In January, the average U.S. all-milk price reached its highest level since the final month of the 2013-2014 price spike. At $10.54 per hundredweight, the Margin Protection Program (MPP) margin for November–December was the highest in two years. Also in January, dairy exports continued to improve, representing 13 percent of milk solids production, the second highest-ever January percentage after January 2014’s level of 14.4 percent. At the same time, milk production growth has been steady for several months at a rate of approximately 2.5 percent year-over-year. This has caused cheese production to overtake consumption growth, boosting inventories and putting pressure on prices.
Commercial Use of Dairy Products
Fluid milk sales dropped by 1.2 percent from a year earlier during the fourth quarter of 2016, and by 0.9 percent during all of 2016. Whole milk increased by 5.2 percent and the milkfat content of all fluid milk sales rose by an estimated 1.6 percent, adjusted for the leap year. Butter consumption was up during the quarter by more than 5 percent from a year earlier, reflecting particularly robust holiday-season use. Holiday use also buoyed domestic cheese consumption, particularly for American types. The growth rates of total milk consumption continue to show a wide divergence when measured on a milk equivalent milkfat basis versus skim solids basis. The domestic market is making increasing claims on milkfat, leaving less to export, while the recovering world markets have been doing the opposite for U.S. skim milk solids production.
U.S. Dairy Trade
Year-over-year changes in U.S. dairy exports during November 2016–January 2017 showed further improvement from earlier in 2016 for butter, Cheddar, total American-type and all cheeses and dry whey, as well as for total milk solids. This general across-the-board improvement in the dairy export situation was driven by improved international demand and prices during the period, together with lower milk production in the major exporting countries. During July–December 2016, combined milk production in the United States, European Union,New Zealand and Australia was 4.3 billion pounds, or 1.4 percent less than during the same period a year earlier.The United States exported 1.9 percent more of its milk solids during November 2016–January 2017 compared with the same period a year earlier.
The milk solids content of dairy imports was down slightly during November 2016–January 2017, as were imports of butter,cheese and casein,while milk protein concentrate imports rose.
During November 2016–January 2017, U.S.milk production increased by 2.4 percent from a year earlier, while the number of cows producing that milk increased by 0.5 percent. At the beginning of 2016, U.S.milk production was virtually even with a year earlier, but it grew steadily during the year. It subsequently stabilized at around 2.5 percent year-over-year during each of the four months through January 2017. This rate was sustained by robust growth in fewer than 10 of the larger milk producing states. However,trends in these and other states indicate that production growth will probably not expand much beyond this rate over the next several months.
Production of American-type cheese, particularly Cheddar, has been accelerating in recent months after being down year-over-year earlier in 2016. This change matches closely the increased growth of U.S.milk production. Cheese production growth between American and other types switched during 2016,with other types starting out strong and finishing weaker.Butter production was down again during November 2016–January 2017 as holiday demands claimed increased volumes of cream before they could get to the churn. Dry whey and whey protein concentrate production was down during the period despite the increase in cheese production.
Read the full March Dairy Market Report.