Cheese Production Continues to Draw Milk Away from Other Uses
Published: Friday, January 19, 2024
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Winter weather made the headlines last week as it moved across the U.S. HighGround Dairy warned, "After a green and brown December in the northern half of the U.S., meteorologists expect storms to increase in January due to El Niño." The Pacific Northwest got its turn last Friday, where my thermometer read 5 degrees as I wrote this, living 10 miles south of the U.S. Canada border.
You'll recall that November milk production was down .6% from a year ago. The November Dairy Products report shows that milk continued to move away from the churn and dryer to the cheese vat.
Cheese output totaled 1.164 billion pounds, down 2.6% from October but .7% above November 2022, the third consecutive month to be above a year ago and the highest November total ever. Cheese output in the 11 months hit 12.9 billion pounds, up .3% from the same period in 2022.
Italian cheese totaled 485.4 million pounds, down 4.2% from October and .7% below a year ago. YTD output, at 5.4 billion pounds, was down .8% from 2022.
American output came in at 469.4 million pounds, down .2% from October, but .7% above a year ago. YTD American stood at 5.2 billion pounds, up 1.6%.
Mozzarella totaled 380.7 million pounds, down .9% from a year ago, with YTD at 4.2 billion pounds, off .2%.
Cheddar output, the daily traded cheese at the CME, fell to 322.6 million pounds, down 6.3 million, or 1.9%, from October output, which was revised down 2.9 million pounds, and was down 1.2 million, or .4%, from a year ago. YTD Cheddar stood at 3.7 billion pounds, up 1.1% from 2022.
The Cheddar blocks averaged $1.63 per pound in November, down from the $2.12 per pound November average in 2022.
Butter production inched up to 165.2 million pounds, up 2.9 million pounds, or 1.8%, from October's level which was revised up 1.7 million pounds. Output was down 6.3 million pounds, or 3.7%, from a year ago. YTD butter stood at 1.9 billion pounds, up 2.5% from a year ago.
Butter averaged $2.72 per pound in November 2023, down from $2.86 in 2022.
Yogurt production totaled 352.1 million pounds, up 4.5% from a year ago, with YTD at 4.4 billion pounds, up 3.3%.
Hard ice cream, at 52.1 million pounds, was down 3.8% from 2022, with YTD output at 669.9 million pounds, down .5% from a year ago.
Dry whey production fell to 67.5 million pounds, down 6.8 million pounds or 9.2% from October and 4.5 million pounds, or 6.4%, below year ago. YTD whey stood at 856.2 million pounds, up 1.9%. Stocks slipped to 71 million pounds, down 4.4 million, or 5.8%,from October, and down 2 million, or 2.7%, from a year ago.
The Daily Dairy Report's Monica Ganley Quarterra wrote in the Jan. 5 Milk Producers Council newsletter, "Whey manufacturers continue to route the whey stream toward high protein products, which is likely helping to put some support under dry whey prices. November output of whey protein isolates and whey protein concentrates (WPC) with more than 50% protein rose by 16.4% and 7.5%, while production of dry whey and lower protein WPCs fell by 10.9% and 16.8%, respectively."
Nonfat dry milk output dropped to 115.7 million pounds, down 11.7 million, or 9.2%, from October and down 45 million or 28% from a year ago. YTD powder was at 1.7 billion pounds, down 3.8% from a year ago. Stocks dipped to 208.9 million pounds, down 7.7 million, or 3.6%, from October and down 42.7 million pounds, or 16.9%, from a year ago.
Skim milk powder production climbed to 57.9 million pounds, up 14.4 million pounds, or 33.1%, from October, and 8.8 million, or 17.8%, above a year ago. YTD SMP was at 501.1 million pounds, down 15.6% from a year ago.
"NDM volumes continued to fall on poor milk production in the West," said HighGround Dairy. "However, SMP output climbed, indicating that export demand may have increased slightly from an abysmal showing throughout 2023."
The DDR's Quarterra said, "Domestic buyers are buying powder steadily. Participants are optimistic that 2024 will bring additional interest from international buyers."
