Check in here to see the MRV commentary on what we have seen and are seeing in the dairy market. These insights have developed from MRV’s proprietary data, industry experience, and industry reports referenced below. Here’s our latest!
2022’s Dairy scene has seen much turmoil already and no signs of slowing. Milk prices have been overwhelmingly strong through all of 2022 so far due to improved exports, global demand, and slow milk production. MRV Dairy Solutions projects fluid milk prices to subtly decrease throughout the remainder of the year, but these decreases won’t overcome the overall height of increase year-over-year. Week over week, price per pound of butter, block, and barrel cheese have decreased, 3.1 cents, 5.1 cents, and 4.9 cents respectively.
Year over year, cheese production has grown 2.1%. The whey from this increase in production has expanded the output of whey products altogether. Dry whey had an increase of 9.5%, whey protein a 17.1%, and whey protein concentrates an 8.1% increase in production. Due to the low availability of milk, production of Class 4 products suffered in May. In turn, butter production fell 0.7% year over year. April’s butter inventories had also fallen, 23% below last year’s levels. According to USDA, this marked the ninth consecutive month of YoY declines in stock. Butter prices had climbed to $3 in June, their height back in 2015. The low production of butter and other Class 4 items reinforce higher prices in these markets. We see these prices remaining elevated in the near term.
Butter’s short supply has a few factors contributing to its high price: Tight labor supplier, limited cream, and increased exports. According to Dairy Market News, butter output at some plants has fallen up to 20% due to short staffing; and with summer starting, frozen novelty products and ice cream will take priority, pulling cream away from butter, where it’s already tight.
International Dairy Foods Association’s ice cream survey reported that 73% of consumers enjoy ice cream once a week and 84% prefer buying from a grocery store over going to a scoop shop. According to those surveyed, of the frozen dessert market, premium and regular ice cream make up a whopping 80%. In April, consumption of ice cream dropped 6.3% year over year.
As inflation is currently at 8.6% (its peak since 1981) and projected to reach 8.8% this month, it is expected that more and more families will remain at home rather than eat out.
We forecast fluid dairy to slowly decline for the remainder of the year, but we expect the price of butter to remain elevated for the time being.