cream supply

Slide 7: Slide 7
Slide 8: Slide 8
Slide 5: Slide 5
Style_Bullvine: Style_Bullvine

Archive for cream supply

Soaring Temperatures Hammer Dairy Production: Tight Milk Supply and Rising Costs Impact Market

Sunday, July 14th, 2024

How are soaring temperatures impacting dairy production and milk supply? Discover the challenges faced by farmers and the market shifts affecting your dairy products.

For America’s dairy producers, the increasingly sizzling summers are a testament to their resilience. Despite the rising heat and humidity that create severe difficulties for the dairy business, these farmers continue to persevere. The unrelenting heat may compromise cow comfort and lower milk output, but these dedicated individuals are finding ways to adapt. Their efforts, even in the face of the worst conditions in decades, are a source of inspiration. They are proving that even in this heat, cows can still produce.

Tightening of Spot Milk Availability: A Dire Shift for Dairy Processors

Month	Average Price ($/cwt)	Year-Over-Year Change	Five-Year Average ($/cwt)
January	21.87	+3.5%	19.30
February	20.75	-2.0%	19.60
March	22.15	+1.8%	19.80
April	23.05	+4.2%	20.00
May	24.00	+5.1%	20.20

The lack of spot milk availability is rather apparent. Dairy Market News notes a shortfall of extra shipments even during last week’s vacation. As temperatures climb and cow comfort falls, Midwest milk workers find it challenging to meet demand. Usually, there would be a surplus, but this season provides few choices. Against the five-year average of about $2.70/cwt discounts, processors seeking spot cargoes of milk now face expenses averaging 50¢ above Class III. This sudden shift draws attention to the mounting strain in the dairy sector.

Improvement in Milk Margins: A Double-Edged Sword for Dairy Farmers

Month	Milk Margin 2023 ($/cwt)	Milk Margin 2024 ($/cwt)	Change ($/cwt)
January	$8.90	$9.60	+$0.70
February	$8.30	$10.10	+$1.80
March	$8.50	$10.05	+$1.55
April	$8.75	$9.60	+$0.85
May	$9.60	$10.52	+$0.92

Despite the better milk margins recorded by USDA’s Dairy Margin Coverage program, the financial environment for dairy farmers is not without its challenges. The Milk Margin Over Feed Cost climbed to $10.52 per hundredweight (cwt) in May, a noteworthy 92%-increase from April, the highest number since November 2022. This increase has helped dairy producers relax some of their financial load. However, various economic hurdles include high interest rates, increased borrowing costs, and limited operational investment. Further impeding development are low heifer supplies necessary for herd expansion, replenishment, and high meat costs. As such, increasing milk production presents significant difficulties even with improved profits.

Significant Decline in Dairy Powder Production: A Paradoxical Market Stability

Month	NDM Production (Million lbs)	SMP Production (Million lbs)
January 2024	120.5	95.3
February 2024	115.2	90.1
March 2024	118.7	92.8
April 2024	112.3	88.6
May 2024	109.4	86.5

The effects on dryers have been notable; nonfat dry milk (NDM) and skim milk powder (SMP) output shows a clear drop. The industry’s difficulties were highlighted in May when the combined production of these powders dropped by 15.9% year over year. Over the first five months of 2024, NDM and SMP’s combined production fell to a decade-low. Still, NDM rates have remained highly constant, varying within a small 20′ range over the previous 17 months. Tepid demand balances the limited supply and preserves market equilibrium, providing this stability.

Volatile Dairy Export Markets Take a Hit: Mexico and Southeast Asia Push NDM and SMP Exports to Record Lows

Month	NDM Exports (Million Pounds)	SMP Exports (Million Pounds)
January	150.2	33.1
February	130.4	31.7
March	120.9	29.3
April	140.3	32.5
May	133.6	30.6

The dairy sector has been severely disrupted by the decline in NDM and SMP exports, which has been made worse by a dramatic reduction in demand from Mexico and Southeast Asia. The lowest for May since 2017, shipments of NDM and SMP dropped 24.2% year over year to barely 133.6 million pounds. The drop occurred mainly due to a notable 18.3% annual fall in sales to Mexico. Orders have also notably dropped in key markets in Southeast Asia. This crisis exposes dairy export markets’ sensitivity to trade dynamics and regional economic situations.

Butter Market Soars Amid Supply Constraints: Elevated Prices Highlight Unyielding Demand

Reflecting a robust historical figure, the butter market has maintained high prices at $3.10 per pound. Fundamental causes include:

Limited cream supply from the summer heat.
Growing competition from Class II users.
An aggravating cream shortage.

