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 July 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 are joined by Betty Berning, HighGround Dairy’s Contributing Dairy Economist. Fall is in the air and I am enjoying some beautiful midwestern weather today along with the start of the school year and football season. Go Vikings! But I have some summer data to review on this Friday afternoon. USDA released July’s Dairy Product Report at 2 pm central and I am ready to discuss.
(0:58)
July cheese production rose 1.9% year-over-year totaling 1.2 billion pounds of product and these numbers were actually slightly bearish to our expectations. Cheddar volumes continued to lag year over year but the downward trend is slowing. July’s volumes were down just 5.8% versus the same month in 2023. However, when you look at June the total is down 9.6% year-over-year so the decreases are lessening in the cheddar space. Further, June to July cheddar output fell 1.9% which is typical for cheddar output to drop between these two months and the five-year average is actually a decrease of 2.9%. So a little better than what one would have expected.
(1:51)
While production of cheddar is still lackluster, blocks hit a two-year high today in CME spot trading and barrel prices are elevated too. With volumes improving slightly against these higher prices that was the rationale for our slightly bearish call. The team does not expect that prices will fall real far but they do have some room to drop from their lofty purchase. Most other cheese varieties were up on a year-over-year basis with Swiss and Parm being the exceptions.
(2:22)
Let’s move over into the class iv space. Butter was neutral to expectations a total of nearly 162 million pounds were made in July, a 2.2% increase versus prior year and a high for the month. 2024’s butter totals are running hot 3.6% more butter has been made in 2024 through July than in 2023 and 2024 is running eight percent ahead of two years ago. If you remember butter prices began to increase in August in 2022 and 2023 and reached a peak in mid-October so they’re great years for comparison. Since springtime prices have sat above $3 per pound and it seems like there is a new baseline being established in the butter market. All of this said a lot of butter was taken out of inventories in July as we learned in the Cold Storage Report a couple weeks ago 23 million pounds to be exact were taken out from June to July but when we look at what’s in Cold Storage which was 354 million pounds in July that’s still bigger than those record price years of 2023 and 2022. One other notable thing in the butter data today was that June’s total was revised 1.16 million pounds lower or 0.7% of the actual.
(3:49)
Dry whey – this really was the headline of the report and possibly what I should have fled with but dry whey volumes plummeted they totaled 60.6 million pounds and that’s actually the lowest dryer output since at least January 1990 and maybe even further back. This was likely due to a production issue over the summer at a whey plant which caused these whey volumes to drop significantly and prices to spike as we saw in CME spot markets. Stocks were down they dropped counter-seasonally actually. They were down 6% and neared 60 million pounds and all of these things coming together made dry waste slightly bullish to our expectations. Spot markets are currently at $0.5875 per pound so hiccups in the supply chain like dwindling stocks and dealing with production issues which what we have heard is that this plant is back online all of this though could be price supportive and cause things to get tighter later this year. It’s important to note there was a huge revision to June’s dry weight volumes to USDA lowered the peg there by 8.6 million pounds or 12.6% of the actual high protein wheys. Those were neutral to expectations.
(5:10)
It was more of the same production of whey protein isolate and WPC 50 to 89.9 percent both rows year over year and volumes of WPC 25-49.9% decreased. Stocks of all three categories are smaller than a year ago and were mostly flat from June. WPI stocks in June were revised 310,000 pounds lower or 2% of the actual.
(5:39)
Also in the dairy protein space and something that we don’t usually cover in depth is milk protein concentrate. This was really noticeable so the category production has grown year on year for the past eight months and in July it actually was up 74% versus July 2023. 24.7 million pounds of product were made that month. Milk protein concentrates are a cheap source of dairy protein and for a price conscious consumer they may opt to purchase that as opposed to a spendier WPC and food manufacturers may use MPCs in lieu of these more expensive WPCs to keep protein content high in their products. MPCs tend to be made in class iv plants, though, and so what that means is an increase in milk protein concentrate production can result in a decrease in non-fat dry milk and that’s actually what’s been going on.
(6:40)
So nonfat dry milk let’s switch over to that and skim milk powder output remains smaller than year-ago levels and pretty lackluster. Dryers made 178.3 million pounds in July and that’s a drop of 10% year on year. Nonfat dry milk stocks built though they were up year over year for the first time since March 2023 and in July they counted to 269.7 million pounds. Stocks for nonfat tend to peak in May and then get drawn down seasonally so thus far from May to July the drawdown this year is at about 11 million pounds which historically speaking is in the middle of the five-year average May to July drawdown so not a lot to write home about there. Nonfat dry milk and skim milk powder exports were pretty strong in July the highest they’ve been all year surpassing the 70,000 MT mark however since stocks didn’t really fall much from June to July they were down just 3.6 million pounds. This indicates that domestic demand was likely weak if international demand was strong. All of this said today’s data neutral to our expectations. Yes, the spot nonfat dry milk market has been taking off but if we dig deeper and look at futures those are moving lower and in a price range of $1.32 to $1.35 per pound out to June of next year. This indicates that buyers are pricing an expected lower demand for quite some time and our balance sheet too for nonfat dry milk is not overly cumbersome.
Okay we made it to the end. Subscribers, watch your inbox you will receive more detailed analysis have a wonderful weekend everyone watch some football take care and cheers.
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