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Milk supplies remain constrained in most areas of the U.S.

You’ll recall that preliminary USDA data showed May milk production was down 0.7% from May 2021. The May Dairy Products report shows which products got shorted and it wasn’t cheese.

May cheese output totaled 1.188 billion pounds, up 2.5% from April and 2.1% above May 2021. It was the 19th consecutive monthly gain. Remember that cheese stocks hit a record high in May, up 3.7% from a year ago. Cheese output year to date (YTD) stands at 5.8 billion pounds, up 2.5% from a year ago.

Wisconsin produced 289.5 million pounds of the May total, up 1.8% from April but 1.8% below a year ago. California vats provided 211.8 million pounds, up 3.1% from April and 2.0% above a year ago. Idaho contributed 77.2 million pounds, down 10.6% from April and 3.5% below a year ago. 

Italian cheese totaled 486.3 million pounds, down 0.6% from April but 2.9% above a year ago. YTD Italian stands at 2.5 billion pounds, up 3.3%.

American type cheese, at 482.8 million pounds, was up 3.3% from April and 0.3% above a year ago. YTD output, at 2.3 billion pounds is down 0.3%.

Mozzarella totaled 388 million pounds, up 4.6% from a year ago, with YTD at 1.9 billion pounds, up 4%.

Cheddar output climbed to 335.4 million pounds, up 15.4 million pounds or 4.8% from April, but was 13 million pounds or 3.7% below May 2021, the third consecutive month it was below a year ago. YTD Cheddar is at 1.6 billion pounds, down 3.2% from a year ago, which has firmed CME prices.

May butter output totaled 181.7 million pounds, up 500,000 pounds from April but 1.3 million or 0.7% below a year ago. California output was down 3.2%. YTD butter production is at 942.3 million pounds, down 3.5% from a year ago. Butter stocks, you’ll recall, were down 22.3% from May 2021.

Yogurt output totaled 400.5 million pounds, up 1.7% from a year ago, with YTD output at 1.96 billion pounds, down 3.1%.

The extra cheese production meant higher whey product output. Dry whey output climbed to 84.6 million pounds, up 1.8 million pounds or 2.2% from April, and 7.3 million or 9.5% above a year ago. YTD is at 401.2 million pounds, up 2.3%.

Dry whey stocks totaled 73.5 million pounds, up 300,000 pounds or 0.3% from April and 5.7 million pounds or 8.1% above a year ago.

Nonfat dry milk output slipped to 192.7 million pounds, down 3 million pounds or 1.6% from April, and 12.8 million or 6.2% below a year ago. YTD powder was at 920.8 million pounds, down 7%.

Stocks jumped to 316.2 million pounds, up 17.1 million pounds or 5.7% from April but 32.3 million or 9.3% below a year ago.

Skim milk powder output climbed to 38.7 million pounds, up 3.3 million pounds or 9.3% from April, but down 9.8 million or 20.3% below a year ago. YTD SMP was at 180.2 million pounds, down 27.6% from 2021. Combined nonfat and skim milk powder output was below a year ago for the sixth month in a row.

The Dairy Products report looked relatively bearish, according to StoneX Dairy Group. “Nonfat dry milk in particular stands out as a bear with stock levels 42 million pounds over forecast. The fact that production leaned heavily towards NFDM and not SMP also would seem to weigh upon that market.”

Cheese looked bullish, adds StoneX. “American cheese production was some 6 million pounds less than forecast as we continue to see very strong mozzarella production. Expect cheese exports to remain strong moving forward given the production levels.”

Butter looked a bit bearish with heavier than expected production, according to StoneX, while the whey breakdown appeared bullish. “Stock levels were 6 million pounds under expectations. It looks like demand was very strong which makes sense with slightly lower prices we’ve seen of late.”

Dairy product prices entered July weaker. The markets were closed for the Fourth of July holiday Monday and Tuesday was not a great reopening. The Global Dairy Trade dropped and most CME prices fell soon after.

