Dairy Skim – April 2023 USDA 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 2023 USDA Dairy Products Report. You 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 is Monday, June 5^th. My name is Betty Berning, Contributing Dairy Economist at HighGround Dairy, and I am ready to dive into USDA’s April Dairy Products Report.

[00:29] Let’s start in the cheese complex, as spot Cheddar blocks have made multi-year lows as of late. In April total cheese production of 1.17 billion pounds was down 0.2% from the prior year, neutral to our expectations. However, Cheddar production remains strong, totaling 346.2 million pounds and this was up 5.8% from April 2022, or, put differently, these volumes were 19 million pounds larger in 2023 than in April 2022. Year-to-date, vats have turned out over 1.365 billion pounds of Cheddar. That’s almost 53.6 million more pounds than the same period in 2022. Production of other cheeses, such as mozzarella and parmesan fell year-on-year and month-on-month, in April. With the heavy milk flows in the Upper Midwest and American cheese and Cheddar-centric manufacturing region, it’s not surprising to continue to see big numbers posted in those categories. USDA also took March’s cheddar production up almost 2.5 million pounds.

[01:43] Moving to the Butter space, this was bearish to our expectations, as production of nearly 195 million pounds was 7.6% larger than in April 2022, all regions across the country grew their butter output, with the Central region increasing output by 13.7%, or over 9 million pounds, versus the prior year. While production fell from March to April, this is a relatively common occurrence, happening in 2018, 2019, 2021, and 2022. Only in the pandemic year of 2020—which we all know was pretty odd—did production actually grow from March to April.

[02:27] Dry whey production for human consumption fell 1.9% year-over-year in April, equaling 76.4 million pounds, but dry whey did see a substantial lift from March to April of 8.2%, much larger than the five-year average of a 0.8% decrease. Dry whey stocks built by 5.4% from April 2022, an increase 16.5% compared to prior month which definitely goes against the typical drawdown of whey stocks from March to April. Today’s data is slightly bearish to HighGround’s expectations, and while it is hard to go much lower in the spot market than the levels we’re at, futures continue to carry a premium to spot, meaning there’s room for the forward months to come down closer to where we’re at today.

[03:20] In the high protein whey space, WPC volumes were up 8.3% year-over-year and year-to-date are nearly 10% ahead of 2022’s totals. Stocks rose in tandem, growing 24% from prior year to 85.2 million pounds. Year-to-date stocks have remained above 80 million pounds for all of 2023, a historically high level. Whey isolate production fell 27.8% compared to April 2022, yet stocks still built, increasing an enormous 64.6%, weighing in at 25 million pounds, the highest level since 2018. There were some decent size revisions in the high-protein whey complex, with the WPC category raised 820,000 pounds in March production. WPI production in March was revised one million pounds lower, representing almost 12% of the actual total production. Putting this all together, the high-protein whey numbers are bearish to our expectations.

[04:31] Rounding things out, nonfat dry milk production of close to 200 million pounds in April was 1.9% bigger than April 2022. This was up 3.4% from March, right at the average for 2018, 2019, 2021, and 2022’s values. Nonfat dry milk stocks remained above 300 million pounds, totaling 309 million, but fell 1.1% versus March, which is larger than the 2018, 2019, 2021, and 2022 average for that timeframe. Skim milk powder production continued to decline in April, likely to due weak exports, with driers generating 34.5 million pounds, decreasing 22.6% on an annual basis. Furthermore, March’s SMP production was lowered by 729,000 pounds, over 2% of the month’s actual volume. Stocks and production seem healthy and in line with current prices so nonfat dry milk was neutral to HighGround’s expectations.

That is the quick rundown. HighGround subscribers, watch your email for more comprehensive analysis coming later tonight or early tomorrow morning. We’ll offer more analysis and get into regional data, as well. Have a Happy Monday!