Dairy Skim – June 2024 US Dairy Products Report

Dairy Skim is a bite-size episode series where HighGround’s top analysts break down the latest dairy data release. Today, Betty Berning discusses the June 2024 US Dairy Products Report. Customers can view the snapshot report here. Subscribe so that you never miss an episode!

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Transcript:

(0:14) Betty Berning:
Hello, everyone, and welcome back to the Dairy Skim. HighGround Dairy’s bite size podcast intended to give the dairy industry some flavor into recent reports or events that can impact global commodity pricing. Today you are joined by Betty Berning. I am HighGround’s Contributing Dairy Economist. USDA just released June’s Dairy Products Report, and I am ready. We’ll start with cheese.

(0:44)
Cheese production fell, was down 1.4% year over year, summing to 1.16 billion pounds, and this was slightly bullish to our expectations. The team here at HighGround anticipates a range of $1.80 to $2.00 per pound cheese through at least October, and with blocks settling at $1.84 per pound today, this production data indicates that there is room for prices to move towards the high end of our range.

(1:15)
American cheese was down for the seventh consecutive month on a year-over-year basis and marked the lowest June output since 2020 as manufacturers continued to make far less cheddar this year. Cheddar vats turned out 312 million pounds of product, a drop of 9% versus prior year, and a fall of 2% from May. This 2% decrease is bigger than the five-year mean of a 0.6% month-on-month decline.

(1:45)
Italian cheese volumes, which had been up year-over-year from January to May, fell slightly year-on-year in June by 0.1%, and these volumes were flat to two years ago. Parmesan production tanked, and that really drug the Italian cheese numbers down. Parm production was down by 23% against June 2023. However, mozzarella, which we’ve all been watching closely, those vats were busy as totals climbed 2% annually. Still, the impact of tight milk supplies here in the US is weighing on all categories, as less mozzarella was made in June than in May, which bucked the typical increase in mozzarella production between these two months.

(2:34)
June’s butter volumes totaled 169 million pounds and were neutral to our expectations. As expected, churns turned out more product in June 2024 than in June 2023 and set a record for the month. The month-to-month drawdown of 14.5% was slightly more than the five-year average. However, it is expected that churn output will drop through the summer months, so nothing to be too concerned about. With butter prices sitting at their lofty perch over $3 per pound, it remains pretty hard to be any more bullish.

(3:12)
Let’s move on to the whey complex. Holy smokes, dry whey prices hit a nearby high last week of $0.6250 cents per pound, and they remain over 60 cents this week. That said, dry whey production in June of 76.4 million pounds was smaller than a year ago, plummeting 9.2%. Still, compared to May, June’s volumes rose by nearly 8 million pounds and stocks climbed by 4 million pounds from May to June. This indicates that perhaps manufacturers are trying to get the right balance of product made, and given the rallying whey price here in the last month, it seems as though some of these factors are baked into the prices.

(3:59)
In the high-protein whey space, all three products were bullish to varying degrees. WPC80 and WPI were slightly bullish to our expectations. Stocks of both items were down from June 2023 and May 2024. WPI output was up, with June’s total of 16.2 million pounds ranking second all-time for production. Despite this, inventories were down. This is an indicator of strong demand. WPC80 production was off slightly, falling by 0.1% versus prior year, but it is important to note that June’s total of 29 million pounds still is in the top 10 all-time, so still a very strong production number for the month. USDA revised inventories of both WPI and WPC80 higher for May’s totals, with a sizable revision of 1.4 million pounds to WPC80, that’s 4% of the actual total.

(5:06)
In the lower-protein space, WPC34 was actually most bullish to our expectations, and that is a line item of WPC25-49.9% on the USDA report. Production was down by double digits again this month, as drier output of this commodity has fallen year over year for the past 10 months. Stocks are dwindling too. They were down 2 million pounds month-to-month, and down 19 pounds from last year. That’s a far cry from the 36.3 million pounds that sat in inventories at the end of June 2023, so pretty bullish to our expectations.

(5:49)
Last item on my list here, nonfat dry milk. Output was terrible. 127.8 million pounds of product was made in June, and if I did my calculations right, this is the lowest June nonfat output since 2007. It’s a decrease of 45 million pounds from June 2023, and a decrease of over 35 million pounds from May 2024. That would seem pretty bullish normally. However, if we look at the stocks number, despite this terrible production number, stocks were only down 7.5 million pounds month to month. Skim milk powder had a decent showing though, with dryers pushing out 60.5 million pounds of product, and that’s the most SMP that’s been made in 2024, and it’s 22% more than a year ago. Still, when I combined nonfat dry milk and skim milk powder totals, things were still down versus June 2023. Prices have rallied though, as of late, setting a nearly 18-month high last week in the CME nonfat dry milk spot market. That price was $1.2475 per pound. Also important to note that US prices are most expensive relative to the rest of the world, so although supply is pretty poor of NFDM, it appears that demand is quite poor too given the weak drawdown in stocks, and that made these numbers bearish to our expectations. Markets certainly seem to have accounted for some of this and then some.

Alright, that’s what I have for now. I am going to be busy pouring over all of this data tonight and into tomorrow morning. Stay tuned, subscribers, watch your inbox for more detailed analysis. Please reach out to the team at HighGround with any questions. Our email is info@highgrounddairy.com. Thanks again and have a great night. Cheers.

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