US Dairy Market Tone Kept Bearish Over Positive Milk Production and Ample Product Availability

The US dairy commodity market has been under pressure over the last few months on highly favourable fundamentals and a consistent flow of products from farms and factories to consumer markets. Market tones have hence been bearish with no signs of a drastic reversal, at least in the short term.

Milk production at the farm level has been developing upwards across most parts of the country. Cool and dry spring conditions in some states have enabled milk production and pushed collection numbers up. US fluid milk collections for quarter one of 2023 have been higher than numbers in the same months last year. Even strong late cyclical snow in the Midwest and Eastern states could not hamper milk collections over that period. Collections for January were 8.75 million mt, up 1.4% YoY and 200 thousand mt higher than the 5-year average. In February, milk collection also ticked up 0.8% YoY to 8.01 million mt, 121 thousand mt higher than the 5-year average.

The rising milk production has meant raw milk has been available for processing into other dairy commodity products. Dried milk production has also since gone up with inventories widely bounteous helping to weaken its price in the US amid a lackadaisical demand. The weekly price average for grade-A non-fat dry milk as of January 14 had traded down (-0.0028) to $1.1410 per lb. Dry whey was also down (-0.0513) to $0.3675 per lb.

Cream stocks have also held firm, with ample availability for butter production. In the East and Central regions of the US, they have become more accessible. Butter producers, nonetheless, ramped up production schedules ahead of the Easter holidays helping keep market tones bearish. Retail demand and demand from the food services sector have also been lower to steady. Supply is therefore outstripping demand and consolidating the market in the short term. Grade-AA butter at the start of last week was trading at $2.3500 per lb but by the end of the week, it had lost (-0.0225) to finish at $2.3275 per lb.

The increased milk production numbers have been felt in cheese production too. Milk volumes are available and growing for cheesemakers in the Northeast and West. Lower milk prices are pushing loads of milk into cheese production at the present time. Cheesemakers are operating speedy production schedules as they work through using the available milk rather than having to dispose of it. The price has also pushed down-US Cheese barrels went from $1.6300 per lb on the 10th of April to $1.5125 per lb on Friday the 14th of April, down 7%. The 40-pound cheese blocks also followed the same price trend falling 4% from $1.8550 per lb to 1.7750 per lb by the 14th.

These drivers are all coming together to hold the market on the downside. That picture may hold for a few months as the milk production forecast for April and May is positive on a higher projected recovery in cow numbers. Prices may move from steady to lower with dealers saying the market is keeping a close watch on the weather developments across the country.