke even more decisively

out of a very stable level during the three prior months to gain $1.50/cwt from April, to $22/cwt, boosting the DMC margin by $0.92/cwt from the prior month to $10.52/cwt, well above the $9.50/cwt maximum coverage level for payments.

MAY 2024

APR 2024

MAY 2023

2023-2024 CHANGE

$22.00

$20.50

$19.30

$2.70

Corn (per bushel)

$4.51

$4.39

$6.54

-$2.03

Soybean Meal (per ton)

$389

$358

$424

-$35

Premium Alfalfa Hay (per ton)

$276

$260

$317

-$41

Corn

$4.84

$4.71

$7.02

-$2.18

Soybean Meal

$2.86

$2.63

$3.11

-$0.26

Premium Alfalfa Hay

$3.78

$3.56

$4.34

-$0.56

DMC Feed Cost* (per cwt.)

$11.48

$10.90

$14.47

-$3.00

DMC Margin* (per cwt.)

$10.52

$9.60

$4.83

$5.70

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 Every month since it began reporting them in its World Agricultural Supply and Demand Estimates (WASDE) reports in May 2023, USDA either lowered, or didn’t change, its monthly forecasts of calendar year 2024 U.S. milk production – until this past May. Two months later, it resumed dropping them and now predicts milk production this year will be only 0.3 percent greater than production in 2021, three years earlier.

Before milk production plateaued following 2021, it grew at an average rate of 1.5 percent per year since 1995. By contrast, total U.S. milk solids production is estimated to grow by 3.3 percent from 2021 to 2024, while it increased by 1.7 percent per year between 1995 and 2021. USDA also lowered its 2025 milk production forecast from last month’s estimate. This is a continued indication that milk

solids production has become a more accurate indicator of the supply of milk available to meet total demand for U.S.produced dairy products than is liquid producer milk.

The July WASDE also raised its forecasts for all dairyrelated prices it reports, including all four NDPSR-reported product prices, the Class III, Class IV, and all milk prices.

From June, USDA raised its 2024 all milk price forecast by $0.65/cwt to $22.25/cwt and for 2025 by $1.00/cwt to $22.50/cwt.

Available forecasts in mid-July indicate the DMC margin will average between $11.60/cwt and $11.70/cwt during 2024. This would be highest average margin for a calendar year under the DMC program and the second highest since margin protection became the basic federal safety net program for dairy in 2014.

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.