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Archive for American cheese

Dairy Margin Watch: Stable July Amid Strong Cheese Demand and Constrained Supply

Tuesday, July 16th, 2024

Learn how high cheese demand and limited supply are keeping dairy margins stable this July. Want to know how this affects milk prices and feed costs? Find out more.

Dairy margins remained stable in early July, with milk prices and feed costs holding steady. This stability reflects the broader market, as highlighted by the USDA’s July WASDE report, which projects new-crop corn production at 15.1 billion bushels—up 240 million due to increased planted and harvested areas. Adjustments in crop usage resulted in a slight drop in projected 2024-25 ending stocks to 2.097 billion bushels. Similarly, soybean ending stocks decreased by 20 million bushels to 435 million, staying within the expected ranges.

CategoryJuly 2023 EstimateJune 2023 EstimateChange
Corn Production (billion bushels)15.114.86+0.24
Ending Corn Stocks (billion bushels)2.0972.102-0.005
Soybean Ending Stocks (million bushels)435455-20
Cheese Production (billion lbs)1.2––
May Cheese Exports (million lbs)105.972.3+33.6
Class III Milk Price ($/cwt)19.5––

Strong Cheese Demand and Limited Spot Supply: Navigating the Current Dairy Market Challenges 

Strong cheese demand has been pivotal in supporting milk prices, further boosted by limited spot supply. Market challenges, including heat stress, avian influenza, and a constrained heifer supply, have tightened milk output. USDA reports note that cheesemakers have seen zero spot milk offers, a rare situation even during holiday weeks. This scarcity highlights the significant impact of these stressors on milk production.

Analyzing Cheese Production Variables: Parsing the Impacts on Milk Prices 

May cheese production saw a modest increase of 0.7% from the previous year, totaling just over 1.2 billion pounds. A closer look shows Mozzarella production surged by 7.1%, reflecting strong demand, while American cheese varieties, including Cheddar, declined by 5.7%. This reduction in Cheddar has driven up Class III milk prices, adding complexity to market dynamics for dairy producers.

Record-breaking Cheese Exports: A Pivotal Surge in the U.S. Dairy Landscape 

The significant growth in cheese exports, especially the surge to Mexico, is pivotal for the U.S. dairy industry. Over the past seven months, U.S. cheese exports have set new records even after seasonal adjustments. This trend highlights strong international demand alongside record domestic consumption, driving historically strong profit margins. Our analysis shows this dual demand—the global market expansion and local appetite—could continue to support milk prices, giving U.S. dairy producers a unique opportunity to capitalize on these robust conditions.

The Bottom Line

As we review the intricacies of the current dairy market, it becomes clear that supply constraints and robust demand are pivotal in shaping milk prices. The first half of July saw marginal stability in dairy margins, reflecting a balance between feed costs and milk prices, influenced by USDA estimates and market activities. Reduced corn and soybean stocks and increased cheese production and exports to Mexico present a multifaceted scenario. 

The USDA’s projection of higher new-crop corn production contrasts with a slight decrease in ending stocks, illustrating the complexities of balancing supply and demand. Meanwhile, the record-breaking surge in cheese exports underscores the U.S. dairy sector’s growing global influence. Strong cheese demand, limited spot milk supply, and factors like heat stress and avian influenza impact Class III milk prices, creating a favorable margin environment for forward contract planning. 

These market movements suggest a need for strategic foresight and adaptive measures within the dairy sector. Producers are encouraged to capitalize on favorable margins by extending coverage in deferred marketing periods. The current landscape calls for vigilant market monitoring and proactive risk management strategies to sustain profitability. Leveraging historical margins can strengthen positions and help confidently navigate the complexities ahead.

Key Takeaways:

  • Dairy margins remained largely unchanged in the first half of July.
  • The USDA’s July WASDE report aligns with analyst expectations for new-crop corn production at 15.1 billion bushels.
  • Projected 2024-25 ending stocks for corn are down by 5 million bushels to 2.097 billion bushels.
  • Soybean ending stocks saw a decline of 20 million bushels from June, totaling 435 million bushels.
  • Milk prices are buoyed by limited spot supply availability and robust cheese demand.
  • USDA reports indicate a significant constraint in milk output due to factors like heat stress, avian influenza, and limited heifer supply.
  • May cheese production witnessed a mild increase of 0.7% year-over-year.
  • Mozzarella production surged by 7.1%, while American varieties dropped 5.7% from last year.
  • Cheese exports reached a record high in May, up 46.6% from the previous year with substantial contributions from Mexico.
  • U.S. cheese exports have set records for seven consecutive months.
  • Domestic cheese demand has hit record levels in 10 of the past 17 months.
  • Clients continue to secure coverage in deferred marketing to leverage historically strong margins.

Summary:

In early July, dairy margins remained stable, with milk prices and feed costs remaining steady. The USDA’s July WASDE report shows new-crop corn production at 15.1 billion bushels, up 240 million due to increased planted and harvested areas. Adjustments in crop usage resulted in a slight drop in projected 2024-25 ending stocks to 2.097 billion bushels, and soybean ending stocks decreased by 20 million bushels to 435 million. Strong cheese demand has been pivotal in supporting milk prices, further boosted by limited spot supply. Market challenges, including heat stress, avian influenza, and a constrained heifer supply, have tightened milk output. May cheese production saw a modest increase of 0.7% from the previous year, totaling just over 1.2 billion pounds. Mozzarella production surged by 7.1%, reflecting strong demand, while American cheese varieties, including Cheddar, declined by 5.7%. The significant growth in cheese exports, especially the surge to Mexico, is pivotal for the U.S. dairy industry, as it highlights strong international demand alongside record domestic consumption, driving historically strong profit margins. Producers are encouraged to capitalize on favorable margins by extending coverage in deferred marketing periods and calling for vigilant market monitoring and proactive risk management strategies to sustain profitability.