Hopefully, that will be the case as U.S. dairy exports remain below year-ago levels. The latest data shows November exports totaled 480.6 million pounds, down 7.5% from November 2022.
HighGround Dairy reported that shipments to Southeast Asia (excluding the Philippines), China and Canada were down from November 2022 while exports to Mexico grew 7.5%. Cheese and whey protein concentrate were the only commodities seeing gains.
Cheese exports totaled 85.1 million pounds, up 11.7% from October and up 4.1% from a year ago, largest volume of any month since June 2022, according to the Daily Dairy Report.
Mexico garnered a 38% market share, according to HGD economist Betty Berning in the Jan. 15 Dairy Radio Now broadcast. Purchases set another monthly record, she said, however sailings to South Korea, Japan and Australia, three of the top five cheese export markets, saw year-on-year declines. Cheddar exports were down for the tenth month in a row, and 2023 year-to-date totals trail 2022's record levels by 7.9%, according to HGD.
Nonfat dry milk exports, at 148.8 million pounds, were down 4.7% from a year ago, the lowest November since 2020, driven by lower volumes to Mexico, Indonesia, Vietnam and China. Still, the loss was not as bad as the double-digit decreases posted in September and October, according to Berning.
Dry whey exports, at 32.7 million pounds, were down 25.4%, down for the eighth consecutive month and have been down by 10% or greater since May 2023.
HGD blamed "dismal sales to China as the primary reason, with smaller volumes to Southeast Asia and Canada also playing a role. But, whey protein concentrate 80 shipments picked up year-over-year for the fourth month in a row" according to HGD, with bigger demand from China, Canada, Brazil and India.
"Late summer's high butter prices killed international demand," added HGD. Just 3.4 million pounds were exported, down 81.9% from a year ago, the lowest mark since November 2020. "Through November, butter exports were less than half of January-November 2022, said HGD. "It seems unlikely, given the high U.S. butter prices compared to Oceania and Europe that exports will recover in 2024."
Speaking of butter, the U.S. price acted as a magnet, with imports hitting 12.6 million pounds, up 18.8% from a year ago, third highest ever, according to Berning. About 90% of the imports are from Ireland and New Zealand.
U.S. cheese imports were up for the second month in a row, totaling 41.3 million pounds, up 1.5%. Italy and France were the top two suppliers, according to Berning, though their volume was actually down, but offset by import gains from the Netherlands, Spain, Ireland, and Argentina.
National Milk Day came and went, but there wasn't enough draw down to impact the spot market much.
CME block Cheddar climbed to $1.56 per pound last Wednesday, gave back a penny Thursday, but closed the second Friday of 2024 at $1.5625, up 12.75 cents on the week, highest in four weeks, but 43.75 cents below a year ago.
The barrels climbed to $1.48 last Wednesday but finished Friday at $1.4450, up 3.50 cents on the week, 26.25 cents below a year ago, and 11.75 cents below the blocks. Sales totaled 24 loads of block on the week and 42 of barrel.
Spot milk availability remains at holiday levels, according to Dairy Market News, and prices as low as $7-below Class III. Plant downtime was reported throughout the Midwest. Winter weather was expected to add some hurdles. Cheese loads were reportedly moving well via steady demand. Barrel, Cheddar and Italian style cheesemakers relay similar demand notes. Contacts in the upper Midwest say that inventories are not heavy, nor tight, and they expect the bolstered milk levels to keep market prices in check until demand ebbs.
Retail cheese demand in the West is steady to lighter. Food service is mixed. Milk is readily available for cheese makers and spot load demand is strong to steady, says DMN. A few noted heavy pulls on Class III milk has taken some away from Class IV. Cheese makers indicate production is stronger to steady. Plenty of cheese is available and domestic prices have strengthened buying activity from international purchasers, according to DMN.
Butter fell to $2.53 per pound Monday, lowest since Dec. 15, 2023, but closed last Friday at $2.5675, down .75 cents on the week and 14.25 cents above a year ago. There were 15 sales put on the board for the week.
Spring demand preparations are underway for butter makers in the Central region, says DMN. Butter output is very busy. As winter weather disrupted hauling at plants through the region, plants were doing what they could to run as much as possible.
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