MRV BLOG: MRV Market Commentary December 16, 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:

Over the past month, dairy commodity prices have shown mixed trends. Butter prices decreased from around $2.70 per pound to $2.58 (/lb) after earlier highs, while cheese prices softened to an average $1.89 per pound due to increased production and slower post-holiday demand. Nonfat dry milk held steady near $1.38 per pound, supported by consistent export demand. Conversely, dry whey remained weak at $0.59-$0.60 per pound, reflecting high supply and reduced demand.

Cold Storage Report
As of October 2024, butter inventories declined 12.6% month-over-month. However, driven by seasonal consumption butter inventories are up 10.2% year-over-year to 267.5 million pounds. Cheese stocks also fell from September levels, reflecting increased demand for domestic use and exports. These reductions are tightening supplies, likely placing upward pressure on butter and cheese prices. Stable inventory levels for dry whey and NFDM suggest more balanced supply and demand in those categories.

Avian Flu
As of December 3, the H5N1 avian flu impacted 475 herds across 15 states, with clinical signs in less than 10% of cows per herd and a mortality rate under 2%. Milk from affected cows has been diverted, ensuring the safety of the commercial milk supply, as pasteurization effectively inactivates the virus. State and federal agencies continue monitoring and promoting biosecurity to contain its spread.

The USDA has announced a National Milk Testing Strategy (NMTS) to address the spread of H5N1 avian influenza in dairy cattle, alongside a new Federal Order requiring the collection and testing of raw milk samples nationwide. This strategy involves a five-stage process, starting with mandatory silo monitoring at dairy processing facilities to identify affected areas and herds. The testing will progress to bulk tank sampling, rapid response in affected states, and eventually demonstrating the absence of the virus nationwide. States will be classified into stages based on H5N1 prevalence, with regular monitoring to ensure the virus does not re-emerge. The USDA emphasizes collaboration with state and federal partners to enhance biosecurity, protect farmworkers, and control the virus’ spread. The program begins with six states—California, Colorado, Michigan, Mississippi, Oregon, and Pennsylvania—before expanding nationwide. This initiative builds on USDA’s prior efforts and complements existing orders for testing lactating cows before interstate shipment.

Exports
In October, U.S. dairy exports declined 2% year-over-year in milk solids equivalent, marking a low point for 2024. Year-to-date, volumes were still up 0.6%, and export values surged 11% YOY to $695.7 million due to strong cheese and high-protein whey sales. Cheese exports rose 12% YOY, driven by demand from Mexico, South Korea, and Australia. However, exports to Southeast Asia fell sharply for NFDM and low-protein whey, reflecting challenges in that key market.

USDEC

Summary
Dairy commodity prices are experiencing diverse trends, with butter and cheese softening, impacting milk pricing. Declining butter and cheese inventories point to tighter supplies and potential price increases in the future. While exports showed mixed results, strong cheese demand highlighted U.S. competitiveness. The H5N1 avian flu has impacted dairy herds but has not compromised milk safety due to stringent safety measures. Overall, these factors shape a dynamic outlook for the U.S. dairy market, emphasizing evolving supply-demand balances and robust export strategies. MRV projects Class I milk to decrease for January coming out of the holiday season.

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, USDEC, CME Group, and USDA.