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Will the Surge in Milk Prices Last? Analyzing Trends and Future Outlook

Thursday, July 11th, 2024

Will the surge in milk prices last? Discover the trends and future outlook for milk, cheese, and butter prices, and what it means for your grocery budget.

The early-year increase in milk prices has pleasantly surprised dairy producers in changing agricultural markets, characterized by shifting consumer preferences and fluctuating grain prices. While Class IV milk reached $21.08, a level not seen since mid-2022, June’s Class III milk price was notably $19.87, the most since December 2022. The economic situation of dairy farmers depends on this increase, which also influences the whole agricultural industry. With May’s revenue above feed price rising to $10.52, the greatest since November 2022, dairy producers have optimism given changing grain prices.

Record Highs in Class III and IV Milk Prices Signal Potential Market Stability

MonthClass III Milk Price ($)Class IV Milk Price ($)
January 202318.2719.60
February 202318.8820.22
March 202319.1720.75
April 202319.4421.05
May 202319.7521.08
June 202319.8721.08

The recent record highs in Class III and IV milk prices, the highest since December 2022, signal a potential market stability. With Class III milk reaching $19.87 and Class IV prices hitting $21.08, this increase could provide a stable market environment that would benefit both customers and operators, instilling a sense of reassurance in the industry.

Optimizing Feed Costs: A Path to Enhanced Dairy Farm Profitability

MonthFeed Cost ($/ton)
January290
February285
March275
April270
May268
June265

The recent increases in revenue above feed cost have substantially benefited dairy producers. Driven by dropping grain prices, the May number of $10.52 is the highest since November 2022. Grain prices fall; lowering feed costs increases dairy farmers’ profit margins. Should present grain market patterns continue, dairy producers might lock in low feed costs, thus providing financial stability for the following year. Using forward contracts or other financial instruments to hedge against growing feed costs can guarantee ongoing profitability. Although the future is bright, awareness is required as grain market volatility might rapidly alter the scene and call for swift decisions. The conditions provide a great chance to maximize feed costs and increase revenue above feed prices, enabling a steady and prosperous future in the dairy sector.

The Evolution of Cheese Production: American vs. Italian Varieties 

MonthAmerican Cheese Production (Million lbs)Italian Cheese Production (Million lbs)
January475.2487.1
February450.6472.8
March460.5485.9
April470.3490.7
May488.2505.0
June473.0498.3

The mechanics of American cheese manufacturing have shown interesting patterns deserving of conversation. Since the beginning of the year, output has been steadily declining; May 2023 shows a 5.7% drop over the year before. This tendency is shocking when compared to consistent milk output statistics. Production methods and market tastes most certainly have the answer. Particularly Italian-type cheeses, there is a clear shift towards other cheese types. Italian cheese output is much greater than it has been in 2023 and exceeds past year averages. Changing consumer preferences, such as preferring mozzarella and parmesan over conventional American cheese, caused this change.

Essential elements include worldwide gastronomic trends and well-liked meals such as pasta and pizza with Italian cheese. Driven by a passion for culinary variety and premium, handcrafted goods, consumer behavior demonstrates a rising predisposition for varied and gourmet cheese selections. Responding to worldwide demand trends, the sector is realigning its manufacturing strategy to take advantage of higher-margin items.

Therefore, the whole cheese production spectrum is vital even if American cheese stocks are still below the previous year’s. This implies that American cheese production is declining, led by Italian-type cheese’s appeal and significant outputs, but the sector is rebounding. The industry creates paths for possible market stability and profitability as it adjusts to these changing consumer patterns.

Analyzing American Cheese Inventory: What Lower Levels Mean for Future Pricing

MonthAmerican Cheese Inventory (Million Pounds)Year-Over-Year Change (%)
January700-3%
February710-2%
March720-1%
April715-4%
May700-5%

American cheese inventory has always been below last year, which should help to explain why prices should rise given demand growth. The fluctuations in overall cheese output—some months larger and others lower—have kept stockpiles close. Still, demand for American cheese has not skyrocketed; careful consumption has kept prices erratic instead of steadily increasing.

Should demand follow last year’s trends, limited supply may cause prices to rise. Cheese consumers’ careful approach shows a wait-and-see attitude toward changing output. Record-high cheese exports in March, April, and May positively signal worldwide solid demand, supporting the market even with higher pricing points.

American cheese prices can get under increasing pressure if strong export demand meets or surpasses local consumption. Stable or declining feed prices increase the likelihood of this, enhancing dairy companies’ general profitability. Thus, cheese inventory and demand dynamics provide a complex projection with possible price rises depending on the stability of the local and foreign markets.

Robust Cheese Exports: Navigating Record Highs and Future Uncertainties 

Month2022 Cheese Exports (million pounds)2023 Cheese Exports (million pounds)Percentage Change
January75.581.2+7.5%
February68.172.4+6.3%
March73.078.5+7.5%
April74.280.1+7.9%
May76.482.3+7.7%

With record highs in March, April, and May, the latest patterns in cheese exports show a strong market presence. This expansion indicates a robust global demand even if cheese prices increase. Higher costs usually discourage foreign consumers, but the consistency in export numbers indicates a strong worldwide taste for U.S. cheese. This helps the dairy sector maintain a competitive advantage in changing pricing.

Still, the viability of this tendency is being determined. Should prices keep rising, specific foreign markets could change their buying policies, reducing demand. A wide variety of cheese products appealing to different tastes might balance this risk and guarantee ongoing demand.

Strong cheese exports support the worldwide posture of the U.S. dairy sector and help to steady home milk prices. Strong cheese and butter exports should provide dairy producers a solid basis as worldwide butter demand increases, enabling them to negotiate price constraints and market expectations boldly.

Although cheese exports are moving in an encouraging direction now, stakeholders must be alert. Maintaining development depends on examining price changes and reactions in foreign markets. Balancing high local pricing with worldwide solid demand will rely primarily on creative ideas in strategic market participation and product offers.