Demand is weaker than most people expected, explained Matt Gould, editor and analyst with the Dairy and Food Market Analyst newsletter in the July 11 Dairy Radio Now broadcast. He also pointed to the Fed raising interest rates, the slowing economy, and the loosening of our tight supply chains.

When asked if exports will bail dairy out, Gould said “That’s the almighty question.” U.S. dairy prices have moved below the rest of the world, he said, “If you’re an international dairy buyer, you look at the U.S. and say, their dairy products are on sale.” So, while dairy prices have fallen, Gould says “It will not be a total plunge and we will see a floor put in here, if for no other reason than milk supplies globally remain tight.” 

Milk supplies also remain constrained in most areas of the U.S., he said, especially in the West where drought is a factor and elevated feed costs, “but this is true globally where we don’t have a wall of milk anywhere,” he concluded.

Speaking of exports, the U.S. sent 89 million pounds of cheese sailing in May. While down slightly from March and April, volume was up 31% from May 2021, highest May on record, according to HighGround Dairy. Cheddar exports were up 135.1%. Mexico remained the top cheese destination, with volume up 14%.

Butter totaled 8.9 million pounds, down 8.4%. Year to date exports are up 17.7%.

Nonfat dry milk/skim milk powder exports totaled 177.3 million pounds, down 9.4%, sixth consecutive month to be below the previous year but still the second highest May on record, according to HGD. Mexico’s imports were down 2.3%.

The U.S. exported 35.9 million pounds of dry whey, down 23.4% from a year ago, mainly due to deteriorating demand from China, says HGD, down 51%.

Meanwhile, troubles remain in the Global Dairy Trade which saw the weighted average drop 4.1% this week, following the 1.3% decline on June 21. Traders brought 51.7 million pounds of product to market, up from 45.8 million on June 21. The average metric ton price fell to $4,360 U.S., down from $4,600.

Butter led the declines, plunging 9.1%, after gaining 2.4% on June 21. Anhydrous milkfat was down 3.1%, following a 4.7% drop. Skim milk powder was down 5.2%, after inching up 1.0% last time, and whole milk powder was down 3.3%, following a 0.6% slip.

Cheddar was up 1.4%, after leading the declines last time with a 9% plunge.

StoneX says the GDT 80% butterfat butter price equates to $2.4992 per pound U.S., down 25 cents, after gaining 6.5 cents in the last event, and compares to CME butter which closed Friday at $2.97. GDT Cheddar, at $2.2263, was up 1.5 cents, after losing 22.2 cents last time, and compares to Friday’s CME block Cheddar at $2.11. GDT skim milk powder averaged $1.8428 per pound, down from $1.9397. Whole milk powder averaged $1.7966 per pound, down from $1.8713. CME Grade A nonfat dry milk closed Friday at $1.7475 per pound.

Volume purchased by the North Asia region, which includes China, continues to be lower than year-ago levels, according to StoneX, but once again purchases grew from the previous event. “North Asia market share has returned to over half of the auction purchases. Purchases by Southeast Asia and the Middle East were also higher than year-ago levels.”

As stated, CME block Cheddar plunged 8.75 cents Tuesday and stayed put at $2.0850 per pound until Friday when a sale took it back up to $2.11, down 6.25 cents on the week but 38.50 cents above a year ago.

The barrels dropped four cents Tuesday, to $2.1650, but finished Friday at $2.1825, 2.25 cents lower on the week, 60.25 cents above a year ago, and 7.25 cents above the blocks. There were two cars of block sold on the week and three of barrel.

Midwestern cheese producers tell Dairy Market News they’re facing challenges. While milk supplies are currently available, some farmers are downsizing due to a lack of help. Add to that, the availability of milk haulers in the region. Some are selling their trucks, while others are retiring and leaving the business altogether. Spot milk was moving at similar to strong discounts, at least on average, to pre-holiday levels this week, as low as $6 under Class, according to DMN.

