MRV BLOG: MRV Market Commentary November 27, 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:

Understanding the Year-Over-Year Changes in Food CPI and Inflation

Inflation remains a significant concern for consumers, and the Food Consumer Price Index (CPI) offers a clear lens through which these economic shifts can be examined. In the United States, the Food CPI rose by 2.1% from October 2023 to October 2024, reflecting ongoing pressures on household budgets. Month over month, the Food CPI saw a more modest increase of 0.2% from September to October 2024, indicating a slight deceleration in food price inflation.

Interestingly, the growth in food-at-home prices, which climbed 1.1%, was outpaced by the 3.8% rise in prices for food consumed away from home. This dynamic suggests a shifting consumer preference or necessity towards more affordable dining options, possibly due to economic constraints. Such inflationary pressures are exacerbated by the rising costs of staple dairy products, like milk, which saw a 2.9% increase in October 2024.

Key Developments in U.S. Dairy Production and Cow Numbers

The U.S. dairy sector has experienced notable shifts, particularly in cow numbers and milk production. As of October 2024, the national dairy herd consisted of 9.365 million head, marking an increase of 19,000 from the previous month and 10,000 more than in October 2023. This uptick breaks a trend of declining cow numbers seen earlier in the year, signaling potential resilience among dairy producers.

Production levels have followed suit, with a 0.2% increase in milk volumes compared to the same period last year. This growth is largely attributed to rising cow numbers, although productivity per cow also saw a slight uptick, with yields increasing by 3 lbs. to 1,996 lbs. per cow. However, regional disparities persist, with states like California facing production challenges due to factors like the avian flu, while states such as Texas have reported significant growth in both cow numbers and milk output.

Global Dairy Market Trends: Insights from Europe and Oceania

Globally, the dairy market is experiencing varied trends. The Food and Agriculture Organization’s (FAO) Food Price Index (FFPI) noted a 2% increase year over year in October 2024, with dairy prices particularly buoyant, up 24.5% from the previous year. This surge is driven by climbing cheese and butter prices, despite subdued demand for powdered dairy products.

In Europe, milk production has faced hurdles, notably due to the bluetongue disease affecting northern European countries. Germany, for instance, registered its lowest September milk collections since 2016, with a 1.8% year-over-year decline. Conversely, France and the UK saw production gains, offsetting declines elsewhere in the region. Oceania, on the other hand, reported higher milk production levels, sufficient to counterbalance deficits in regions like Argentina.

Implications of Dairy and Food Price Movements on Consumers

The interplay between rising food and dairy prices has profound implications for consumers, particularly in low-income households. As inflation moderates, it remains close to target levels in the U.S., yet the economic burden is disproportionately felt by those with tighter budgets. Consumers are turning to value options, such as pizza and fast-food hamburgers, which heavily utilize cheese, to stretch their food dollars further.

Internationally, the steady yet cautious demand for dairy highlights economic uncertainties in developing regions. The limited growth in world milk supplies means that even stable demand can sustain high prices, impacting affordability. As global dairy markets continue to navigate these challenges, the potential for expanded production in response to higher prices remains a watchful trend, with implications for future food price stability.

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.