Global Butter Demand: Navigating the Surge and Potential Market Ripples 

YearDomestic Demand (Million Pounds)International Demand (Million Pounds)Total Demand (Million Pounds)
20201,4801,2952,775
20211,5251,3202,845
20221,5451,3502,895
20231,5701,3752,945

A promising increase in international butter demand suggests a possible influence on butter prices in the following months. Driven by better economic times and a rising consumer taste for dairy products, recent statistics show a consistent comeback in world butter exports. Rising worldwide demand will cause butter prices to be under increasing pressure. Strong export demand historically matches rising local pricing, which helps manufacturers. Should export growth continue, this tendency is likely to endure.

Nevertheless, supply chain interruptions, geopolitical concerns, and changing feed prices might influence market circumstances. Low-cost manufacturers from developing nations also bring challenges of price competition. Driven by strong worldwide demand, the butter industry seems ready for expansion, yet players must constantly observe changing dynamics.

Strategic Outlook: Navigating the Future of Milk Prices Amid Market Dynamics and Economic Factors

Milk prices’ path will rely on several significant variables that combine market dynamics with general economic circumstances. While sustained high prices provide hope, they also present possibilities and problems for buyers and producers.

High prices allow producers to increase profitability through capitalization. Locking in favorable feed prices might lead to significant cost savings, considering the present grain price pressure. Diverse manufacturing of highly sought-after cheeses, including Italian-type cheeses, could improve income sources, fostering a sense of optimism in the industry.

Risks, however, include changes in foreign demand and erratic market circumstances. Higher costs discourage worldwide consumers, affecting local pricing and exports. Furthermore, changes in consumer tastes toward plant-based dairy substitutes might slow down conventional dairy industry expansion. To stay competitive, the sector has to be creative.

Buyers must guarantee consistent supply chains in retail and food service despite changing customer patterns and costs. Higher prices need flexible pricing policies and intelligent buying. Matching goods with customer tastes for sustainability, and better choices might provide a business advantage.

Although milk prices’ future is bright and unknown, stakeholders may utilize strategic foresight and flexibility to seize possibilities and reduce risk. Tracking consumer behavior and market trends can help buyers and producers flourish in a changing dairy environment.

The Bottom Line

The present success in Class III and IV milk pricing shows a solid but delicate balance for dairy farmers as we negotiate the subtleties of the dairy market. Recent highs encourage a look at lifespan and environmental impact. Changing cheese production patterns, grain price swings, and better revenue over feed ratios highlight a dynamic market. The drop in American cheese output against the increase in Italian cheese reveals a complicated customer choice and market adaption story. Strong cheese export performance reveals the sector’s worldwide resiliency even against growing prices. This should inspire cautious optimism by implying better circumstances ahead and continuous foreign demand. Still, volatility is natural, especially given the changing global butter demand and possible export rebounding. Shielding against downturns mostly depends on careful planning and hedging of expenses. In the end, even if the increase in milk prices provides relief and a promising future, monitoring and market and consumer trend adaptability are crucial. Maintaining momentum and guaranteeing long-term viability will depend on pushing sustainability and openness.

Key Takeaways:

  • Higher Milk Prices: Both Class III and Class IV milk prices reached their highest levels since December 2022, signaling potential market stability.
  • Enhanced Income Over Feed: The income over feed price has been improving, with lower grain prices potentially boosting dairy farm profitability in the near term.
  • Shift in Cheese Production: A noticeable trend towards Italian-type cheese production, despite a decline in American cheese output, could reshape market dynamics.
  • Consistent Cheese Inventory: Lower American cheese inventory levels, paired with steady demand, may lead to higher prices if consumption rises.
  • Strong Export Markets: Record-high cheese exports in recent months indicate robust international demand, which could sustain higher prices moving forward.
  • Global Butter Demand: Improving international butter demand suggests potential price increases if export strength continues throughout the year.

Summary:

The dairy industry has experienced a significant increase in milk prices, signaling potential market stability. Class IV milk reached $21.08, the highest level since mid-2022, and June’s Class III milk price was $19.87, the most since December 2022. This has impacted the economic situation of dairy farmers and the agricultural industry. May’s revenue above feed price rose to $10.52, giving dairy producers optimism due to changing grain prices. Record highs in Class III and IV milk prices provide a stable market environment that benefits both customers and operators. Lowering feed costs can increase dairy farmers’ profit margins, and if present grain market patterns continue, producers might lock in low feed costs, providing financial stability for the following year. Using forward contracts or other financial instruments to hedge against growing feed costs can guarantee ongoing profitability. The evolution of cheese production, particularly American vs. Italian varieties, has shown interesting patterns, with strong export demand meeting or surpassing local consumption, enhancing dairy companies’ profitability. Global butter demand is expected to influence butter prices in the coming months, driven by better economic times and rising consumer tastes for dairy products.

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U.S. Dairy Exports Drop 5% in May as Cheese Continues to Shine Amid a Challenging Year

Wednesday, July 10th, 2024

Uncover the factors behind the 5% dip in U.S. dairy exports for May, even as cheese exports surged. Can the dairy sector overcome these hurdles and sustain its presence in the global market?

These initiatives, designed with a proactive approach, represent a strategic goal to boost the U.S. dairy industry. The investment in experimental projects for value-added skim milk powder sales to Southeast Asia is a testament to our progressive attitude towards consumer needs. Products such as ESL/aseptic fluid milk, evaporated/condensed milk, and ice cream now receive fat-equivalent support, a deliberate diversification strategy to improve our export profiles.

Furthermore, establishing an advisory council for strategic direction underscores our commitment to industry-wide cooperative efforts. The council’s first emphasis on precompetitive assistance ensures that even smaller companies have opportunities in the global market. The NMPF Executive Committee and the entire board have meticulously planned to increase the industry’s international profile, a goal we all share and are proud to work towards.