Retail demand for cheese is steady to lower in the West as higher prices are affecting purchases. Food service is also softening but export demand remains strong due to U.S. competitive prices. Regional milk is available for cheese makers to run busy schedules although output was steady to lower this week, as plants planned down time for the holiday weekend. Labor shortages and delayed deliveries of production supplies continues says DMN.

Butter lost seven cents Tuesday but ended the week at $2.97 per pound, down four cents on the week but $1.2950 above a year ago, with 47 sales reported, highest weekly total since the week of September 20, 2021.

Butter contacts relay that cream is steadily available but butterfat components are seasonally sliding. Weather in the upper Midwest has yet to put a notable dent in available cream. Churning is busy in spite of a lack of employees. There are growing concerns that consumer purse strings are expected to tighten as gas, fuel, and grocery costs rise, says DMN. Contacts suggest consumers are less likely to buy butter in larger quantities or may look at alternatives.

Cream inventories are still available in the West but demand is strong as ice cream and butter makers are running busy schedules. Labor shortages and delayed supply deliveries continues to keep them below capacity. Demand for butter is softening in retail markets as rising prices cause some to switch to alternatives. Food service demand is also declining as restauranteurs reduce hours due to labor shortages and higher input costs. 

Grade A nonfat dry milk was down 5.50 cents Tuesday and fell to $1.74 per pound Wednesday, lowest since May 16. It rallied to a Friday close at $1.7475, down 5.50 cents on the week but 49.75 cents above a year ago, on 12 sales.

Dry whey saw its Friday finish at 49 cents per pound, down a penny, and 1.75 cents below a year ago, with two sales recorded on the week at the CME.

U.S. dairy margins improved over the second half of June as projected feed costs decreased more than milk prices with both markets trending lower, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.. 

“The corn market in particular has been under extreme pressure with risk premium being removed on improved weather forecasts." the MW stated. "USDA released the revised acreage report at the end of the month along with Quarterly Grain Stocks. Both figures were considered largely neutral relative to expectations. The corn acreage figure was pegged at 89.92 million compared with the average trade estimate of 89.69 million and up 431,000 acres from the March Planting Intentions.”

The MW cited details from the May Milk Production and Cold Storage reports, concluding; “Strong cheese production has kept pressure on the market recently” and “A combination of high spot butter prices and strong demand both domestically and in the export market have likely led to the stocks drawdown, with cheese manufacturing diverting milk supplies from driers.”

In the week ending June 25, 50,900 dairy cows were sent to slaughter, down 3,200 head from the previous week, and 4,900 or 8.8% below a year ago. Year to date slaughter is down more than 3%.

The latest Crop Progress report shows 64% of U.S. corn was rated good to excellent, as of the week ending July 3, down 3% from the previous week, but dead even with a year ago.

Looking at soybeans, 96% have emerged, up from 91% the previous week, 2% behind a year ago, and mirrors the five year average. 16% are blooming, 11% behind a year ago and 6% behind the average. Ratings put the crop at 63% good to excellent, 2% behind the previous week, 4% ahead of the five year average.

Cooperatives Working Together (CWT) members accepted 10 offers of export assistance this week to capture sales for 500,000 pounds of American-type cheese and 560,000 pounds of cream cheese. The product is going to customers in Asia and Central America, and will be delivered through September. 

CWT’s 2022 export sales now total 53.5 million pounds of American-type cheeses, 348,000 pounds of butter, 28.5 million pounds of whole milk powder, and 5.6 million pounds of cream cheese. The products are going to 18 countries.

Last but not least, a hearty salute to Dutch farmers who are vigorously fighting their government for their livelihoods by rejecting harsh nitrogen reduction targets being forced upon them in the name of “climate change.” 

The U.S. Supreme Court just reigned in our own Environmental Protection Agency’s overreach but this fight is far from over, in the world or in this country. A word to the wise. These zealots will not be satisfied until we are all eating and drinking grass and riding bikes as we recharge our “electric cars.”

Lee Mielke is a graduate of Brown Institute in Minneapolis, MN. He’s formerly the voice of the radio show “DairyLine,” and his column appears in agricultural papers across the U.S. Contact him at