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
continued on page 2
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
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Commercial Use of Dairy Products from page 1
a year earlier. Whole milk sales were 4.6 percent lower and reduced fat 5 percent lower. These recent fluid sales loss figures were all lower than pre-pandemic trends, largely because they were in comparison to higher than pre-pandemic sales volumes during the first pandemic year. Domestic commercial use during the December 2021 through February 2022 period was robust for butter, all major types of cheese, and total milk equivalent for both fat and skim solids.
U.S. Dairy Trade The U.S. dairy industry exported 16.6 percent of U.S. milk solids production in February. This followed two months during which this percentage was 14 or below. Those two months represented a pause from the 10-month period February–November 2021, when monthly exports varied between 16.9 and 18.8 percent of U.S. milk solids production. With declining milk and dairy production from most other
U.S. Dairy Exports
major dairy export suppliers, including the European Union and New Zealand, this year’s monthly exports may remain at these recent higher levels. Driving the February return to previous total export levels were dry skim milk and all the products within the broad whey complex. Butter and some cheese types also contributed to the increase. Total U.S. dairy imports during February were equivalent to just under 3 percent of U.S. milk solids production. Monthly imports have been below that benchmark during about one-quarter of the 326 months since the beginning of 1995 and have averaged 3.5 percent during those 27-plus years.
Milk Production The deflation of U.S. milk production growth, which is approaching a full year in duration, appears to have hit another pause, or perhaps the start of a reversal, in February. Following a pause around a no-growth level early last fall, annual growth went decisively negative, reaching minus 1.7
Dec 2021–Feb 2022
continued on page 3
Dec 2020–Feb 2021
2021–2022 Change
Percent Change
(metric tons)
Butter Anhydrous Milk Fat / Butteroil Cheddar Cheese American–type Cheese All Other Cheese Total Cheese Dry Skim Milk Whole Milk Powder Dry Whey Whey Protein Concentrate / Isolate Lactose Percent of U.S. Milk Solids Exported
12,060 4,382 16,166 16,457 76,971 93,428 180,391 9,579 41,306 44,990 86,956 14.7%
9,213 1,607 9,849 9,923 71,329 81,253 193,297 9,000 53,933 54,169 77,935 15.1%
2,848 2,775 6,317 6,534 5,641 12,175 -12,906 578 -12,627 -9,179 9,021 -0.4%
31% 173% 64% 66% 8% 15% -7% 6% -23% -17% 12% -2%
U.S. Dairy Imports
Dec 2021–Feb 2022
Dec 2020–Feb 2021
2021–2022 Change
Percent Change
Butter Cheese Dry Skim Milk MPC (all protein levels) Casein Percent of U.S. Milk Solids Imported
9,872 38,659 139 12,140 17,710 3.0%
5,165 -2,337 96 -98 2,613 0.3%
110% -6% 220% -1% 17% 11%
(metric tons)
2 – Dairy Market Report | April 2022
4,707 40,996 44 12,238 15,097 2.7%
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Milk Production from page 2
percent in January. But this then moderated to just under one percent in February. Among indications of what this portends, USDA’s latest forecast does not foresee an increase in U.S. milk production over a year ago during all of 2022. This, together with continued high costs and short availability of feed, replacement cows, hired labor, construction materials, and machinery, as well as continued dispersal auctions of large dairies, provides no suggestions of a return to strong milk production growth in the near future. However, four of the 10 largest milk-producing states showed slowing rates of growth decline in February. Year-over-year
changes in total U.S. milking cow numbers have declined steadily since last May through February, but annual change in production per cow has been positive for over half of those months, including February. Year-over-year changes in U.S. milk solids production have averaged 0.8 percentage points higher than the corresponding changes in U.S. raw milk production during the past twelve months.
Dairy Products Production of butter and dry skim milk products continues to drop as cheese claims a growing portion of available milk, and seasonably increasing ice cream and frozen dairy products draw additional volumes. Total cheese production was 6.3 continued on page 4
Milk and Dairy Products Production
Dec 2021–Feb 2022
Dec 2020–Feb 2021
2021–2022 Change
Percent Change
Milk Production Cows (1,000 head) Per Cow (pounds) Total Milk (million pounds) Total Milk Solids (million pounds)
9,370 5,906 55,335 7,358
9,454 5,925 56,020 7,367
-84 -19 -685 -9
-0.9% -0.3% -1.2% -0.1%
Dairy Products Production Cheese American Types Cheddar Italian Types Mozzarella Total Cheese
(million pounds)
1,374 972 1,458 1,127 3,428
1,375 997 1,415 1,103 3,334
-1 -24 43 24 95
-0.1% -2.4% 3.1% 2.1% 2.8%
Butter
558
603
-46
-7.6%
Dry Milk Products Nonfat Dry Milk Skim Milk Powder Dry Whey Whey Protein Concentrate
509 111 233 141
590 118 241 124
-81 -7 -8 16
-13.7% -5.9% -3.1% 13.1%
Dairy Product Inventories
Feb 2022
Jan 2022
263 833 636 296 63
219 838 607 267 57
Feb 2021
2021– 2022 Change
(million pounds)
Butter American Cheese Other Cheese Dry Skim Milk Dry Whey
355 817 619 354 70
-26% 2% 3% -16% -10%
Dairy Market Report | April 2022 – 3
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Dairy Products from page 3
Dairy Product Inventories
percent higher in February than a year earlier, the largest annual increase for a single month since last April. Total American and total Italian cheese showed particularly large annual gains compared with recent months, as did cheddar as a single variety. The whey streams from growing cheese production are going entirely to further processed products WPC, WPI, modified whey and lactose, while dry whey production continues to drop.