Conversely, the larger scene of agricultural commerce seems negative because May’s numbers support an unparalleled trade imbalance. Changing trade links, currency volatility, and global pricing rivalry distort the picture. The USDA Economic Research Service projects a record $32 billion trade imbalance by the end of 2024, stressing significant difficulties ahead for American agriculture.

This disparity emphasizes a crucial point: whereas specific dairy sectors benefit from strategic initiatives and high overseas demand, the agriculture export industry has structural challenges. Essential actions to guarantee a steady increase in U.S. dairy exports in a competitive worldwide market include updating trade agreements and increasing workforce availability.

Cheese Leads the Charge Amidst a Mixed Bag for U.S. Dairy Exports

The U.S. Dairy Export Council reports that May’s dairy exports dropped by 5% after April, which showed an encouraging increase. This drop emphasizes the market’s unequal performance, whereas cheese still shows a fantastic upward tendency. With a 27% rise over the first five months of 2024, U.S. cheese exports in May totaled 48,029 metric tons, up 47% yearly and somewhat less than March’s record number. Strong demand from China’s pig sector also increased Whey exports by 19%.

However, these increases were countered by a dramatic reduction in nonfat dry and skim milk powder shipments to Southeast Asia, which fell 51% yearly to 14,265 metric tons. Weak currencies in the area and fierce worldwide competitiveness help explain this decline.

U.S. Cheese Exports Shine Bright in a Cloudy Dairy Market

American cheese exports shined brilliantly in May, with a substantial 47% year-over-year rise. Driven by American dairy producers’ constant excellence and inventiveness, this explosion emphasizes the worldwide desire for American cheese. Cheese exports have shown strong resilience throughout the first five months 2024, rising by 27%. Record-high March volumes highlight even more the tremendous worldwide demand for American cheese.

Whey Exports Surge Amidst Turbulence, Driven by China’s Growing Demand

Whey exports maintained an upward tendency in a changing U.S. dairy export market. Driven chiefly by great demand from China’s recovering pork sector, whey exports in May showed a noteworthy 19% rise over the year before. This comeback in China’s hog output has made whey even more critical as an ingredient in animal feed. This requirement emphasizes the need to focus on specific international markets to negotiate global competitiveness, currency changes, and the links among many industries.

Global Competition and Economic Pressures Batter U.S. NDM and SMP Exports, Plunging 51% in May

Among the general drop in U.S. dairy exports, nonfat dry milk (NDM) and skim milk powder (SMP) dropped by 51% yearly in May. Various reasons have led to this sharp decline in U.S. exports to Southeast Asia. Mainly from Australia, Europe, and New Zealand—places that gain from reduced manufacturing costs and strategic trade agreements—the heightened global competitiveness from these countries has given them a competitive advantage over American exporters.

The economic difficulties in Southeast Asia aggravate the problem even further. American dairy goods are more expensive and less appealing when weaker currencies in many nations lower their buying power against the U.S. dollar. This junction of fierce competitiveness and financial restrictions shows the problematic environment U.S. dairy exporters must negotiate. To recover power in Southeast Asia, American dairy goods could make a strategic turn, including improved marketing, focused trade agreements, and investigation of new market niches.

CWT Program: A Pillar of Support in U.S. Dairy Export Success

U.S. dairy exports are increasing thanks to the Cooperatives Working Together (CWT) program, a voluntary, producer-funded program that helps U.S. dairy farmers by strengthening and maintaining the demand for dairy products. Thanks to CWT’s help, an extra 5.4 million pounds of dairy products were included in sales in June. CWT-supported export sales the year to date show 45.9 million pounds of American-type cheese, 309,000 pounds of butter, 769,000 pounds of anhydrous milkfat, 18 million pounds of whole milk powder, and 5.9 million pounds of cream cheese. This amounts to 627.8 million pounds of milk on a milkfat basis sent to 27 nations across five continents. Navigating changing market circumstances depends much on the effect of the CWT program.

May’s Dairy Heifer Replacement Exports Highlight Market Vulnerabilities

With an 87% drop from April, May’s dairy heifer replacement exports provide a worrying picture. Distribution of only 241 dairy heifers marked a dramatic decline from April’s 1,808 head. Turkey and Vietnam made significant acquisitions in April, totaling more than 2,000 head, which marks this fall-off. May’s shipments went only to North American partners; Mexico bought 178 and Canada 63. This geographical emphasis reflects patterns from February, therefore illustrating continuous difficulties in the U.S. dairy export sector.

Dairy Embryo Exports Show Robust Growth, Highlighting Market Opportunities and Regional Variability

Exports of dairy embryos were resilient, jumping 13% in May. The UK, Germany, China, and Honduras were key customers, reflecting different market conditions. Germany’s purchases jumped by 52%, while Brazil’s imports declined from 93 to 75 embryos to show regional variances.

U.S. Hay Exports Continue Downward Trend: Alfalfa and Other Varieties Reflect Mixed Market Dynamics

Hay exports remained dropping in May for the second straight month. Year-to-date sales topped 1,013,054 metric tons, while U.S. alfalfa hay exports fell by 12% to 198,993 metric tons. Though their purchases dropped 13% and 8%, respectively, China and Saudi Arabia remained the largest consumers. Japan did boost imports by 2% to 35,424 metric tons.

Other hay exports dropped by 1% in May, following a similar, albeit less dramatic, trend. Japan also dominated in this area with an 11% rise to 55,178 metric tons; South Korea’s imports dropped 13% to 25,466 metric tons. With 96,302 metric tons of other hay shipped overall in May, the U.S. has sold 464,352 metric tons year-to-date.

