DAIRY MARKET REPORT
11/27/2024
OVERVIEW
The monthly margin under the Dairy Margin Coverage (DMC) program in September set its second straight record high at $15.57/cwt, the result of relatively high milk prices and falling feed costs. Meanwhile, U.S. dairy export volumes are recovering from a mid-year slump, achieving in September the second highest percentage of domestic milk solids production for that month.
Monthly milk production grew slightly in August and September, ending a consecutive 13-month stretch during which it remained below year-earlier levels, but increasing milk production remains difficult due to scarce dairy replacement heifers and high costs to build and equp facilities to accommodate bigger herds. Brisk increases in the component composition of producer milk continue to provide a relatively low cost means of increasing supplies to meet available demand that doesn’t require additional animals or facilities.
COMMERCIAL USE OF DAIRY PRODUCTS
September fluid milk sales were down from a year ago by 1.6%, a more traditional year-over-year loss for fluid sales, but with sales above a year earlier for five out of the nine months so far this year, year to date fluid sales are still up over a year ago by 0.5%. Aggregate commercial use of milk in all dairy products is traditionally measured as milk equivalents. Milk equivalents of commercial use, in turn, are essentially measured as adjusted liquid milk production numbers. As a result, static to lower liquid milk production during the 2021-2024 period has translated into static aggregate growth in commercial use of milk (equivalent) in all products. Aggregate commercial use can also be measured by milk solids; USDA’s Economic Research Service provides commercial use data by both measures.
Commercial use of milk solids in all dairy products is
essentially an adjusted measure of total milk solids production, which therefore shows a greater rate of growth than when use is measured by milk equivalents. For example, total commercial use (domestic plus exports) of U.S. milk in all dairy products grew annually by 0.6% during July through September measured by total milk solids (milkfat plus nonfat solids), but decreased by 0.3% measured by milk equivalent, total solids basis. Domestic commercial use of total milk solids declined by 0.3% during the period but was 1.3% below a year earlier on a milk equivalent, total solids basis. This difference of essentially an entire percentage point makes measuring total dairy consumption growth just one more issue that has become more complicated by the relatively recent growth in the component compostion of producer milk in the United States.
COMMERCIAL USE
U.S. DAIRY TRADE
Although it’s had its ups and downs, 2024 is becoming a respectable year for U.S. dairy exports. The year started strong, with exports as a percent of domestic milk solids production the highest ever for the month of February and the third highest for a January. But March-June performance languished, reaching no higher than sixth place by this measure for any of these months. Since then, it rose to third, fourth and second place for the months of July, August and September, respectively, as improved exports of nonfat dry milk, skim milk powder, lactose, and dry and modified whey drove sales. Despite this improvement, monthly exports during the last eight months of the banner export year 2022 were so strong by this measure that it may be some time before any one of these
eight months breaks through to the number one spot in the future.
U.S. dairy imports for the third straight month ran close to the equivalent of 4% of domestic milk solids production. Dairy products and products containing dairy components have entered the United States under 225 separate Customs categories, or tariff codes, this year. But more than 25% of the milk solids equivalent of this year’s imports have entered under just three of them, namely, out-ofquota butter and two non-quota codes for milk protein concentrate. Six additional codes for various protein concentrate products, cheese and cream bring the total to almost half of this year’s imported milk solids.
U.S. DAIRY EXPORTS
MILK PRODUCTION
USDA revised its preliminary August U.S. milk production estimate to show a small increase over August 2023 production and also preliminarily reported September production just slightly higher than production a year earlier. This ended the recent string of consecutive monthly milk production drops at 13 months, ending in July. Milk production dropped by 0.8% from the same period a year earlier during this period, while total milk solids production
increased by 0.1%, almost a full percentage point faster, and milkfat production increased by 1.4%. Weightedaverage cow numbers were 0.7% lower, milk production per cow was 0.1% lower, total milk solids production per cow increased by 0.8%, and milkfat production per cow increased by 2% during the 13-month period of production declines.
PRODUCTION
DAIRY PRODUCTS
Of the three broad categories of cheese produced in the United States, namely American, Italian, and other types, the smallest, “other,” category showed the greatest increase over the past year during July-September, followed by Italian types, while American types were again lower than a year ago. However, the production shares of these three types of cheese have remained remarkably
steady over the past decade. The American types’ share of total U.S. cheese production was unchanged at 39.7% both during calendar year 2015 and during the 12 months Oct. 2023-Sept. 2024. Between these two periods, Italian types’ share dropped from 42.9% to 42%, and the share of all other types increased from 17.4% to 18.3%.
DAIRY PRODUCT INVENTORIES
Month-ending stocks of butter, cheese and the major dry skim ingredient products all were lower at the end of September than a month earlier, particularly for butter. End-
of-September stocks of most of these product categories with significant imports were also lower than a year earlier, butter being a notable exception.
DAIRY PRODUCT AND FEDERAL ORDER CLASS PRICES
As anticipated, the significant drops in the cash market prices of butter and cheddar cheese during the latter part of September showed up in the monthly NDPSR survey prices of those products in October. The monthly butter price lost $0.43/lb over the month, while cheese prices were down by single-digit cents, and the two dry products rose by similarly modest amounts. The Class II and Class IV prices lost almost $1.40/cwt from September to October, driven by the large drop in butter prices, while Class III was off by a dollar less.
Rising farm milk prices have pushed up retail dairy product prices in recent months, but fluid milk and natural cheese prices, as well as the aggregate price of all dairy products at retail, are still below levels reached from mid-2022 through early 2023. By contrast, processed American cheese, butter, yogurt and ice cream have all hit new price highs at retail during the past three months, according to data from the Bureau of Labor Statistics. At the same time, the aggregate price of all items, also known as the cost of living, and the aggregate price of all food and beverages have both hit new retail price highs each month in 2024.
MILK AND FEED PRICES
The September monthly DMC margin rose by $1.85/cwt from August’s previous record level to $15.57/cwt, to set yet another record. The September all-milk price was $25.50/ cwt, $1.90/cwt higher than the month before, while the DMC
feed cost formula inched up from August by $0.05/cwt of milk, mostly on offsetting price moves for corn and premium alfalfa.
*DMC calculations are not revised
LOOKING AHEAD
In its November World Agricultural Supply and Demand Estimates (WASDE) report, USDA raised its forecast for 2024 annual milk production from October’s 225.8 billion pounds estimate to 226 billion pounds. The change
followed more than a year’s worth of monthly reductions in the department’s 2024 annual milk production estimate and effectively resulted from the recent end of the long string of monthly year-over-year drops in U.S. milk
production. The November WASDE report did not change the 2025 annual milk production estimate of 227.7 billion pounds, which represents a 0.8% increase over its revised 2024 production estimate. The 2025 estimate had been fairly steadily reduced each month since USDA began estimating it last May.
The November WASDE report made relatively small changes from its October Class III, Class IV and all milk price forecasts for this year and next, except for a $0.35/
cwt increase in its 2025 estimate for the Class III price. USDA is currently predicting $22.75 for this year’s average all milk price and a dime higher for 2025. Compared to these WASDE forecasts, the mid-November CME futures indicated an all milk price about $0.20/cwt lower for this year and about $0.30/cwt higher during 2025. The futures also projected the DMC margin would average around $11.90/cwt for all of calendar year 2024.
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.