MRV BLOG: MRV Market Commentary August 9, 2022

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!

Something is always happening to affect the dairy industry, but even more so lately. From supply chain challenges to slow production to labor issues to farm needs and even fires, something is always altering the course of this market.

As of right now, component prices are shrinking week over week, with butter, dry whey, and NFDM decreasing $0.013, $0.01, and $0.06 respectively. Cheese has also dropped even a little steeper with block dropping $0.06 and barrel down $0.086. While their prices dropped, their volumes remained relatively neutral. MRV projects class I items to decline this upcoming month, however, that may not hold for long. CME futures suggest that prices may elevate one last time in October before continuing their downward trend to close out the year.

Challenges

Hot weather and winds have roared up the McKinney Fire in Northern California, burning 60,000 acres so far. With grazing months in that surrounding region usually being May to October, other concerns have raised with the fire being contained only 40%, according to InciWeb. One worry of farmers in Northern California is keeping the highways open to allow feed and milk trucks through. One result of these highway closures could be having to dump the milk.

The McKinney Fire is wreaking havoc in the western dairy region. The rest of the country is seeing its own challenges on both sides of the ledger as well. Consolidation has created initial turmoil as seemingly each week brings news of a business or plant closing or being acquired. Suppliers seek more efficiencies and economies of scale. Meanwhile, dairy buyers are looking to continue to access their complete product portfolio as seamlessly as possible.

Exports

While the domestic market is in challenging times right now, exports are hitting highs! US dairy exports have increased substantially in June (9% YoY). The biggest drivers for this increase were cheese and whey with cheese retaining its rapid growth so far, +33% vs June 2021 and +17% from January ’22 to June ’22. Whey also had a dramatic increase of 23% in June (YoY). The only significant downfall of the major items is NFDM/SMP (-14%).

US cheese exports are enticing compared to others due to price and availability. Despite the limited milk production, cheese has expanded. January ’22 to May ’22, cheese production is up 2.5% while consumption is down 1.7% same period. Cheese exports are in a position to continue growing in the near future.

While US inflation is currently at 9.1%, it is forecasted to remain the same this upcoming month. Class 1 prices are forecasted to decrease for September, pick back up in October, then continue their downward trend to round out 2022.

Statistical data referenced here gleaned from reports by MRV Proprietary Data, Dairy Herd, USDEC, CME, and USDA.

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.