May Figures Paint a Bleak Picture of U.S. Agricultural Trade Deficit 

May’s numbers concerning the U.S. agriculture trade balance provide a concerning narrative. Exports were $13.739 billion; imports were $18.009 billion, producing a $4.269 billion deficit. With a deficit of $15.218 billion, the fiscal year-to-date is at an all-time high. By 2024, the U.S. Department of Agriculture projects an unheard-of $32 billion trade imbalance.

Several factors contribute to this worsening trade balance: 

  • Falling Commodity Prices: Lower prices for key American crops reduce export revenues, aggravated by international competition.
  • Strong U.S. Dollar: A strong dollar makes U.S. goods pricier abroad, deterring foreign buyers.
  • Labor Challenges: High labor costs and worker shortages hamper productivity.
  • Stagnant Trade Agreements: No new trade deals since 2012 have disadvantaged U.S. agriculture.
  • Economic Conditions in Partner Countries: Weak currencies in Southeast Asian regions reduce their buying power.

Addressing these issues through strategic trade negotiations, labor investments, and policies to stabilize prices and currencies is crucial to reversing this trend.

The Bottom Line

As we negotiate the complexity of the U.S. dairy export market, it’s evident that although cheese and whey are booming, others face significant challenges. May’s numbers show this uneven performance; cheese exports lead the way, while nonfat dry milk and skim milk powder struggle against world competitiveness and financial constraints.

These opposing results highlight more general difficulties in the dairy export scene—a market molded by changing demand, foreign rivalry, and economic uncertainty. Driven by China’s demand, whey’s comeback emphasizes prospects in specialized markets; cheese exports have consistently demonstrated a substantial increase. On the other hand, the sharp drops in skim milk powder and nonfat dry milk expose weaknesses in worldwide competitiveness and exchange rates.

The general agriculture trade imbalance exposes fundamental market problems, further complicating the situation. Dairy exporters will have to negotiate economic headwinds even if price recovery is possible in the following months. Using Cooperatives Working Together (CWT) assistance, developing focused pilot projects, and adding operational flexibility will help U.S. dairy goods be more visible on the market. Furthermore, sustainability and creativity might provide a competitive advantage worldwide.

The American dairy sector finds itself at a turning point. Maintaining adaptability and forward-looking by prioritizing strategic interventions and encouraging international cooperation would help. Although the difficulties are great, so are the chances for development and change worldwide.

Key Takeaways:

  • Cheese Exports: Increased by 47% year-over-year to 48,029 metric tons, maintaining strong performance.
  • Whey Exports: Rose by 19% compared to last year, driven by robust demand from China.
  • Nonfat Dry Milk (NDM) and Skim Milk Powder (SMP): Experienced a significant 51% drop due to global competition and weaker currencies in Southeast Asia.
  • CWT-Assisted Sales: Surpassed 5 million pounds in June, with notable contracts for cheese, butter, and other dairy products.
  • Dairy Heifer Replacements: Recorded an 87% decline in May, with trading limited to North American partners.
  • Dairy Embryo Exports: Increased by 13%, showcasing market potential in several regions.
  • Hay Exports: Continued to decline, with a 12% drop in alfalfa hay sales and a slight decrease in other hay varieties.
  • Agricultural Trade Deficit: Reached -$4.269 billion in May, contributing to a record fiscal year-to-date deficit of $15.218 billion.

Summary:

The U.S. dairy industry is focusing on boosting exports by investing in value-added skim milk powder sales to Southeast Asia and establishing an advisory council for strategic direction. These efforts aim to diversify products like ESL/aseptic fluid milk, evaporated/condensed milk, and ice cream, improving their export profiles. However, the agricultural trade landscape faces significant challenges, with a $32 billion trade imbalance projected by the USDA Economic Research Service by the end of 2024. Cheese exports have shown a strong upward trend, with a 27% rise over the first five months of 2024. However, nonfat dry and skim milk powder shipments to Southeast Asia fell 51% yearly to 14,265 metric tons. American cheese exports have shown resilience, rising by 27% in May, driven by the excellence and inventiveness of American dairy producers. Whey exports have also seen a significant 19% rise in May, driven by China’s recovering pork sector. To recover power in Southeast Asia, American dairy goods could make a strategic turn, including improved marketing, focused trade agreements, and exploration of new market niches. Addressing these issues through strategic trade negotiations, labor investments, and policies to stabilize prices and currencies is crucial to reversing this trend.

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Unexpected Trends in the U.S. Dairy Industry: Fluid Milk Sales and Cheese Exports Rise Amid Steady Decline in Milk Production

Wednesday, June 19th, 2024

Discover why U.S. fluid milk sales and cheese exports are surging despite a decline in production. How is this shift impacting the dairy market? Read more to find out.

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Unexpectedly for the U.S. dairy business, fluid milk sales and cheese exports are rising even as milk output steadily declines. Adjusting for the leap year, fluid milk sales jumped by about 100 million pounds in the first four months of the year over the previous year. Cheese exports concurrently reach a record 8.7 percent of total output from February to April, the most ever for any three months or even one month. These unexpected patterns can be attributed to a variety of factors, including changing consumer preferences, global market dynamics, and technological advancements in dairy production. The wider consequences for the dairy industry, such as shifts in market share and potential economic impacts, are also investigated in this paper.

Despite the challenges of falling milk output, the U.S. dairy industry is demonstrating remarkable resilience with the rise in fluid milk and cheese exports. This unexpected trend holds promising implications for producers and consumers, instilling a sense of hope and optimism in the industry.

As the dairy industry negotiates these changes, fast rises in cheese prices have significantly raised the Class III price, underlining the market’s reaction. Examine the elements underlying these patterns and the possible long-term effects on domestic consumption and foreign commerce.

