Dairy Skim is a bite-size episode series where HighGround’s top analysts break down the latest dairy data release. Today, Betty Berning discusses the November 2023 US Dairy Products Report. Customers can view the snapshot report here. Subscribe so that you never miss an episode!
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Transcript:
[00:04] Betty: Hello, everyone, and welcome back to the Dairy Skim: HighGround Dairy’s bite-sized podcast intended to give the dairy industry some flavor into recent reports or events that can impact global commodity pricing. Today, you are hearing from Betty Berning, HighGround’s Contributing Dairy Economist. Happy New Year to all of you! I made it up later than my colleague, Cara Murphy—I made it all the way to 1:45 AM on January 1st before falling asleep on my couch. I’ve been back at work, though, and today is a very big day for the month. USDA released November’s Dairy Products Report. Let’s get started.
[00:47] In the Class III space, total cheese production of more than 1.16 billion pounds climbed 0.7% compared to November 2022. Still, the category had some interesting data points. Cheddar and Mozzarella volumes, which made up about 60% of the cheese manufactured in November, were down year-over-year. Cheddar vats turned out 322.6 million pounds of product, falling 0.4% versus November 2022, and that could have been due to the lower prices that we saw at the CME. Manufacturers may have opted not to make a cheaper product. Mozzarella volumes sat at 380.7 million pounds in November, down 0.9% year-over-year. Oftentimes, when we see a decline in Mozzarella production, it can be indicative of lower pizza demand. The gains in the cheese category came via the Other-than-American-Cheese category, which includes things like Colby and Jacks. These varieties weighed in at 146.8 million pounds, rising 3.1% against the previous year. The Cheese category also climbed, up 5.7% relative to November 2022, with 91.7 million pounds made ahead of the December holidays.
[02:15] Let’s talk about revisions. It seemed like there were some significant ones in this report. We’ll start with the cheese ones. October’s total cheese number was not revised much at all. It was taken down just -0.01% of the actual, so really minor. However, the devil is in the details, as some commodities within the category saw some pretty sizable changes. Cream Cheese, Gouda, were actually taken up, with cream cheese increased 791,000 pounds or 0.8% of actual. Gouda was increased 254,000 pounds, or 6.66% of actual. On the other hand, though, Natural American Cheese was revised downward by –3.9 million pounds or 0.8% of actual. Cheddar was lowered nearly 3 million pounds, or 0.9% of the actual. So, some pretty significant revisions in there, even if the total cheese number doesn’t reflect that.
[03:16] Moving to the other part of the Class III formula: Whey. In the Whey complex, production of high-protein items such as WPC 80 and Whey Protein Isolate (WPI) climbed, while lower-protein wheys dropped. This is a narrative that we’ve seen playing out for the last few months. Dry whey production of 62.6 million pounds dropped nearly 11% versus November 2022, with stocks sitting at 66.9 million pounds—a fall of 6.2% from October. Further, WPC 25-49.9% (typically WPC 34) volumes shrank by 16.8% to 12.3 million pounds. That’s actually the lowest November value for that category going all the way back in the data set to 2003. Stocks of WPC 235-49.9% fell year-over-year and month-on-month on the lower production. However, high-protein wheys were the name of the game in November. WPC 50-89.9% (usually WPC 80) volumes totaled 27 million pounds and increased 7.5% against prior year. They were even up 2.1% against October, registering the highest total for November. The bigger production pushed stocks up 10.3% from October, and those stocks sat at 39.1 million pounds—still smaller than the prior year.
[04:56] The other item in the high-protein whey space is WPI. That production grew year-on-year for the second month in a row, up 16.4% as driers turned out 10.5 million pounds on the bigger demand. Stocks also increased here as manufacturers have gotten the message to increase production. Stocks are building as a result, too, with stocks up 3.9% month-on-month—the first month-on-month increase that we’ve seen (there had been six months in a row of declines).
[05:29] USDA revised October’s production and stocks of Dry Whey, WPC 25-49.9%, and WPC 50-89.9% lower.
[05:41] Moving on to the Class IV space, butter churns made 165.2 million pounds of product, declining by 3.7% year-over-year. That decrease was not that surprising, considering lower milk production in the Western US in November and that demand likely decreased after the record-high prices at the CME in the previous month. Further, USDA took October’s volumes up by over 1.7 million pounds, or 1.06% of the actual, and that changed the year-over-year from down 0.9% to up +0.1%. Again, another revision that seems significant as we look at these numbers.
[06:29] Nonfat Dry Milk and Skim Milk Production was slightly bullish to our expectations. Nonfat Dry Milk volumes plummeted by 28% year-on-year, totaling 115.7 million pounds. Stocks dropped to 208.9 million pounds, the lowest value for November point since 2015. Again, that lower milk production in the west is likely what’s driving that. USDA also took down October’s Nonfat Dry Milk stocks by over 7 million pounds, or 3.23% of the actual. This is probably the most sizable revision in today’s report.
[07:09] On the other hand, though, let’s talk about Skim Milk Powder. That actually turned in a decent number compared to the rest of the year, climbing 17.8% relative to November 2022, and was up a whopping 37.5% from prior month. The category weighed in at 57.9 million pounds. Still, when we sum Skim Milk Powder and Nonfat Dry Milk Powder together, the combo of those two was a year-on-year decrease of 17.3%. The SMP that was produced went for export, so perhaps there was some demand that picked up in November, but to be honest, year-to-date production of 2.1 billion pounds between the two commodities trails 2022 by 6.7% and it is the lowest January to November total since 2019.
Alright, there were a lot of numbers in there and a lot of details but believe it or not, I think I can find a few more details. I will be busy analyzing this afternoon and evening. Watch your inbox for the comprehensive report and I wish you all a wonderful weekend.
