Dairy Skim – June 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 June 2023 US Dairy Products Report. You 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

[00:05] Betty: 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 Friday, August 4th and USDA just released its June Dairy Products Report. I’m Betty Berning, Contributing Dairy Economist at HighGround Dairy. Let’s dive right in, shall we?

[00:32] In the past month, we’ve seen some markets ratcheting up after some pretty dismal prices in late June and early July. We expected to see some month-on-month declines in several commodities due to the US herd shrinking from May to June and milk production falling as a result—and that’s what happened for many commodities.

[00:54] Starting with cheese: total production of 1.17 billion pounds was up 0.4% from a year-ago and a month-ago, when we used 30-day adjusted months. However, that small increase month-on-month was less than the five-year average growth of 1.3% from May to June. So, kind of what we were expecting—markets have moved up and production has slowed a little bit more than one would expect seasonally. After a very strong spring of Cheddar production, vats ran slower in June, with total volumes down 2.1% from May to June and the category logging its first year-over-year decline in 2023. This, again, was likely driven by lower milk production. Cheddar volumes fell across all regions, and while production was off quite a bit in California (down 28% year-over-year), the rest of the West fared better with total production growing on an annual basis. Soft cheese production of things like mozzarella and ricotta, were down from June 2022, which would suggest lower demand for fresh cheeses, but Parmesan volumes, as an example—which is an aged cheese—increased.

[02:10] Moving over to Butter—that was actually slightly bullish to our expectations. Output was down 13.6% from May, which is a more substantial decline than the normal May to June decrease. The spot market has recently rallied and there was the big drop in stocks in the Cold Storage report, so decline in production wasn’t entirely surprising, but again points to less milk being available. With, butter, too, California’s production fell significantly, plummeting 12% from the prior month and it was also down from prior year.

[02:49] Nonfat dry milk output tends to also fall seasonally from May to June and did again this year. After a very big May print, output was down almost 10% in Juneon lowered volumes across the country—every region: Atlantic, Central, and West—compared to previous month. Stocks fell a modest four million pounds or 1.3% from June 2022, which was right at the five-year average. All of that said, with nonfat dry milk prices increasing in the past month from their lows, the slightly tightening numbers here in production and stocks help to explain some of that upward momentum we’ve seen in the markets.

[03:27] Rounding out the major commodities, dry whey was actually slightly bearish to expectations. Production grew month-on-month and year-over-year and totalled 79.6 million pounds. Stocks rose for the third month in a row, with 30 days of inventory sitting in warehouses.

Alright, I tried to keep it short since it’s Friday. More detailed analysis will be on its way. For those of you who are subscribers, watch your inbox. Have a great weekend, everyone!

Be sure to subscribe so that you never miss an episode. And if you’re interested in receiving more information, as well as our analysis, please visit highgrounddairy.com to request a free 30-day trial today. Futures and options trading involves substantial risk and is not suitable for all investors.