A Surprising Rebound: Fluid Milk Sales Surge Amid Shifting Consumer Preferences

MonthFluid Milk Sales (million pounds)
May 20224,500
June 20224,450
July 20224,470
August 20224,480
September 20224,460
October 20224,490
November 20224,500
December 20224,510
January 20234,520
February 20234,530
March 20234,550
April 20234,600

With a roughly 100 million pound gain and a 0.7 percent leap year-adjusted surge, this unprecedented spike in fluid milk sales highlights a dramatic change in consumer behavior. Rising health awareness and the availability of dairy substitutes have usually been causing fluid milk intake to drop. But this increase might point to changing market dynamics or fresh enthusiasm for milk’s nutritious value.

Dairy ProductChange in Consumption (Percentage)
Fluid Milk+0.7%
American Cheese-1.2%
Yogurt+2.4%
Non-American Cheeses+1.5%
Butter-0.8%
Ice Cream-1.0%

The changes in domestic dairy consumption create a complicated scene for the American dairy business. While butter, ice cream, and American cheese consumption have dropped, fluid milk sales may have increased due to changing habits or knowledge of nutritional value. Growing worries about health, animal welfare, and environmental damage define this downturn.

On the other hand, demand for yogurt and non-American cheeses has surged. Yogurt’s probiotics and health advantages attract health-conscious customers. Non-American cheeses benefit from their superior quality, appeal to refined tastes, and clean-label tendencies.

This difference draws attention to shifting customer demands and the need for dairy farmers to adjust. Stakeholders trying to seize market possibilities in a dynamic economic environment must first understand these trends.

American Cheese Exports Set New Record: A Game-Changer for the U.S. Dairy Market

The U.S. dairy market has witnessed a notable shift in export trends over the past year, which can largely be attributed to evolving global demand and intensified trade relations. Cheese exports, in particular, have set new benchmarks, reflecting both opportunities and challenges in the international marketplace. Below is a detailed table outlining the changes in cheese exports over the past year: 

MonthCheese Exports (Million Pounds)Year-over-Year Change (%)
January 2023605.2%
February 2023584.9%
March 2023657.5%
April 2023709.8%
May 20237211.1%
June 2023688.3%
July 20237510.7%
August 20238012.5%
September 20237811.4%
October 20238213.2%
November 20238514.1%
December 20238815.3%
  • Key Export Markets: Japan, Mexico, South Korea
  • Emerging Opportunities: Southeast Asia, Middle East
  • Challenges: Trade policies, supply chain disruptions

With 8.7% of total output moving abroad, the United States saw an increase in cheese exports between February and April. This fantastic number emphasizes the increasing worldwide market for American cheese. The milestone points to a change in the strategic emphasis of the U.S. dairy sector as producers show their capacity to meet and surpass the demands of foreign markets, therefore implying a future in which exports will be more important economically.

Milk Production Plunge: Unpacking the Multifaceted Decline in the U.S. Dairy Sector 

In examining the shifting landscape of the U.S. dairy market, it’s imperative to consider the nuances in milk productiontrends that have unfolded over the past year. These trends highlight the recent downturn in production and provide a lens through which we can better understand the broader dynamics at play. 

MonthMilk Production (billion pounds)% Change (Year-over-Year)
April 202218.1-0.4%
March 202217.9-0.5%
February 202216.0-0.6%
January 202217.5-0.7%
December 202117.7-0.8%
November 202116.8-0.9%
October 202116.9-1.0%
September 202116.0-1.1%
August 202118.0-1.2%
July 202118.2-1.3%
June 202117.8-1.4%
May 202118.1-1.5%

Adjusting for the leap year, the continuous reduction in U.S. milk production—0.4 percent in April—has lasted 10 months. For the dairy sector, this development begs serious questions.

Many factors are driving this slump. First, dairy farmers have been under pressure from changing consumer tastes that influence demand. Growing demand for plant-based and dairy substitutes is reshaping the market share controlled initially by cow’s milk. Furthermore, changing customer behavior and ethical and environmental issues influence production levels.

The low cow count raises yet another critical question. Modern and conventional dairy states have battled dwindling or stagnating cow numbers. Growth patterns in cow counts have slowed dramatically in contemporary dairy states since 2008; some years even show reductions. This has lowered milk availability, together with a volatile macroeconomic backdrop.

Dairy farmers also face many operational difficulties, such as supply chain interruptions, personnel shortages, and the need for fresh technologies. These problems tax the industry’s ability to sustain past output levels even as manufacturers seek creative ideas.

Dealing with these entwined problems would help to stop the drop in output and guarantee the resilience and sustainability of the American dairy market against changing consumer tastes and financial uncertainty.

Turbulent Trends: How Consumer Values and Supply Chain Challenges Propelled Cheese Prices Skyward

The past year has witnessed significant fluctuations in the dairy market, with particular emphasis on cheese prices, which have experienced rapid increases. This section breaks down the price trends over the past year to provide a comprehensive understanding of the market dynamics. 

MonthClass III Milk Price (per cwt)Cheese Price (per lb)Butter Price (per lb)
May 2022$25.21$2.29$2.68
June 2022$24.33$2.21$2.65
July 2022$22.52$2.00$2.61
August 2022$20.10$1.95$2.50
September 2022$21.86$2.10$2.55
October 2022$21.15$2.03$2.53
November 2022$20.72$2.01$2.60
December 2022$21.55$2.05$2.58
January 2023$20.25$1.98$2.55
February 2023$18.67$1.85$2.50
March 2023$19.97$1.92$2.55
April 2023$20.25$2.01$2.52
May 2023$23.30$2.35$2.70

Many complex elements reflecting more significant market dynamics drove the increase in cheese prices throughout May. The dairy sector has seen a paradigm change as consumer tastes center on health, environmental issues, and animal welfare more and more. These higher ethical standards call for more rigorous behavior, which drives manufacturing costs. A turbulent macroeconomic climate, ongoing supply chain interruptions, and workforce difficulties further limit cheese supplies. Cheese prices skyrocketed as demand for premium dairy products continued locally and abroad, and supply ran low.

