Dairy Skim – January 2023 US Dairy Products Report

Dairy Skim is a bite-size episode series where HighGround’s Eric Meyer and Betty Berning break down the latest USDA Dairy data release, the January 2023 U.S. Dairy Products Report. You can view the snapshot report here. Subscribe so that you never miss an episode!

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[00:04] Eric: Hello everyone, it’s Friday, March 3rd and this is the Dairy Skim: HighGround’s bite-size podcast with a quick look at USDA’s most recent data. This afternoon, USDA published the January 2023 Dairy Products Production & Dry Stocks report. Since it is late on Friday, and since Betty needs to catch a flight, we are going to keep this short and sweet. Joining me today is Betty Berning, one of HighGround’s newest members of the team as our contributing dairy economist, and she and I have been huddling in the conference room at HighGround’s downtown Chicago office to see what’s inside these numbers. Betty, it’s been great having you in Chicago these past two days, any parting thoughts as we ship you home this evening?

[00:45] Betty: Thanks, Eric. I had a great time. Had a lot of fun bowling with the team and it was really fun to just dissect one of these reports live and in person and in living color!

[00:55] Eric: Fantastic, you raised your hand to tackle the Class IV products, both nonfat dry milk and butter, what’s significant in that data?

[01:05] Betty: January 2023 butter production equaled almost 195 million pounds and increased by 3.8% on the year. However, compared to 2021 and 2020, production was down. This is the third month in a row that butter production was higher on a year-over-year basis and it followed the typical seasonal build from December to January. The main driver of this increase were the churns in the central part of the country, which turned out nearly 81 million pounds of butter, a jump of 7.5% relative to January 2022.

[01:40] Moving to the other side of the Class IV complex, nonfat dry milk production grew 4% in January, totaling 177 million pounds. Like the other commodities, the central region of the US led the charge, with a dramatic increase of nonfat dry milk production almost 29% versus January 2022, reflecting the very strong milk production there. California, the nation’s top nonfat dry milk producer, saw its production fall by 0.3% year-over-year. Overall, this is a good showing for January looking at the end number, but it’s notable that January 2023 is down against 2021 and 2020. Skim milk powder production neared 43 million pounds was down 1.5% from a year ago. Notably, though, USDA revised its nonfat dry milk and skim milk powder production from December, taking the December nonfat dry milk numbers down 8.8 million pounds, while raising the SMP number by 6.1 million pounds. Stocks of both commodities grew in January, reflecting weaker demand.

[02:48] Eric: Thanks so much, Betty. So now let’s take a look at the cheese side here. The big surprise was cheddar cheese production at 356 million pounds, was up 7.1% over the previous January. That helped drive total cheese up 3.2% year-over-year and even on the cheddar month-over-month was up 4.7% which was well-above trend. So much of that cheap milk in the Upper Midwest was turned into cheese and we saw some pretty significant growth across the central region. But when we were looking a the see numbers and comparing them against Cold Storage—remember, in our Cold Storage analysis, we saw both year-over-year and month-over-month declines in the natural American style—it suggests now that we have it. The January demand was really strong. So, what was it? Was it strong exports? Well, we will find out that information next Wednesday when the USDA releases its updated trade numbers. Our feeling is that that’s not necessarily the case but there could have been some residual Q1 exports done a little bit more than we would have expected. But most likely it came from domestic demand and I think it’s important to remember as we’ve talked about during that cold storage analysis that the first half prices ended up really high.

[04:03] Looking at the dry whey side, I think another interesting piece here: sweet whey powder was the lowest monthly production of any month since October of 2021 and for January, it was the lowest dry whey production since 2014. Stocks were down month-over-month but slightly above year-over-year levels. Interestingly enough, we still have really high numbers on the whey side. And then looking at whey protein concentrate and whey protein isolates, production was below previous year for the last three consecutive months, yet stocks are rising incredibly high. It tells us that demand is not very good.

In any case, that’s a little bit here from the Dairy Skim. Eric Meyer and Betty Berning from HighGround Dairy. We hope you all have. a great weekend and we are looking forward to diving even further into this data and releasing our comprehensive written analysis on Monday (find that report here). Have a good one!