DAIRY MARKET REPORT
VOLUME 27 | ISSUE 10
OVERVIEW
10/23/2024
Highlights for the June-August period include continuing annual growth in total fluid milk consumption and the opposite for production of raw milk, both unusual when compared with decades-long tends. Yogurt, butter, other than American-type cheese, and even fluid milk and total cheese all effectively showed annual per capita consumption growth during the period. The U.S. dairy industry exported more than 17% of U.S. milk solids production during three consecutive months for the first time since the fourth quarter of 2022. The monthly National Dairy Product Sales Report prices of all four basic dairy products reached their highest levels for 2024 to date in September, while the August Dairy Margin Coverage margin was the highest since margin protection became the basic federal dairy safety-net program in 2015, with continued high prices and margins expected.
COMMERCIAL USE OF DAIRY PRODUCTS
August total fluid milk consumption was 1.6% higher than in August 2023, while year-to-date fluid milk consumption through August was up by 0.7% from the same period a year earlier. Domestic consumption of yogurt, butter, other than American-type cheese, and even fluid milk and all cheese increased more rapidly than U.S. population, which rose 0.57% over the same
period. The rapid rise in the component composition of raw farm milk is evident in the difference between the 1.5% year-over-year loss in milk equivalent, total milk solids basis, of domestic commercial use of all dairy products during June-August and the smaller corresponding loss of just 0.5% when measured as total milk solids consumption itself.
U.S. DAIRY TRADE
U.S. dairy exports started out strong this year, with January the third-highest for that month ever, and February the highest ever for that month, as measured by percentage of U.S. milk solids production exported. The next four months were more challenging, all of them with less than 17% of solids production exported. Both July and August saw levels back above 17%. As is often the case, the change in overall export volume performance was driven by swings in
the largest product category of nonfat dry milk/skim milk powder.
On a volume basis, U.S. dairy imports will always remain a minor feature of the U.S. dairy economy, but July and August imports ran close to the equivalent of 4% of U.S. milk solids production, the fifth and sixth highest months, respectively, by this measure in more than 15 years.
MILK PRODUCTION
August U.S. milk production was 0.1% less than production in August 2023, adding a fourteenth consecutive month to the current string of monthly liquid milk production below year-ago levels. During that 14-month period, production of raw milk and of total milk solids were 0.8% and 0.1% respectively below the corresponding period a year earlier. Milkfat production rose by 1.2%.
DAIRY PRODUCTS
U.S. cheese production growth has slowed considerably since the pandemic years. Year-to-date production through August of all cheese is only 0.2% higher this year than in 2023. For 2020, 2021, 2022 and 2023, year-to-date total cheese production was up by 0.1%, 4.6%, 3%, and 0.8%,
respectively. For butter, the pattern has been effectively the opposite, with August year-to-date production growth each year during 2020 through 2024 equalling 8.3%, -1.7%, -2.2%, 4%, and 5.3%, respectively.
DAIRY PRODUCTS PRODUCTION
JUN-AUG 2024
JUN-AUG 2023 2023-2024
DAIRY PRODUCT INVENTORIES
Month-ending butter stocks have been dropping steadily since hitting their seasonal peak in May but have been growing annually in recent months. They were up 7.4% yearover-year by volume in July, but when measured by days of commercial use in stock, they were up by only 1.5% from a year earlier that month. Over time, growing commercial use
of a food product requires a correspondingly higher “normal” level of stocks to properly service and supply. Cheese stocks have been generally dropping since July 2023. Stocks of dry skim milk, principally nonfat dry milk, have been relatively stable over the past year, while those of dry whey and whey protein concentrate have dropped significantly.
DAIRY PRODUCT AND FEDERAL ORDER CLASS PRICES
The significant drops in the cash market prices of butter and cheddar cheese during the latter part of September will not show up in the monthly NDPSR survey prices of those products until October, while September monthly prices gained again from August, especially for cheese. Looked at from an annual perspective, it is noteworthy that the NDPSR (wholesale) prices of butter and cheese rose in September from a year earlier by $0.40/lb and $0.35/lb, respectively, while the retail price of butter gained $0.60/ lb but that of cheddar cheese dropped by $0.12/lb over the same period. The wholesale and retail prices of other listed products were somewhat less volatile at the same time.
Retail price inflation is widely reported in the general media in terms of year-over-year change in the U.S. cities average of the Consumer Price Index for All Urban Consumers (CPI-U) for all items. The year-over-year change statistic is also widely used for reporting inflation for more disaggregated groups of products and services and more specific geographic regions of the country. But additional insight can be gained by comparing the actual CPI measures used to compute the year-over-year changes. For food items at least, these are still mostly reported with a base of 100=1982-84 and therefore express how much prices have changed over a span of more than four decades. The CPI-U for all items and that for the broadest
food category of “All Food and Beverages” both generally hit new highs every month. For September, these were 315.3 and 329.4, respectively, meaning these prices had more than tripled over the past four decades, with food doing so slightly faster than general inflation. The CPI-U for all dairy products, at 269.6 for September, is quite favorable for consumers by comparison. The CPI-Us of several individual dairy products were mostly even lower – except for butter, which hit a new all-time
high of 324.8 in September, ahead of overall inflation. Additional context can be gained by still other product and category comparisons. The CPI-U for all fluid milk, for example, at 258.7 in September, while slightly lower than the general dairy measure, was well above the 219.5 September number for the general beverage category of “Nonalcoholic Beverages and Beverage Materials.” On the other hand, butter’s record-high CPI-U was actually well below that of “Margarine,” which was 464.5 in September.
MILK AND FEED PRICES
The monthly margin under the Dairy Margin Coverage (DMC) program rose by $1.40/cwt from the month before to $13.72/ cwt in August, the highest since margin protection replaced the old price support program as the basic dairy safety net
program in January 2015. The August all-milk price was $23.60/cwt, up $0.80/cwt from July, while the DMC feed cost formula dropped by $0.60/cwt of milk, driven mostly by a lower corn price.
calculations are not revised
LOOKING AHEAD
By this time in any calendar year, USDA’s monthly forecasts of milk production for the year usually show ever smaller changes from one month’s World Agricultural Supply and Demand Estimates (WASDE) report to the next. From June through September, these monthly production estimates of this year’s annual production showed steady, relatively large reductions. However, October’s report slowed the pace of these reductions considerably, and estimated calendar year 2024 U.S. milk production at 225.8 billion pounds, just below its reported productions of 226.2 billion pounds in 2021 and 226.4 billion pounds in both 2022 and 2023.
Similarly, the monthly WASDE forecasts of calendar year average prices tend to show smaller monthly changes during a year’s fourth quarter. However, recent drops in butter and cheese cash market prices showed up as relatively sizeable declines from a month earlier in WASDE’s October estimates of several key prices during 2024. In particular, its estimate of the 2024 U.S. average all milk price was lowered from $23.05/cwt to $22.80/cwt.
In mid-October, the dairy and grain futures indicated that the DMC margin would average slightly above $12/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. Peter Vitaliano, National Milk Producers Federation pvitaliano@nmpf.org www.nmpf.org