MRV BLOG: MRV Market Commentary March 8, 2024

Check-in here to see the MRV commentary on what we have seen and are seeing in the dairy market.  These insights have been developed from MRV’s proprietary data, industry experience, and industry reports referenced below. Here’s our latest:

Domestic

Over the last month, we are seeing commodities climb overall. Butter had a 15 cent increase in its price while its volume decreased 34%. Both block and barrel cheese saw an increase of 7 and 13 cents respectively  with volume remaining consistent MoM. Dry whey had a 6 cent increase and its volume increased a whopping 55%. NFDM’s price is one of the exceptions seeing a marginal decrease of 1 cent, however, its volume increased 26%.

Fluid Milk Sales and Commodity Output

Fluid milk sales as a whole were down 1.5% in 2023 versus 2022. With only a couple months toppling 2022’s levels (May, October, and November). However, overall fluid milk sales are down about 17% since 2013. One exception was whole milk sales which actually rose 1% YoY.

Cheese output in December and January fell versus the same period last year, with January being down 1.2%. This decline was unanticipated since the nation’s cheese production capacity is growing. The Cold Storage report from February shows growth in inventories with cheese stocks being up 0.5%. Butter inventories were also up 25% versus December 2023, but were down 5.8% versus prior year. Churns picked up with an increase of 6.4% in January over January 2023, making it the second highest month for volume behind January 2021. NFDM and SMP production are down 10.7% compared to last year’s levels, which is their lowest output since 2016. The February milk production forecast from USDA was adjusted to be lower, albeit insignificantly, due to lower expected output per cow. However, this is offset by the number of head.

Dairy Producers

Dairy Producers are still facing some struggles but looking better for 2024. While class III prices are higher than January’s lows it’s still not looking too hot. There are some saving graces for producers, with class IV futures remaining well above the average cost to make milk. The large spread between class III and class IV is incentivizing depooling, which benefits producers who belong to a cooperative with class IV manufacturing, while penalizing others who do not. Tight milk supplies are also slowing milk to dryers, lowering the share of milk sold at the higher class IV price.

A bright side for producers are decreased feed costs. Feed costs are showing signs of slowing and it is likely that they will continue to decline. Also, the DMC (Dairy Margin Coverage) program continues to look better and better for producers as well. Last year, enrolled producers who were eligible received a payment 11 out of the 12 months.

Report fromUSDEC

Exports

USDEC reported the 12^th consecutive monthly decline (YoY). On a milk solids equivalent, US dairy exports volume fell 5% and its value declined 16%, compared to January 2023. While we’re not expecting demand to take off right away, there are a couple key actions that have caused optimism for 2024. Cheese exports for US set record January numbers rising 13%. This was primarily driven by Latin America (Mexico, Central America, South America, and Caribbean). And high-protein whey exports rose for the sixth straight month with January’s volume increasing 25% (YoY) despite showing declines in two key markets, Japan and Brazil.

Report from MRV Proprietary Data

Summary

Based on current market conditions, MRV projects class I prices to be moving upward for April and for the foreseeable future. Higher fat items are projected to increase while peaking late summer. Output as a whole is down 1.5% when comparing 2023 to 2022 and it hasn’t quite caught up yet. However, the Cold Storage report shows promising inventories MoM. Dairy producers are still seeing some struggles but look forward to 2024 as feed costs slow and the DMC program continues to be a helpful tool. Exports are still on a negative streak but show some promise for 2024 as other markets pick up some slack.

This information cited by MRV Marketing, LLC is for informational and reference purposes only. It is not intended to be a conclusive statement of future market conditions. It is not legal advice or legal documents. The data used in these documents contains references to information created and maintained by other organizations or agencies. Please note that MRV Marketing, LLC does not control and cannot guarantee the accuracy of these outside materials.

Statistical data referenced here is gleaned from reports by MRV Proprietary Data, Daily Dairy Report, USDEC, CME Group, Dairy Herd Management, and USDA.