Dairy Market Dairy Management Inc.
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Vol u m e 2 5 | N o. 4
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April 2022
D MI | NMP F
U.S. milk production lagging behind year-ago levels, combined with robust demand for dairy domestically and overseas, are driving milk prices toward record highs, even as inventories remain relatively balanced. Higher feed costs continue to eat into farmer margins.
Overview
U.S milk production was 1.7 percent lower than a year earlier in January, but this moderated to just under one percent lower in February. Cheese production and seasonably increasing ice cream and frozen dairy products are claiming a growing portion of available milk at the expense of butter and dry skim milk, the traditional supply balancing products. Domestic commercial use during the first months of the year was robust for butter, all major types of cheese, and total milk equivalent, both fat and skim solids. Meanwhile, U.S. dairy exports rebounded in February to 16.6 percent of U.S. milk solids production, following two months at 14 percent or below. Wholesale dairy product prices continue to increase, but some retail prices are increasing much faster, particularly for fluid milk and, just recently, butter. U.S. average milk prices are expected to reach roughly $27/cwt during the second half of 2022, according to current futures. However, feed costs will likely reach the same high levels they did during the drought period of 2012-2013. That will restrain DMC margins, but still at rates above the maximum coverage level of $9.50/cwt.
Commercial Use of Dairy Products The pandemic not only boosted fluid milk sales but also produced wide divergences in sales of different types of fluid products. For example, during the pandemic’s first year, March 2020 through February 2021, total organic fluid milk sales were almost 12 percent higher than during the same months a year earlier, while total conventional milk sales
dropped by 1 percent, year-over-year, during the same period. Sales of whole milk, both conventional and organic, were almost 3 percent higher, while total reduced fat milk was almost 4 percent lower than a year ago. However, during the next 12 months, March 2021 through February 2022, these differences had largely disappeared. Organic sales were down by 4.5 percent, conventional by 3.8 percent from
Domestic Commercial Use
Dec 2021–Feb 2022
Total Fluid Milk Products Yogurt Butter American–type Cheese All Other Cheese Total Cheese Dry Skim Milk All Products (milk equiv., milkfat basis) All Products (milk equiv., skim solids basis) All Products (milk equiv., total solids basis)
11,192 1,120 500 1,329 1,911 3,240 164 52,436 44,709 47,148
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Dec 2020–Feb 2021
2021–2022 Change
Percent Change
-277 -6 10 39 67 106 -21 471 569 563
-2.4% -0.5% 2.1% 3.0% 3.7% 3.4% -11.5% 0.9% 1.3% 1.2%
(million pounds)
11,469 1,126 490 1,291 1,843 3,134 185 51,965 44,140 46,586