Notwithstanding these limitations, May’s 4% year-over-year growth in butter output points to strong demand. These supply problems disturb the churns, yet the market needs more butter to satisfy industrial and consumer requirements.

A Tale of Two Cheeses: Italian Varieties Surge While Cheddar Falters

Cheese Type	Production Change (Year over Year)	Key Influences
Italian Varieties	+4.4%	Rising Demand, Improved Margins
Cheddar	-9.7%	Lack of Available Supplies, Market Fluctuations

Cheese manufacturing is undergoing a significant shift, reflecting the impact of changing consumer tastes. Italian variants like Parmesan and Mozzarella are witnessing a 4.4% spike in May, indicating the evolving market. On the other hand, Cheddar’s output is falling, plagued by declining milk supplies and growing manufacturing costs. This shift in consumer preferences is a crucial factor that the industry needs to be aware of and prepared for. As global consumers search for less expensive options, present high costs might restrict exports in the future.

Whey Markets Surge: Breaking Through the 50¢ Barrier

Month	Price per Pound	Volume Traded (Loads)	Trend
May	47¢	25	Stable
June	48.5¢	22	Slight Increase
July	50¢	30	Increase
August	51¢	28	Stable

This week, the whey markets performed well, surpassing the 50¢ per pound threshold for the first time since February. Monday’s slight decrease was followed by Tuesday’s and Thursday’s price increases. With three cargoes exchanged, dried whey prices on Friday had risen 1.75% from the previous week to 51¢ per pound. Manufacturers concentrate on value-added goods such as whey protein isolates and high protein whey protein concentrates, even if regular cheese output drives constant whey manufacturing. This change reduces dry whey output and will probably help near-term pricing.

USDA’s July Report: Sobering Projections Amid Flood-Induced Uncertainty

The July World Agricultural Supply and Demand Estimates published by the USDA provide a mixed picture of the maize and soybean output for 2024/25. Increased acreage causes estimates of corn output to rise by 1.6%, but greater use and exports lower ending stockpiles. Conversely, lower starting stocks and less acreage caused soybean output to drop by 0.3%, resulting in declining ending stocks.

While soybean meal prices held at $330 per ton, USDA shaved the average farm price prediction by 10¢ for both commodities, bringing corn to $4.30 per bushel and soybeans to $11.10 per bushel. This ought to keep feed expenses under control. However, recent extreme flooding in the Midwest, particularly along the Mississippi River, has severely disrupted crop output, possibly rendering up to one million acres of maize useless with little likelihood of replanting. These difficulties might cause feed price volatility, changing the economic environment for dairy producers and other agricultural sector players.

The Bottom Line

Modern dairy markets must contend with changing market dynamics, economic instability, and climate change. Rising heat and humidity have put cow comfort and milk output under pressure, therefore affecting spot milk supply. High borrowing rates, heifer shortage, beef pricing, and better margins all help to limit milk output. Extreme weather influences market stability and dairy output: the declining dairy powder output and butter and cheese market volatility highlight sector instability. Unpredictable availability and significant price fluctuations are resulting from supply restrictions and competition. Dampened demand from Mexico and Southeast Asia complicates matters, especially for skim milk powder and nonfat dry milk. The future of the dairy sector depends on changing consumer tastes, economic pressures, and environmental issues. To guarantee a robust and sustainable future for dairy, stakeholders must innovate for sustainability by adopting adaptive practices.

Key Takeaways:

Milk production has declined due to high temperatures affecting cow comfort.
Spot milk availability has tightened significantly, with handlers in the Midwest struggling to find excess loads.
The price of spot milk is averaging 50¢ over Class III, compared to a five-year average discount of $2.70/cwt.
US milk supply has been trailing prior year levels for almost a year on a liquid basis.
May Milk Margin Over Feed Cost reached $10.52/cwt., the highest since November 2022.
Despite improved margins, producer expansion is limited by high interest rates, heifer scarcity, and elevated beef prices.
Milk supplies are tightest for dryers, with NDM/SMP production down markedly and cumulative production at its lowest in a decade.
NDM prices have remained stable despite low production, ending the week at $1.18/lb.

Summary:

Rising heat and humidity in America have put cow comfort and milk output under pressure, affecting spot milk availability. Dairy producers are adapting to these challenges, with processors facing expenses averaging 50¢ above Class III. The Milk Margin Over Feed Cost increased by 92% in May, the highest number since November 2022. High interest rates, increased borrowing costs, and limited operational investment are also impeding development. Low heifer supplies for herd expansion and replenishment are causing difficulties. Dairy powder production has declined significantly, with nonfat dry milk (NDM) and skim milk powder (SMP) output dropping by 15.9% year over year. The volatile dairy export markets have taken a hit, with Mexico and Southeast Asia pushing NDM and SMP exports to record lows. The butter market maintains high prices at $3.10 per pound due to limited cream supply, growing competition from Class II users, and an aggravating cream shortage.

