US dairy markets have fallen through the $2/lb price support level for butter on the CME close to the end of an awfully bearish week of dairy trading. US dairy markets are crushed under the weight of the steadily expanding milk pool, primarily driven by bigger herds and good margins for milk over feed.
The price declines have been substantial across the dairy complex when compared to exactly one year ago. Butter prices lost 39% compared to the same period last year, while cheese fell 30% year-over-year, and nonfat dry milk decreased 16.1%. Dry whey decided to run its own course and trades within a 1% range of last year’s price level.
Supply pressure extends globally
Since the start of September, butter prices have felt like they would have an extremely hard time holding above $2/lb. The supply of milkfat is simply too strong to support prices, and that is exactly what has been happening over the last few weeks.
The price fall is surprisingly global, with European and New Zealand butter prices also feeling heavy under more supplies.
The US market for cheese is in a very similar situation to butter, with expansions in production capacity leading to an increase in cheese production. Growth in production capacity has focused primarily on Cheddar and Mozzarella, which is starting to show in this year’s production data.
Export challenges weigh on powder markets
Nonfat dry milk feels the weight of all the additional milk production, but is primarily struggling with the lowered demand for milk powders worldwide. Import/export data best indicates the US’s struggle in global skim milk powder markets, with only Mexico stepping up to buy more year-over-year.
Exports to Southeast Asia and China are falling by more than 25% compared to last year, to levels that are only a fraction of what they were in 2022.
While the US is now moving a lot less product to Asia, other regions have started to pick up the pace. New Zealand’s exports of skim milk powder to China have grown 11.39% year over year so far this year, while European exports to Southeast Asia have picked up 33.83% year-over-year. The competition in the global market for milk powders is fierce.
Whey products maintain relative strength
On the CME, dry whey is the only market able to maintain last year’s price levels. Even though dry whey has problems finding demand, its big brothers WPC80 and whey protein isolate are keeping up prices across the entire whey spectrum.
Buyers from all over the world are lining up for WPC80, especially US WPC80, at lower levels compared to Europe. There is no such thing as too much protein.
Production volumes surge across categories
After July’s milk production figures showed a massive 3.45% year-over-year growth, the product production numbers tell the story of the commodity production that followed the surge in milk production.
Butter and cheese were produced in high volumes with WPC80, whey protein isolate, and whole milk powder. With milk fat production up 3.5% year-over-year this year, butter, cheese, and whole milk powder were produced in incredibly high volumes.
This year’s 5.44% year-over-year growth in US butter production is remarkable, just as is the 1.73% higher year-over-year cheese production. Whole milk powder has risen 23.5% year-over-year in production so far this year.
Export volumes provide some relief. Anhydrous milk fat exports have grown 221.86% so far this year, to a total of just over 47 million pounds. Butter exports have also grown to over 87 million pounds so far this year and beat the volumes of anhydrous milk fat in size. However, this stream of anhydrous milk fat flowing out of the US is a serious one to consider. US butterfat exports are taking place at a pace that has never been seen before.
Processing constraints limit options
For both dry whey and nonfat dry milk, the incentive to produce is relatively small compared to many of the alternatives, such as whey protein concentrate or milk protein concentrate. However, when milk streams in at the pace they currently do, many producers do not necessarily have much to choose from.
US dairy markets have fallen through the $2/lb price support level for butter on the CME close to the end of an awfully bearish week of dairy trading. US dairy markets are crushed under the weight of the steadily expanding milk pool, primarily driven by bigger herds and good margins for milk over feed.
The price declines have been substantial across the dairy complex when compared to exactly one year ago. Butter prices lost 39% compared to the same period last year, while cheese fell 30% year-over-year, and nonfat dry milk decreased 16.1%. Dry whey decided to run its own course and trades within a 1% range of last year’s price level.
Supply pressure extends globally
Since the start of September, butter prices have felt like they would have an extremely hard time holding above $2/lb. The supply of milkfat is simply too strong to support prices, and that is exactly what has been happening over the last few weeks.
The price fall is surprisingly global, with European and New Zealand butter prices also feeling heavy under more supplies.
The US market for cheese is in a very similar situation to butter, with expansions in production capacity leading to an increase in cheese production. Growth in production capacity has focused primarily on Cheddar and Mozzarella, which is starting to show in this year’s production data.
Export challenges weigh on powder markets
Nonfat dry milk feels the weight of all the additional milk production, but is primarily struggling with the lowered demand for milk powders worldwide. Import/export data best indicates the US’s struggle in global skim milk powder markets, with only Mexico stepping up to buy more year-over-year.
Exports to Southeast Asia and China are falling by more than 25% compared to last year, to levels that are only a fraction of what they were in 2022.
While the US is now moving a lot less product to Asia, other regions have started to pick up the pace. New Zealand’s exports of skim milk powder to China have grown 11.39% year over year so far this year, while European exports to Southeast Asia have picked up 33.83% year-over-year. The competition in the global market for milk powders is fierce.
Whey products maintain relative strength
On the CME, dry whey is the only market able to maintain last year’s price levels. Even though dry whey has problems finding demand, its big brothers WPC80 and whey protein isolate are keeping up prices across the entire whey spectrum.
Buyers from all over the world are lining up for WPC80, especially US WPC80, at lower levels compared to Europe. There is no such thing as too much protein.
Production volumes surge across categories
After July’s milk production figures showed a massive 3.45% year-over-year growth, the product production numbers tell the story of the commodity production that followed the surge in milk production.
Butter and cheese were produced in high volumes with WPC80, whey protein isolate, and whole milk powder. With milk fat production up 3.5% year-over-year this year, butter, cheese, and whole milk powder were produced in incredibly high volumes.
This year’s 5.44% year-over-year growth in US butter production is remarkable, just as is the 1.73% higher year-over-year cheese production. Whole milk powder has risen 23.5% year-over-year in production so far this year.
Export volumes provide some relief. Anhydrous milk fat exports have grown 221.86% so far this year, to a total of just over 47 million pounds. Butter exports have also grown to over 87 million pounds so far this year and beat the volumes of anhydrous milk fat in size. However, this stream of anhydrous milk fat flowing out of the US is a serious one to consider. US butterfat exports are taking place at a pace that has never been seen before.
Processing constraints limit options
For both dry whey and nonfat dry milk, the incentive to produce is relatively small compared to many of the alternatives, such as whey protein concentrate or milk protein concentrate. However, when milk streams in at the pace they currently do, many producers do not necessarily have much to choose from.
The higher year-over-year production numbers of dry whey are a direct result of large expansions in cheese production, while whey protein concentrate production is capped at the same time. Some producers have no other choice but to produce dry whey.
This article is part of a full market analysis. Read the full market analysis here: https://app.vespertool.com/market-analysis/2268?commodity=dairy
