Dairy Skim – October 2023 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 October 2023 US Dairy Products Report. Customers can view the snapshot report here. Subscribe so that you never miss an episode!

Subscribe on Spotify | Subscribe on Apple Podcasts | Subscribe on Amazon Music

Transcription:

[00:04] Betty: Happy Monday 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. I am Betty Berning, HighGround’s Contributing Dairy Economist, joining you on a very gray day here in the Upper Midwest. On the bright side, USDA has published October’s Dairy Products Report and I am ready to break it down for you.

[00:33] Starting with butter. Butter set an all-time record high price in early October and for dairy products, was neutral to our expectations, with volumes on the month totaling 155.4 million pounds, down almost a percent from a year ago. However, output from September to October rose nearly 9%, stronger than the five-year average. And, production values for the past three months have been eerily similar to 2022’s.

[01:03] Moving over to the cheese complex, this was bullish to expectations. Vats turned out close to 1.16 billion pounds, up 0.8% from October 2022. However, the story here is in the product mix. Cheddar production of 321.1 million pounds was the smallest October total since 2020 and down 2.5% from 2022. Further, October 2023 marked the fourth of five months of a decrease year-over-year for cheddar. Output increased from September to October by 3.2%, which is a far cry from the five-year average of a 5.8% increase, and this 3.2% build between the two months is actually the smallest since 2017. With Cheddar prices moving decidedly lower this fall, the product mix changed in the complex with more milk headed to Mozzarella and other-American cheeses, as throughput increased year-over-year in both categories in October. Mozzarella volumes were up for the first time since May, possibly due to increased demand for pizza. Further, vats produced more mozzarella in October than in September, eschewing the typical decline over this time frame. Still, with cheese prices lingering in the $1.50s, one would expect bigger supplies of cheese than what is being reported.

[02:31] Let’s talk about powders. The whey complex, both dry and high protein, was bullish to HighGround’s expectations. Stocks of dry whey and WPC continue to fall month-on-month, suggesting continued robust demand. Dry whey production fell month-on-month, and year-on-year. Production of Whey Protein Concentrate from 50-89.9% and WPIs grew year-over-year, but with stocks falling in both of these categories month-on-month, this supports the story of strong demand for these high-protein wheys. September’s Whey Protein Concentrate and Whey Protein Isolate inventories were also revised downward. The bigger usage in the high-protein space is likely limiting milk flows to dry whey and that’s providing support to the current dry whey market prices.

[03:25] Lastly, nonfat dry milk and skim milk powder production was pretty poor in October, as less milk was available to driers in the West due to milk flows slowing there. So, the lower nonfat and skim milk numbers weren’t a total surprise to the team here at HighGround. Further, driers produced 41.1 million pounds of Skim Milk Powder and that’s the smallest October number since 2017. Nonfat dry milk volumes were pretty dismal too, weighing in at 127.4 million pounds, the smallest number for the month since 2018. On the smaller volumes, stocks fell to 223.6 million pounds, which is the lowest figure since October 2019. And let me clarify—not the lowest October figure, the lowest figure since October 2019.

I will be writing more into the evening and watch your inbox tomorrow morning for more details and the full analysis. Take care, everyone.