Learn more:

Categories : Dairy Markets

Fourth of July BBQ Costs Soar in 2024: The Surprising Role of Dairy Prices

Monday, July 1st, 2024

Explore the impact of soaring dairy prices on this year’s most expensive Fourth of July BBQ. Are your beloved milk and cheese essentials set to strain your wallet in 2024?

As Americans gear up for a Fourth of July celebration filled with the aroma of barbecues and the spectacle of fireworks, they may be in for a surprise. The usual daily staples like cheese and ice cream, essential for this festival, are experiencing unexpected shifts in pricing due to unique market factors. How might this impact your celebrations?

Dairy prices have not skyrocketed as one may have expected, even with a lower US milk supply. Instead, they show a peculiar pattern because of sluggish worldwide demand, especially from big consumers like China. Analyst at Rabobank Dairy Lucas Fuess clarifies these trends:

“The issue that we’ve been dealing with is that demand for dairy has been somewhat weaker as well, especially from a place like China, the world’s number one dairy importer,” notes Fuess.

Knowing these market factors will enable you to properly allocate your Fourth of July BBQ money. Please keep reading to discover more about the cost elements and their effects, thus guaranteeing that your party stays fun and reasonably priced.

The Dairy Dilemma: Low Supply, Low Prices – Unraveling the Market Paradox

Despite the limited US milk supply, the dairy industry has shown resilience. Poor demand for dairy products, especially from big importers like China, has prevented a projected price rise. This resilience in the face of reduced demand has resulted in a market where dairy prices are declining against general economic predictions, providing consumers with some reassurance.

Cheese Prices: Climbing Peaks and Mixed Signals

Notable changes in cheese pricing have occurred in recent years. The record-high milk prices in 2022 significantly increased dairy processor expenses, increasing cheese prices. While there was some respite in the first quarter of 2023, prices remained above levels in past years.

Though they somewhat dropped in the winter, prices were high relative to the same time last year; they peaked in Q4 2023. American cheese prices have risen 7.7% in 2019, reflecting long-term pricing hikes.

As US dairy producers increase production to meet demand, cheese consumption has surged even with erratic pricing. Lower farmgate cheese prices, however, early in 2024 point to a complicated interaction among supply, demand, and manufacturing costs.

Cheese Market Dynamics: Robust Demand Meets Production Challenges

With US dairy producers increasing their capacity to satisfy growing local and international demand, the cheese industry is demonstrating proactive strategies. Despite the challenges, this proactive approach emphasizes hope for the expanding cheese industry, giving consumers a sense of optimism.

Still, complexity abounds. Though this decline is believed to be transitory, early-year cheddar output fell below past levels. Fuess said new and growing cheese plants will probably increase production later in the year.

Record cheese shipments to Mexico in certain months have driven prices even if countries like China have lower demand. Although the cheese industry has some difficulties, overall demand and targeted production increases for future expansion show a strong trend.

Ice Cream Prices Heat: The Summer Struggle for Cream

Demand for the Fourth of July staple of ice cream rises as summer temperatures climb. However, consumers could find more expensive products this year. The dynamics of the cream market have significantly impacted this transformation, as butter and ice cream manufacturers fight for little supply, increasing prices.

According to Rabobank dairy researcher Lucas Fuess, this cream competition is more intense, especially when milk production is low. Butter requires cream equally as much as ice cream, which drives higher costs for both goods. What follows? More charges for your morning toast spread and a preferred scoop of ice cream.

Despite these challenges, the ice cream market remains robust. Manufacturers are managing increased input costs without compromising on production. As a result, consumers can expect higher ice cream costs during the summer, reflecting the general inflation trends in the dairy industry.

The Financial Toll of a Fourth of July BBQ: Record-High Costs Amid Inflation and Shifting Consumer Sentiments

According to Rabobank’s 2024 BBQ Index, a 10-person barbecue costs around $99—a record high. This is a $3 rise from last year and $73 from 2018; products such as alcohol, steak, drink, and lettuce account for 64% of the total cost.

Rising by 32%, inflation for a July 4th BBQ has changed consumer attitudes starting in 2019. The University of Michigan index dropped to 69.1 in May, the lowest since November 2023; meanwhile, credit card debt—especially for Millennials under 35—has surged, and savings have collapsed.

Consumers trading down due to financial pressure: Compared to 45% of earlier generations, 56% of Gen Z and Millennial consumers want to reduce the quantity or package sizes on their shopping lists, according to a McKinsey & Company poll cited by Rabobank.