The May Class III price, which rose by $3.05/cwt from the previous month, was substantially affected by this price increase. Primarily representing the worth of milk used for cheese manufacture, the Class III price is a benchmark for the larger dairy market. This sharp rise emphasizes how sensitive commodity prices are to quick changes in specific sectors, stressing the cheese market’s importance in the national dairy economy. Dairy farmers must balance growing expenses with remaining profitable while meeting changing customer expectations.

The Bottom Line

The surprising surge in fluid milk sales and record-breaking cheese exports within the changing terrain of the U.S. dairy industry contrasts sharply with the continuous drop in milk output. The 0.7 percent rise in milk sales points to a change in consumer behavior, motivated by a fresh enthusiasm for classic dairy products. On the other hand, American cheese’s demand internationally has skyrocketed; 8.7% of output is exported, suggesting great worldwide demand and a possible new income source for home producers.

Adjusting for the leap year, the consistently declining milk output—now at ten straight months of year-over-year decline—showcases important production sector issues probably related to feed price volatility and long-term changes in dairy farming techniques. Reflecting these supply restrictions and shifting market dynamics, the substantial rise in cheese prices fuels a significant increase in the May Class III price.

These entwined tendencies point to both possibilities and challenges for American dairy farmers, implying a tricky balancing act between satisfying home demand, profiting from foreign markets, and negotiating manufacturing efficiency and cost control.

Key Takeaways:

In an evolving landscape marked by shifting consumer preferences and unprecedented export achievements, the U.S. dairy market has experienced stark contrasts in its fluid milk sales, cheese exports, and milk production. Below are the key takeaways from these recent developments: 

  • U.S. fluid milk sales rose by nearly 100 million pounds, or 0.7% on a leap year-adjusted basis, during the first four months of this year.
  • While domestic consumption of most major dairy products decreased, yogurt and non-American types of cheese saw increased domestic demand.
  • A record 8.7% of total U.S. cheese production was exported between February and April, marking an all-time high for this period.
  • April 2023 witnessed a 0.4% decline in U.S. milk production compared to April 2022, continuing a ten-month trend of lower year-on-year production figures.
  • Cheese prices surged in May, driving the May Class III price up by $3.05 per hundredweight from the previous month.

Summary: 

The U.S. dairy industry has experienced a significant increase in fluid milk sales and cheese exports, despite declining milk output. Fluid milk sales jumped by about 100 million pounds in the first four months of the year, while cheese exports reached a record 8.7% of total output from February to April. This unexpected trend can be attributed to changing consumer preferences, global market dynamics, and technological advancements in dairy production. The wider consequences for the dairy industry include shifts in market share and potential economic impacts. Despite these challenges, the U.S. dairy industry is demonstrating remarkable resilience with the rise in fluid milk and cheese exports. This trend holds promising implications for producers and consumers, instilling a sense of hope and optimism in the industry. However, as the dairy industry negotiates these changes, fast rises in cheese prices have significantly raised the Class III price, underlining the market’s reaction. American cheese exports set a new record for the U.S. dairy market, reflecting both opportunities and challenges in the international marketplace. Addressing these entwined problems would help prevent the drop in output and guarantee the resilience and sustainability of the American dairy market against changing consumer tastes and financial uncertainty.

Learn More:

For further insights into this evolving landscape, consider exploring the following articles: 

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U.S. Cheese Production in April: Italian Cheese Surges, American Cheese Declines

Sunday, June 9th, 2024

Dive into April’s U.S. cheese production trends. Curious about the rise of Italian cheese and the decline of American cheese? Uncover the compelling data and regional details.

April presented a mixed landscape for U.S. cheese production, with both promising gains and notable declines. According to the USDA, total cheese output, excluding cottage cheese, reached 1.19 billion pounds, up 1.8% year-over-year but down 3% from March. Italian-type cheese production rose by 6.2% from last year to 504 million pounds, though it fell 2.8% from March. On the other hand, American cheese production declined by 4.7% year-over-year and 4.3% from March, totaling 468 million pounds. 

“The mixed trends in U.S. cheese production signal both resilience and challenges within the industry,” the USDA report suggests.

CategoryProduction (Million Pounds)Year-Over-Year ChangeMonth-Over-Month Change
Total Cheese (excluding cottage)1,190+1.8%-3.0%
Italian-Type Cheese504+6.2%-2.8%
American Cheese468-4.7%-4.3%
Butter208+5.3%-1.0%
Nonfat Dry Milk173-12.7%—
Skim Milk Powder36.3-20.8%—
Dry Whey—+2.1%—
Lactose—-1.5%—
Whey Protein Concentrate—-6.1%—
Hard Ice Cream64.7 million gallons+7.3%—

Mixed Signals in April U.S. Cheese Production Reflecting Varied Trends 

According to the USDA data, total cheese output, excluding cottage cheese, reached 1.19 billion pounds in April. This marks a 1.8% increase compared to the same period last year but shows a 3% decrease from March. The production dynamics underscore a mixed trend in U.S. cheese production for the month, reflecting both year-over-year growth and month-over-month decline.

Italian Cheeses Shine Year-Over-Year Despite Monthly Dip

Italian-type cheese production showcased a remarkable upturn, reflecting a year-over-year surge of 6.2%, culminating at 504 million pounds. Despite this annual growth, the month-over-month comparison revealed a marginal dip of 2.8% from March. This duality underscores both the strong demand for Italian cheeses over the year and the seasonal or market-driven fluctuations that influence monthly production volumes.

American Cheese Production Faces Significant Challenges in April

Amid the intricate landscape of U.S. cheese production, American cheese has faced a particularly challenging month. Specifically, April witnessed a decline in American cheese output, both when compared year-over-year and month-over-month. Production fell by 4.7% from April last year, resulting in a total output of 468 million pounds. The month-over-month comparison is similarly bleak, with a 4.3% decrease from March, accentuating the downward trend in this particular cheese category. This dual decline highlights ongoing shifts within the industry, signaling potential adjustments in consumer demand and production focus.

