Dairy Skim – May 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, Eric Meyer and Betty Berning discuss the May 2023 US Dairy Products Report. You can view the snapshot report here. Subscribe so that you never miss an episode!

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[00:00] Eric: Hello, everyone, and welcome back to the Dairy Skim, HighGround Dairy’s bite-sized podcast intended to give the industry some flavor into recent reports or events that can impact global commodity pricing. Today is Thursday, July 6th, and I’m Eric Meyer, President of HighGround, and USDA just published the May 2023 Dairy Products Production & Dry Stocks report. Of all the major reports we dig into, this one has the most data points to cover, and I’m joined today by Betty Berning, HighGround’s Contributing Dairy Economist, to quickly review some of the key points before she gets under the hood to provide our subscribers with the comprehensive analysis they have come to know and love.

[00:43] First, I’ll take a quick look at the cheese data. To be honest, there wasn’t a whole lot that changed here from recent trends. This is the second straight month that total cheese fell slightly from the previous year, yet that’s still over 1.2 billion pounds of cheese made in this country in May. Cheddar followed an upward trend, up  4.5% versus the previous year and has been higher than 2022 in all five reported months in 2023. Mozzarella cheese production ticked 1% above the previous year, that’s the first time that occurred in the past three months and Parmesan production saw a significant boost to the upside, +10.4% from May 2022 and its strongest year-over-year gain since September 2022. Of note, Provolone production took a major hit in May, down nearly 29% or more than 14 million pounds from the previous year. Cream cheese saw an 8.9% decline and Ricotta cheese also saw an 18% decrease from May of 2022. All in all, the gains in Cheddar match up to the large increase in volume offered at the CME spot market, but it’s hard to call this report bearish when cheese prices are mired in the $1.30s.

Betty, what are you seeing in the butter complex?

[02:00] Betty: Thanks, Eric. The big news of the report was butter, which was bearish to expectations. May production was 194 million pounds, making this the biggest May number ever. Furthermore, churns turned out a whopping 8.1% more product relative to May 2022. Year-to-date production of 987 million pounds is trending 4.4% ahead of the same period in 2022, and just less than ten million pounds away from the record year of 2020. Butter production tends to decline from April to May by nearly 9%, but this year it was down just 4.4%, evidence of all of the excess milk in the country flowing to churns. Of note, West Coast manufacturers turned out more butter in May versus April, which is a pretty rare feat.

[02:57] Switching over to whey, dry whey production for human use increased year-over-year for the first time since January, up 1.7%. However, month-on-month, production was slightly down and stocks grew from April. Both of these data points are evidence of weak demand, and help to explain the 23-cent close, the lowest ever, in the CME spot market today.

[03:21] In the high protein space, WPC production was up 18% versus May 2022, and grew nominally from April, going against the normal decline. Lower-protein WPCs drove the month-on-month growth. Stocks of the 25-49.9% WPCs ballooned by 86% from May 2022 and have been growing ever since February.

[03:46] WPI production continued to trend lower against the comparable month in 2022 and were the lowest May values since 2018. Inventories fell on a month-on-month basis but remain heavy from a historical standpoint, sitting at nearly 23 million pounds, the most extensive May inventory since 2018.

[04:08] Eric: Thanks so much Betty for those hot takes. Lastly, I took a look at nonfat dry milk production for May, at 206 million pounts it was up 7% from the previous year, the fifth consecutive month of gains but when combining with skim milk powder production (which was down more than 30% from the previous year), total nonfat and skim milk powder output came in down 0.8%, the third consecutive month of year-over-year declines. Inventories did dip by 2%, or more than 6 million pounds from April, which isn’t the usual movement of stocks during peak production season, though did remain above 300 million pounds. That seems large on the surface but is actually a four-year low for May, the smallest manufacturing stock total since 2019. Does that change the recent downward trend in US nonfat dry milk prices? This market remains honed in on what global demand appears to be, and with the latest Global Dairy Trade Auction not providing much by way of bullish news, the recent trend will likely remain in place unless something tips the balance sheet in stronger fashion.

[05:16] Betty will be taking a closer look this evening at all of the data contained within the May Dairy Products Report and HighGround will publish our findings within a comprehensive analysis piece by late Friday morning (view the comprehensive analysis here). Thanks for tuning in and we’ll catch you right back here on Friday afternoon with our weekly recap.

Cheers, everyone.

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