Dairy Skim: November 2022 U.S. Dairy Products Report

Dairy Skim is a new bite-size episode series where HighGround’s Eric Meyer and Cara Murphy break down the latest USDA Dairy data release. Subscribe so that you never miss an episode!

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[00:04] Eric: Hi, everyone, and welcome to HighGround’s Dairy Skim!  It’s Friday afternoon, January 6th, 2023, and while we’d prefer to get ourselves out of the office to enjoy the weekend with our loved ones, the USDA dropped one of the most data-intensive reports in our laps just now, the November 2022 U.S. Dairy Products Production and Dry Stocks Report. With me today is Cara Murphy, HighGround’s Market Intelligence Manager, and she and I just had the pleasure of pouring through the report to see what stuck out. So Cara, what was the most important item that stuck out to you?

[00:39] Cara: Thanks, Eric, always fun to dig into these reports on a Friday afternoon.  What appeared to be the most interesting data point to me was U.S. butter production, UP nearly 14 million pounds from last November. That figure seemed to help justify why November ending stocks in the Cold Storage report, released last month, was well above expectations. In fact, the 8.9% production increase was the most significant year-over-year percentage gain in any month since December 2020.

[01:06] When digging further into the data, the Western region saw a huge increase in production from the previous year, up more than 12% from last November, but California, which represents approximately 61% of the Western region’s share, was only 5.9% higher. This means other plants outside of California saw a huge uptick in their butter production. With milk production below prior year in Washington and Oregon and just 0.5% above prior year in Arizona, HighGround believes that Idaho butter production must have been through the roof in November, given that their milk supply was UP 2.3% on a year-over-year basis.

[01:43] Now, butter prices have come down quite a bit since mid-December, from $2.90 per pound to $2.38 to close out the year and has gotten quiet ever since, but this data suggests there may be more butter out there. End-users and buyers may still need to get some coverage after the holiday lull in demand, but this data suggests we may still see a bottom at some point later in Q1 or Q2 this year if milk production continues to hold firm for a handful more months.

[02:09] Eric: Thanks Cara, appreciate that! Cheese production continued ramping up this month over the prior year with Cheddar up for the second consecutive month and Other Natural American, primarily Monterey Jack style cheese, growing above prior year for the first time in six months. That said, October to November monthly Cheddar production ticked lower on a daily average basis by 1.9%, which is opposite the 5-year average of 1% growth. Overall, we think the cheese market is neutral.

[02:40] Finally, the whey complex appears to be quite messy at the moment based on these numbers. Dry whey inventories are at their highest levels since 2019 and when looking at any of the whey protein concentrate or isolate inventory graphs, the trajectory remains at extremely high levels not seen since 2018 and not letting up–particularly the higher the percent concentration.  emand is sluggish for these value-add products and prices still need to come down to find equilibrium.

We’ll dig even further into the data with our comprehensive analysis that will will be published on our website to subscribers no later than Monday.  Thanks for listening!