U.S. Cheese Attracts Interest on International Market
Published: Friday, December 6, 2024
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Butter and cheese stocks fell in October, with the cheese inventory down for the eighth month in a row. The USDA's latest Cold Storage report showed Oct. 31 butter holdings at 267.5 million pounds, down 35.8 million pounds, or 11.8%, from the September inventory, which was revised up 355,000 pounds. They were up 27.4 million pounds, or 11.4%, however from October 2023.
American-type cheese stocks fell to 772.7 million pounds, down 9.6 million, or 1.2%, from the September level, which was revised 461,000 pounds lower, and were down 61.2 million pounds, or 7.3%, from a year ago.
The "other" cheese category holdings, dipped to 547.2 million pounds, down 16.4 million pounds, or 2.9%, from the September level, which was revised 6.9 million pounds lower, and were down 56.8 million pounds, or 9.4%, from a year ago.
The total cheese inventory on Halloween had fallen to 1.34 billion pounds, down a bullish 26.3 million pounds, or 1.9%, from September, and was 116.1 million pounds, or just under 8% below that of a year ago.
Cheese exports, thanks to U.S. competitive prices, have helped offset sluggish domestic demand. However, increasing cheese making capacity may temper this data in the months to come.
StoneX broker Dave Kurzawski stated in the Dec. 2 Dairy Radio Now broadcast, "The report was bullish, but the market presently has been anything but." The cheese inventory came lower than expected, he said, so "we're running very lean on cheese inventories and it's hard to square that with a $1.65 or $1.70 per pound cheese price." Cheese stocks at these levels would argue for a CME price of around $2, he said, so we're 30 to 40 cents undervalued.
New capacity coming on line maybe influencing prices, he said. Exports are strong and we are poised for even more, considering U.S. cheese at sub $1.70 is probably the cheapest in the world. He expects exports will continue to build but that may be impacted by tariffs which incoming President Trump has threatened.
He said Trump may carve out some kind of deal even before he takes office because he doesn't think Trump wants to be punitive to Mexico or Canada specifically. He may simply be trying to message China. "We just don't know what this is going to look like," he concluded. "The futures market is probably worried about it but not really behaving that way."
Fluid milk sales, after topping year ago levels in five out of the first eight months of 2024, backtracked in September, according to USDA's latest data. September packaged sales totaled 3.5 billion pounds, down 1.6% from September 2023.
Conventional product sales totaled 3.2 billion pounds, down 2.3% from a year ago. Organic products, at 249 million, were up 9.1%, however, and represented a typical 7.1% of total sales for the month.
Whole milk sales totaled 1.2 billion pounds, down 1.2% from a year ago, but up 2% year to date, and represented a typical 34.5% of total sales for the month.
Skim milk sales, at 150 million pounds, were down 10.5% from a year ago and down 11.4% YTD.
Packaged fluid sales in the nine month period totaled 31.8 billion pounds, up .9% from 2023. Conventional product sales totaled 29.6 billion pounds, up .4% from a year ago. Organic products, at 2.3 billion pounds, were up 6.9%, and represented 7.1% of total milk sales in the nine months.
The figures represent consumption in federal market order, which account for about 92% of total fluid sales in the U.S.
The good news is that Americans consumed record amounts of dairy products in 2023, led by surging demand for butter and cheese, according to the International Dairy Foods Assn.
The Agriculture Department reported that per capita consumption of dairy products reached 661 pounds per person in 2023, an increase of 7 pounds per person over the previous year and matching the all-time record set in 2021.
Butter and cheese consumption surpassed previous records, says the IDFA, reaching all-time highs of 6.5 pounds of butter and 42.3 pounds of cheese per person in 2023. For context, a typical package of butter containing four sticks weighs 1 pound and a standard bag of shredded cheese is half a pound.
Cottage cheese continues to win back shoppers, notching 2.1 pounds per person in 2023, a level not seen since 2019, and yogurt saw consumption increase from 13.5 pounds per person to 13.8 pounds in 2023, a 2% increase.
Fluid milk and ice cream consumption fell in 2023, although year-to-date sales in 2024 is showing strength.
The IDFA reports that, in the past decade alone, domestic per capita consumption of cheese is up 19% and butter consumption is up 18%. In the past 20 years, yogurt consumption has grown 60%.
Overall, USDA data shows Americans' per capita consumption of dairy is up 3% over the past five years, 9% over the past 15 years, and 16% over the past 30 years, according to the IDFA.
Cash dairy prices were mostly lower in the shortened week of Thanksgiving. After jumping a nickel last Monday to $1.6950 per pound, the Cheddar blocks closed last Wednesday at $1.6425 per pound, down a quarter-cent on the week, but 12.25 cents above a year ago.