Based on several metrics for evaluating individual dairy product inventories, namely volumes and days of total commercial use in stock, and both in relation to trends, stocks of American-type cheese, lactose and, given its seasonal pattern, butter are balanced as of February. February stocks of other than American-type cheese, dry skim milk and dry whey were trending toward excessive, as were whey protein concentrate stocks by volume, but not by days of use in stock.
Dairy Product and Federal Order Prices NDPSR Dairy Product Prices Butter Cheddar Cheese 40-Pound Blocks 500-Pound Barrels Nonfat Dry Milk Dry Whey
Mar 2022
Feb 2022
$2.726 $2.055 $2.075 $2.007 $1.795 $0.794
$2.667 $1.907 $1.909 $1.875 $1.728 $0.780
Mar 2021
2021–2022 Change
(per pound)
$1.590 $1.598 $1.670 $1.502 $1.117 $0.554
$1.136 $0.457 $0.405 $0.504 $0.679 $0.241
(per hundredweight)
Federal Order Class Prices for Milk Class I Mover Class II Class III Class IV
$22.88 $24.76 $22.45 $24.82
$21.64 $23.79 $20.91 $24.00
$15.20 $15.07 $16.15 $14.18
$7.68 $9.69 $6.30 $10.64
Retail Dairy Product Prices Fluid Whole Milk (per gallon) Lowfat Fluid Milk (per gallon) Cheddar Cheese (per pound) Butter (per pound)
$3.917 $3.584 $5.486 $4.076
$3.875 $3.514 $5.447 $3.774
$3.348 $2.966 $5.682 $3.643
$0.569 $0.618 -$0.196 $0.433
Feb 2022
Jan 2022
Feb 2021
2021–2022 Change
Producer Prices All Milk (per cwt.)
$24.70
$24.20
$17.10
$7.60
Feed Prices Corn (per bushel) Soybean Meal (per ton) Alfalfa Hay (per ton) DMC Feed Cost* (per cwt.)
$6.10 $451 $266 $13.50
$5.57 $421 $262 $12.66
$4.75 $427 $211 $11.13
$1.35 $24 $55 $2.38
DMC Margin* (per cwt.)
$11.20
$11.54
$5.97
$5.22
Milk and Feed Prices
*Prices not revised for DMC calculations
4 – Dairy Market Report | April 2022
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Dairy Product and Federal Order Class Prices The federal order Class III milk price rose more from February to March than the other three milk classes, but it remained the lowest of the four, ensuring another month of high producer price differentials and full pooling of Class III milk. The gap between Class III and Class IV prices narrowed a bit in March but remained large enough to cause substantial depooling of Class IV milk for yet another month. At the product level, all NDPSR prices rose in March from February levels, but the monthly gains for butter, nonfat dry milk and dry whey were smaller than for several previous months. Cheese prices have generally alternated in recent months between flat to lower prices one month and strong gains the next. March saw the largest one-month increase in the U.S. average retail price of butter since the Bureau of Labor Statistics resumed reporting retail butter prices in May 2018–30 cents a pound, or 8 percent. Overall inflation in March increased to 8.6 percent, year-over-year. Food and beverage inflation has caught up with this overall rate, and dairy price increases are catching up, with overall dairy retail prices 7 percent higher than a year ago in March. Some individual dairy products are increasing considerably faster than the general consumer price index, with fluid milk prices up 13.3 percent and butter up by 12.5 percent from a year ago in March.
Milk and Feed Prices The second highest monthly surge in feed costs since the emergence of margin protection as the main federal safety net for farmers lowered the Dairy Margin Coverage Program margin by $0.34/cwt, to $11.20/cwt, in February. Steady increases in feed costs for the past year and a half were kicked into a yet higher gear by the developing Russia–Ukraine
Peter Vitaliano National Milk Producers Federation pvitaliano@nmpf.org www.nmpf.org
Dairy Management Inc.
situation, raising fears of reduced global grain production. The February DMC feed cost was $13.50/cwt, up $0.84/cwt from a month earlier and the highest since the introduction of margin protection in 2014. Two-thirds of this increase came from a jump in the price received by U.S. farmers for corn. Partly offsetting the higher feed cost was an increase of the U.S. average all-milk price by $0.50/cwt, to $24.70/cwt.
Looking Ahead The dairy and grain futures markets currently indicate the DMC margin will gradually increase during the rest of the year. Following several months of steady reductions in its forecast of calendar year 2022 U.S. total milk production, USDA has reversed itself and raised its projection slightly, based on higher dairy cow numbers. Its March estimate was 226.0 billion pounds, which it raised to 226.3 billion pounds in its April World Agricultural Supply and Demand Estimates (WASDE) forecast update. The April forecast is essentially the same as the 226,258 million pounds the department has reported for 2021 U.S. milk production. In its latest WASDE update, USDA further raised its forecast of the 2022 U.S. average all-milk price to $25.80/cwt from its March estimate of $25.05/cwt. At the same time, the recently reactivated DMC Decision Tool forecast the 2022 average all-milk price at $25.30/cwt, while dairy futures indicated it would be about $26.45/cwt. The previous highest U.S. average all-milk price for an entire calendar year was $24/cwt in 2014, and the next highest was $20.10/cwt, in both 2011 and 2013. By all measures, therefore, U.S. milk prices will be in relatively uncharted territory this year. In “normal” times, this would lead to explosive growth of milk production. But cost and availability of many, if not most, of the resources needed to fuel such growth are also in uncharted territory.
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) is a farm commodity organization representing most of the dairy marketing cooperatives serving the U.S.
Dairy Market Report | April 2022 – 5