Dairy Skim – April 2024 US Dairy Products Report

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 April 2024 US Dairy Products Report. Customers can view the snapshot report here. Subscribe so that you never miss an episode!

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Transcript:

(0:14) Betty Berning:
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’re joined by Betty Berning, HighGround’s contributing dairy economist.

We are just two weeks away from our upcoming Outlook Conference and are so excited to meet again this year at the Union League Club of Chicago. Registration ends next week on June 14, so register today. We will cover all things dairy markets from producers to demand to lending. We’ll have a domestic and an international Outlook plus sessions on Europe and China. You will not regret attending.

(1:03)
Onwards and upwards though, let’s talk about dairy products. USDA released April’s data just a little bit ago and I am ready to discuss. We’ll start with Cheese. April’s total of 1.187 billion pounds was a 1.8% gain versus the prior year and neutral to our expectations. The story was in the product mix though. Cheddar vats continued to lag 2023’s values, tumbling 8.6% versus April 2023 and weighing in at 322.3 million pounds. That’s the smallest April since 2019. The lighter cheddar volumes helped to explain why we saw such a big rally in the CME Spot markets from mid-March to mid-May as 4 to 30-day old cheddar was short.

On the other hand, Italian cheese production was way up and that propelled the total cheese number higher. Italian cheese volumes totaled 503.9 million pounds, a climb of 6.2% versus prior year and an all-time record high on a 30-day adjusted basis. Wow.  Mozzarella also made a new record, topping 400 million pounds on a 30-day adjusted basis for the first time ever with growth of 6.1% year on year. Year-to-date production in the category is tracking 3.4% ahead of the January to April 2023 period. If we remember export numbers from March, they were also record high and especially in the fresh and grated cheese categories, that trend likely persisted into April providing lift to these mozzarella and Italian cheese numbers.

Also worth calling out from the report were Parmesan and Gouda. Farm totals of 39 million pounds rose 7% against April 2023, bolstering the Italian cheese category and Gouda jumped nearly 25% year on year with 6.7 million pounds made in April. Gouda is another item used pretty heavily in exports and that suggests that there were also strong exports of Gouda again in April. So good news, April’s trade data is going to be released tomorrow morning, so shortly we will have all the answers.

(3:25)
Let’s talk butter, which remains above $3.00 per pound. It did give up some ground today in CME Spot Sessions, settling at $3.0950 per pound, down $0.0675 from Tuesday (yesterday). However, the market and fundamentals do not match. April’s production of 207.8 million pounds was the highest April total since 2020, which as we know was in the heart of the COVID-19 pandemic and an outlier. If we go through the 30-day adjusted data, April 2024 ranks third all time. Wow, that is a lot of butter. From March to April, churns increased throughput seasonally and year over year, more than 10 million additional pounds of product were made in April compared to April 2023. So again, this was definitely bearish to our expectations.

(4:21)
Moving into powders, nonfat dry milk was also bearish to expectations. Combining nonfat dry milk and skim milk production, dryers made 209.6 million pounds, and that’s the lowest value for the month for those two commodities since 2013. Notably, skim milk powder, which is used for exports, summed to 36.2 million pounds and that’s the lowest April since 2015. So just really lagging volumes.

You may be wondering, what is the bearish part of the story if not a lot of product was made? Well, the bearish part is stocks. Stocks climbed by 47.4 million pounds from March to April and sum to 280.6 million pounds. That’s the highest stocks value since June of last year and that’s a big indicator of poor demand. In March, we had 34 days of product in inventory and that climbed to over 40 days in April. That’s a pretty big leap between the two months. Like I said, demand appears to have been terrible with the stocks building despite a drop in volumes. Dry whey production though was slightly bullish to our expectations. Production was flat to prior year and climbed from March to April by 4.4%. That is more than the five-year average. It does follow the seasonal pattern. However, stocks fell both year over year and month on month, plummeting a sizable 8 million pounds from March to April and totaling 67.7 million pounds. So these falling inventories against increased or at least flat output indicate that demand has picked up.

(6:02)
In the WPC and WPI space, those were neutral to expectations. I’m going to break the categories down a little bit further here. So low protein whey concentrate, nearly 11 million pounds were made and that’s 24% lower than April 2023. Stocks are nearly half of where they were a year ago. Still, the smaller numbers seem to really be a function of big demand for high protein wheys, which I’m going to talk about now.

Manufacturers have prioritized high protein wheys as we know. This is evidenced again in April with WPC 50-89.9% volumes of 28 million pounds gaining 3% year on year. This is the 17th month in a row of increases in this category. Stocks have dwindled in the past year but leveled out from March to April building 2.4% month on month to a final tally of 32.9 million pounds.

The other item in the high protein whey space is whey protein isolate and volumes climbed versus April 2023 and were substantial, over 15 million pounds. However, stocks were nearly flat to the prior month and given that inventories neither built nor really declined would indicate that manufacturers are keeping up with the big demand and that made this number neutral to our expectations.

I’m going to review more of the data and the team will be sending out more detailed analysis tomorrow morning so subscribers watch your inbox. I hope you all have a great night and take care.