The barrels finished at $1.6050, down 4.50 cents, lowest since April 15, 8.50 cents above a year ago, and 3.75 cents below the blocks. Sales for the three days totaled one load of block and 38 for the month of November, down from 57 in October. There were 10 loads of barrel on the week and 27 for the month, down from 28 in October.
Midwest cheese plants were running relatively normal schedules last week, minus the holiday, according to Dairy Market News. More milk was available, as is typically the case during a holiday week, but some plants said their extra milk was light in comparison to Thanksgiving week in previous years. Some plants were looking for more milk if the price was right. Cheese markets are still uncertain moving toward the final month of the year. Barrel makers say demand has been a little less robust in recent weeks. Some retail Cheddar and Italian-style cheesemakers have been running active schedules to meet demand, says DMN, and were expecting a quick return to that following the weekend.
Western cheese production was mostly steady through the holiday week. Milk volumes were indicated to be tight for some parts of the region, but cheese manufacturers note Class III milk was ample. Domestic cheese demand is reported to be steady. Domestic prices continue to have a competitive edge to international prices, which is helping to draw international buyer interest. Export demand is steady and there's plenty of cheese available, according to DMN.
Cash butter saw its Wednesday close at $2.4925 per pound, 4.75 cents lower on the week, lowest it has been since Dec. 15, 2023, and 16.25 cents below a year ago. There were 10 sales on the week and 58 for November, down from 318 in October.
Central butter plants were contending with a lot of cream in the holiday week and some were turning away offers. Cream suppliers were hopeful for a smooth week because any additional and/or unexpected downtime at butter plants could create some real backups, as a number of plants were down for at least an extra day, this week. Butter market tones continue to face somewhat bearish pressure as the holiday season begins and the end of the year is in sight.
Butter production is steady in the West. A few producers were shifting more of the focus to bulk butter production, says DMN.
In some cases, decreased butter prices are indicated to be a contributing factor for shifting production to the bulk side. Cream is generally available throughout the region. That said, many manufacturers have ample in-network or contracted amounts of cream and are not looking to secure more. Domestic demand is reported on the lighter end and in line with the pre-holiday week. Buyers continued to secure loads for first quarter 2025.
HighGround Dairy reminds us "U.S. butter is cheaper than Europe and Oceania, and the door for exports could open on the price advantage, if domestic processors have line time to make the international spec." European butter is 82% butterfat, not 80% as in the U.S., and is unsalted.
Grade A nonfat dry milk closed last Wednesday at $1.3950 per pound, up 2.75 cents on the week, and 21.50 cents above a year ago. There were 14 sales on the week and 77 for the month, down from 120 in October.
Dry whey closed last Wednesday at 71 cents per pound, up a nickel, highest CME price since March 28, 2022, and 31 cents above a year ago. There were three sales on the week and 30 for the month of November, down from 46 in October.
The Global Dairy Trade Pulse auction last Tuesday featured 4.86 million pounds of product sold, down from 4.96 million in the last Pulse.
HighGround Dairy says 98% of the total offered was sold. Seventy-three metric tons more regular whole milk powder and 72 metric tons less instant whole milk powder (67 metric tons in total) was sold versus the last Pulse.
The price on skim milk powder was down slightly while the price on whole milk powder was up slightly from the last Pulse.
Politics
In politics, dairy processors gave a thumbs up to President Trump's pick of Brooke Rollins and Robert F. Kennedy to lead the Agriculture Department and Department of Health and Human Services, respectively.
Michael Dykes, D.V.M., president and CEO of the International Dairy Foods Assn. stated, "IDFA is confident that President-elect Donald Trump is choosing leaders for USDA and HHS who understand that safe, reliable food systems are the foundation of health and wellness for our great nation."
"Once confirmed, IDFA looks forward to working with Ms. Rollins at USDA and Mr. Kennedy at HHS to enhance the diet quality of Americans, protect the integrity of food production and processing, and establish a regulatory environment that drives innovation and efficiency. These efforts will enable our industry to continue leading the world in the production of high-quality dairy nutrition."
"Fluid milk production, at the farm level, is mixed across the country," according to DMN's week's update, "and gets stronger moving east to west. Pockets of the northeast are seeing weaker volumes, while in other portions of the northeast and southeast, milk levels are ticking up in small increments. Elsewhere in the region volumes are steady. Farms in the Central region are seeing gradual seasonal growth in milk production. Farms in the West region are seeing steady or strengthening numbers. California handlers convey milk production is trending slightly higher week to week. Farms in the Pacific Northwest are reporting steady volumes. The remaining states are all reporting stronger numbers."
"Class I bottling demand is strong throughout the country. Class III demand for milk is strong in the Central and East regions, while the West region is seeing steady demand from cheesemakers. Cream remains amply available in all regions. Demand for cream for Class IV is steady, but demand is increasing for other classes. Condensed skim availability is mirroring milk in the East region and is looser in the West region. Demand for condensed skim remains steady," according to DMN.
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