DAIRY MARKET REPORT
VOLUME 27 | ISSUE 5
OVERVIEW
5/22/2024
U.S. cheese exports posted a 20 percent year-over-year increase during 2024’s first quarter, a bright spot in an otherwise soft picture for domestic and overseas U.S. dairy products. About 8.1 percent of total domestic cheese production was exported during the first quarter – a very strong number considering that the highest percentage of U.S. cheese production exported on an annual basis has been 7.1 percent. Growing cheese sales abroad is a key part of growing overall U.S. dairy exports.
Domestic cheese prices are showing strength following a year of mostly weak performance, partly due to this recent export strength. Meanwhile, butter prices have been mostly closer to $3/lb. than to $2/lb. since the beginning of 2022.
Feed prices have moderated considerably over the past year, as measured by the Dairy Margin Coverage feed cost formula. Coupled with slowly improving milk prices, they have increased the DMC margin to around the $9.50/cwt maximum Tier 1 coverage level under the program, with further increases likely.
COMMERCIAL USE OF DAIRY PRODUCTS
Dairy consumption in the U.S. domestic market was weak during the first quarter of this year. The aggregate measures were all down over a year ago, adjusting for the leap year, as were the major product categories, with the exception of butter and yogurt. Continued weakness in food service consumption is a key factor causing these results.
for Leap Year
U.S. DAIRY TRADE
U.S. dairy exports slipped back in March from the very strong results the month before. March exports were equivalent to 16.6 percent of U.S. milk solids production, the sixth highest year by this measure. Particularly large export volume losses were posted for dry skim milks and lactose, while cheese and whey protein concentrate and isolate made strong gains that partly offset losses.
Year-over-year drops in concentrated milk protein imports were smaller during the first quarter of 2024 compared to the running three months just prior. But butter import growth was smaller during first quarter than during the three months just before.
*Adjusted for Leap Year
U.S. DAIRY IMPORTS
*Adjusted for Leap Year
MILK PRODUCTION
In its March milk production report, USDA’s National Agricultural Statistics Service (NASS) revised upward its U.S. milk production and milk cow numbers for January and February. However, its March production number still reflects stalled production growth, showing a 0.7 percent drop from March 2023. The March U.S. dairy milk cow herd was 85,000 head lower than a year earlier, while
milk production per cow was up a quarter of a percent in March from a year ago. On a leap year-adjusted basis, the volume of milkfat produced on U.S. dairy farms during this year’s first quarter was 1.3 percent above the first quarter a year earlier, despite a one percent drop in the liquid milk containing that milkfat over the same period.
DAIRY PRODUCTS
Total cheese production was 1 percent lower than a year earlier during the first quarter this year, adjusted for leap year. The gap between the growth of Italian-type varieties and declines of American-types widened considerably during the quarter compared with the prior three-month
period. Butter, dry whey and whey protein concentrate production showed modest gains, while dry skim milk products fell by double-digit percentages during the quarter.
*Adjusted for Leap Year
DAIRY PRODUCT INVENTORIES
Stocks of total cheese in cold storage were essentially unchanged from February to March, as American-type losses of about 4 million pounds were slightly more than offset by about 6 million additional pounds of other types.
Butter stocks seasonally gained 19 million pounds during the period, which compares with a 14 million average gain from February to March during the five prior years. Dry skim milk and dry whey inventories continued to increase in March.
DAIRY PRODUCT AND FEDERAL ORDER CLASS PRICES
The rebound in spot market cheese prices that took place during the latter part of April was reflected only to a small extent in the weekly NDPSR surveys at the end of the month and not at all in the April monthly federal order cheese prices. However, if the price rally continues, as the futures strongly suggest, the monthly cheese prices will show a very large increase in May. The other products also showed relatively small changes in April, as did Class II and Class IV prices. Class III prices showed a relatively larger change, downward, on lower cheese and higher butter prices.
Yogurt and ice cream retail prices hit their highest levels ever in April, but other dairy products tracked by the U.S. Bureau of Labor Statistics remain below their highest levels of recent years. Retail butter prices have made larger than average monthly moves, in both directions, in 2024, while the average retail price of natural cheddar cheese dropped substantially in April from the month before.
Federal Order Class Prices for Milk (per
Retail Dairy Product Prices
MILK AND FEED PRICES
The DMC margin rose by $0.21/cwt from February to March to $9.65/cwt, putting it just above the maximum $9.50/cwt maximum Tier 1 coverage level. The March All-Milk price rose by $0.10/cwt to $20.70/cwt, and the March DMC feed cost calculation dropped by $0.11/cwt, almost entirely on a $7/ ton lower premium alfalfa hay price.
*DMC calculations are not revised
LOOKING AHEAD
After a year of maintaining or lowering its monthly forecasts of 2024 annual U.S. milk production in its World Agricultural Supply and Demand Estimates (WASDE) report, USDA raised its May estimate back up to its March number of 227.3 billion pounds. As it does each May, WASDE began reporting its estimates for the coming year, with a forecast of 229.3 billion pounds for calendar year 2025, a gain on 0.9 percent over its current 2024 estimate.
The May WASDE product price forecasts for 2025 are well below where the futures were settling at the same time,
except for a bullish $2.915/lb. forecast for butter, $0.19/ lb. above the futures. May forecasts of the 2024 and 2025 Class III, Class IV and U.S. average All-milk price were similarly understated.
Mid-May futures-based forecasts indicated that DMC margins might drop briefly and modestly below the $9.50/ cwt maximum Tier 1 coverage level during the spring but would rise to around the high levels reached during 2022 during the remainder of the current calendar year.
Peter Vitaliano, National Milk Producers Federation pvitaliano@nmpf.org www.nmpf.org
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 ®
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.