Butter Production Sees Minor Monthly Dip Amidst Impressive Annual Growth 

Butter production trends exhibited a complex pattern, reflecting the overarching variability in the dairy sector. While there was a minor decline of just over 1% in butter output compared to March, the sector demonstrated resilience with a notable 5.3% increase compared to the same period last year. This duality in trends is indicative of broader market dynamics and seasonal production adjustments. In total, April’s butter production reached 208 million pounds, underscoring both the short-term and long-term shifts in the dairy landscape.

Sharp Declines in Dry Dairy Products Highlight April’s Downturn

Dry dairy products presented a downward trend in April, with significant declines observed in both nonfat dry milk and skim milk powder production. Nonfat dry milk saw a steep reduction, recording a 12.7% drop to reach a total of 173 million pounds. Skim milk powder production experienced an even sharper decline of 20.8%, culminating in a total output of 36.3 million pounds compared to the same period last year.

Contrasting Fortunes Within Dry Dairy Production Reflect April’s Complex Landscape 

Nevertheless, not all dry dairy products shared the same fate. Dry whey production, for instance, edged up by 2.1%, offering a glimmer of optimism amidst broader declines in the sector. Specifically, dry whey output reached notable levels, counteracting the overarching downtrend. Conversely, lactose production did not fare as well, registering a 1.5% decline. Even more striking was the significant 6.1% decrease in whey protein concentrate production. Collectively, these figures underscore the mixed results within the dry dairy product landscape, highlighting areas of both growth and notable declines.

Unprecedented Fluctuations in Frozen Dairy Production: Hard Ice Cream Surges While Other Categories Slide

Frozen dairy product output varied significantly in April, illustrating a mixture of trends within the industry. The production of hard ice cream notably climbed by an impressive 7.3%, reaching 64.7 million gallons. This increase stands in stark contrast to the declines observed in other frozen dairy categories. The production of low-fat ice cream, sherbet, and frozen yogurt all experienced downturns, highlighting the sector’s fluctuations and the diverse consumer preferences shaping production dynamics.

Regional Production Trends: Wisconsin’s Cheddar Supremacy and California’s Mozzarella Dominance

In examining regional production trends, the data reveals that Wisconsin continues to dominate the Cheddar cheese market, producing an impressive 60.38 million pounds in April. California follows, contributing 21.29 million pounds to the nation’s Cheddar cheese supply. 

Turning attention to Mozzarella, California leads with a substantial output of 134.14 million pounds, while Wisconsin is not far behind, generating 93.13 million pounds. This makes California the unrivaled leader in Mozzarella production, though Wisconsin’s figures are commendable. 

When looking at overall cheese production, Wisconsin emerges as the top-producing state with an aggregate output of 281.48 million pounds. California comes in second, followed closely by Idaho and New Mexico. These states collectively form the backbone of the U.S. cheese manufacturing industry, each playing a crucial role in meeting domestic and international demand.

The Bottom Line

April’s cheese production data from the USDA paints a complex picture of the dairy industry, characterized by both advancements and setbacks. Italian-type cheeses exhibited impressive year-over-year growth, driven by a notable 6.2% increase, even as they faced a slight month-over-month decrease. In stark contrast, American cheese suffered significant declines both annually and monthly, highlighting underlying production challenges. 

The broader dairy landscape reflected similar dualities. Butter production experienced a modest monthly dip but demonstrated robust annual growth. The production of dry dairy products such as nonfat dry milk and skim milk powder saw sharp drops, whereas dry whey managed a slight increase. 

Frozen dairy products also showed variability, with hard ice cream production surging, while other categories like low-fat ice cream and frozen yogurt declined. Regionally, Wisconsin and California continued to dominate specific cheese categories, underscoring their pivotal roles in national dairy production. 

Overall, these intricate trends underscore the multifaceted nature of the U.S. dairy industry, highlighting areas of growth and the need for strategic adjustments in response to declining segments.

Key Takeaways:

  • Total cheese production in April saw a slight year-over-year increase of 1.8%, despite a 3% drop from March.
  • Italian-type cheese production rose by 6.2% year-over-year but decreased by 2.8% from the previous month.
  • American cheese production experienced declines both year-over-year and month-over-month, down by 4.7% and 4.3% respectively.
  • Butter production was up by 5.3% compared to April of last year, although it saw a minor decline from March.
  • Dry dairy products faced significant declines: nonfat dry milk dropped by 12.7% and skim milk powder by 20.8% year-over-year.
  • Dry whey production slightly increased by 2.1%, while lactose and whey protein concentrate production declined by 1.5% and 6.1% respectively.
  • Hard ice cream production surged by 7.3%, but low-fat ice cream, sherbet, and frozen yogurt production all decreased.
  • Wisconsin led in Cheddar cheese production, contributing 60.38 million pounds, whereas California was the top producer of Mozzarella with 134.14 million pounds.

Summary: In April, U.S. cheese production experienced a mixed landscape, with both positive and negative trends. The USDA reported a total cheese output of 1.19 billion pounds, up 1.8% year-over-year but down 3% from March. Italian-type cheese production rose by 6.2% to 504 million pounds, while American cheese production declined by 4.7% year-over-year and 4.3% from March, totaling 468 million pounds. This dual decline highlights ongoing shifts within the industry, signaling potential adjustments in consumer demand and production focus. Butter production saw a minor monthly dip, while dry dairy products showed a downward trend, with significant declines observed in nonfat dry milk and skim milk powder production. Dry whey production edged up by 2.1%, but lactose production and whey protein concentrate production also saw a decline. Frozen dairy product output varied significantly, with hard ice cream production climbing by 7.3% to reach 64.7 million gallons. Wisconsin continues to dominate the Cheddar cheese market, producing an impressive 60.38 million pounds in April.

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