MRV BLOG: MRV Market Commentary January 5, 2023

MRV projects the upcoming month’s fluid dairy cost to decrease, as of today. According to USDA, commodities finally have some relief with the butter price per pound decreasing 29.9 cents from the previous week and almost 50 cents from the beginning of December. Cheese also has some relief with a per pound decrease of 1.6 cents and 5.5 cents for 40# and 500# respectively. The other commodities like Dry Whey and NFDM prices only marginally decreased, however, NFDM sales plummeted for week ending 12/31, at over 50% decrease versus the beginning of the month (December).

Comparing this past week’s data to the same period last year is astounding. Both price and volume have increased quite significantly across the board. The most shocking is butter, even with its recent significant price decrease revealed this past week, versus last year, its price is still up about 17% (YoY).

Milk Production

November’s milk production overall grew 1.4% versus November 2021 due to increase head count and milk per cow, however, the west coast saw some dips in production per cow (YoY). There have also been new innovations in the soybean processing industry with low carbon fuels like renewable diesel, which utilize recaptured oils such as canola oil and soybean oil. This suggests this could result in lower feed costs for farmers in the future.

Inventories

With no surprise, dairy inventories dipped due to seasonality, but it’s not moving as they usually do indicating an even slower demand. Historically, as the demand during the Holidays is met and buying slows, prices decline. According to USDA’s Cold Storage Report for November, butter stocks were down 5% from November of last year and down  17% from last month.

Exports

Dairy exports for the US continue to grow, with a 9% growth in November putting the year-to-date exports up 4%. The consistent growth of cheese and whey products continues to keep the US’ volumes on a positive trajectory in November. November made the 17^th straight month of growth for US cheese. Every month since February 2022 has yielded a new record for cheese, comparing to their respective months the prior year.

USDEC Report

We are expecting lower prices this upcoming month as commodity values sink before climbing once again.  Feed costs for farmers are expected to decrease due to new innovations in feed. Production in the Midwest has grown quite significantly overweighing the decrease in Western production. US exports have grown due to the reliable growth of cheese, cheese had its 17^th month growth streak in November ‘22.