Costs are likely to rise due to limited supply, and beef accounts for about 14% of the cost of the BBQ. Still, there is excellent domestic demand. “Look for featured promotions at your local supermarket or club store,” counsels Rabobank senior beef analyst Lance Zimmerman. Many stores offer discounts to draw consumers and increase sales of other items like beer, burgers, and sides even if beef prices are high.”

Lettuce prices are still high because of less than-projected output, although availability will likely increase in July.

Comprising 27% of the BBQ expenses, beer will cost $2.66 per participant. With soda, which has witnessed a 10% increase since 2019, these drinks account for almost 40% of the total BBQ spending. Rising beer costs have exceeded those of wine and spirits.

Economic Pressures Redefine Consumer Behavior: Inflation Spurs a Shift Toward Fiscal Prudence, Especially Among Younger Shoppers

The ongoing influence of inflation on consumer attitudes and purchasing behavior, particularly among younger generations, continues to shape consumer sentiment. This is evident in the University of Michigan’s indicator, which shows a decline in consumer mood to 69.1 in May, the lowest since November 2020. The increasing credit card debt among Millennials and the decreased savings further highlight this shift towards more frugal spending.

This change is strategic, driven by mounting financial strains. A McKinsey & Company poll referenced by Rabobank shows that compared to 45% of prior generations, 56% of Gen Z and Millennials have begun trading down—preferring lesser amounts or package sizes. This strategy—which emphasizes value maximizing—is most evident among the younger population.

Driven by the desire to stretch every dollar, retailers deal with more demanding and budget-conscious customers. This mirrors a general economic strategy in which financial sustainability comes first above convenience or choice, a significant departure from past years with more spending confidence.

Beef Prices Surge: Navigating the Challenges and Finding Smart Savings

Several factors help to explain the rise in beef prices, mostly related to tighter supply and difficult circumstances for cow-calf growers. Higher feed prices, weather problems, and labor shortages have all taxed output and resulted in fewer cattle entering the market.

Notwithstanding these limited supplies, domestic beef demand is robust enough to increase prices. Consumers getting ready for grilling season deal with this mismatch of supply and demand.

Nevertheless, one can save in some ways. Look for discounts at neighborhood supermarkets or club shops. Retailers can run special offers to draw in consumers even with growing pricing. These specials provide an opportunity to have beef for less money.

Senior beef analyst Lance Zimmerman of Rabobank advises on looking for these offers. “Beef costs might be expensive, but many store owners run deals on many cuts to attract customers who purchase other goods. They want to increase foot traffic and foster loyalty, he explains.

Lettuce Woes: The Surprising Culprit Behind Soaring BBQ Costs

Lettuce cost is critical in sky-high expenses for a Fourth of July BBQ this year. This vital component has witnessed an unheard-of surge driven by below-average production levels. Lousy weather, labor shortages, and supply chain interruptions have limited lettuce production, lowering availability and costs. This increases the load currently on consumers dealing with food inflationary pressures.

Still, there’s optimism as July’s lettuce supply seems to be better. Good weather, fixed supply chains, and increased manufacturing will boost supplies and relieve pricing pressure. As a result, customers should see a slow drop in lettuce pricing, which will make this introductory more reasonably priced for summer BBQs and beyond.

Beverages Take a Bigger Bite: The Surpassing Cost of Beer and Soda at Your Fourth of July BBQ

With 40% of the overall cost coming from beer and soda, they rule the cost of a Fourth of Jul BBQ. Beer alone makes up 27%; Americans only spend around $2.66 per person on beer. This significant percentage emphasizes how much beverage price affects BBQ expenses. To further strain finances, beer costs have soared above wine and spirits. The 10% increase in soda prices since 2019 also affects consumer spending. Since drinks are essential for the event, their increasing cost drives the cost of a 10-person BBQ to new highs.

The Bottom Line

Americans face record-high barbecue expenses as they prepare for Independence Day, much impacted by the dairy industry’s dynamics. The paradox of low dairy supply not driving higher prices emphasizes the intricate interaction among supply, demand, and global dynamics.

Strong demand and supply issues make cheese prices high despite declining milk costs. Furthermore, it is more expensive than ice cream because of conflicting cream needs. Meanwhile, limited availability and growing running expenses cause meat and lettuce prices to soar.

These growing BBQ expenses have wider consequences, encouraging younger generations to be frugal. This change might result in smaller, more frugal festivities.

Although better supply and market adjustments may provide future respite, present economic challenges, and shifting consumer behavior point to altering Fourth of July festivities, the way these customs survive will be shaped by American fortitude and flexibility.