Exports feed demand for dairy products. An increase in exports can pressure inventories and increase prices. An increase in imports reduces domestic demand and can lower prices. This post will review exports and imports of key dairy products. Because exports and imports can be volatile month-to-month, this post will use 12-month moving averages. The dotted lines are trend lines.
Butter
The first dairy product to be covered is butter. Butter prices have set record highs. As covered in the prior post, butterfat prices and component levels are driving attractive producer prices for milk. Butterfat is currently worth $3.77 per pound.
Exports have tumbled in 2023 and 2024 (Chart I). As a result, net exports are negative by 5,400,000 pounds and imports total 10,300,000 pounds which is 5% of U.S. butter production.
Imports have continued to steadily increase doubling over in the last seven years. The main import sources are Ireland and New Zealand.
Cheese
Cheese exports have also fallen in 2023 and 2024 (Chart II). The drop is 23%! Currently, American cheese exports are only 2% of domestic production. The long-term trend line does show growth and in the most recent three months cheese exports have increased.
Imports have remained very stable over the seven years covered in this chart.
Producer prices are based on the price of Cheddar cheese which makes up the majority of American cheese.
Dry Whey
No dry whey is imported. Therefore, Chart III compares exports to domestic use. Export trends have declined in 2023 and 2024. The most significant buyer is China. Dry whey is really a byproduct of cheese production and is used to price “Other Solids” in Class III milk. There must be a market for dry whey so when exports decline, domestic usage must increase as seen in the mirror images in Chart III. Unfortunately, as a result of lower exports, prices have decreased in 2023 and 2024.
Nonfat Dry Milk
Nonfat dry milk (NDM)and skim milk powder (SMP) are byproducts of butter production. Like dry whey, it must find a market (Chart IV). There are essentially no imports, so the comparison in Chart IV compares exports to domestic use.
Domestic use has gradually slowed. Exports of NDM/SMP have followed the pattern of the above products with declines in 2023 and 2024. NDM production is double SMP production. Ninety percent of NDM is exported. NDM does have a long shelf life, so it can be stored when exports are low. However, as inventories grow, prices fall.
NDM prices change the value of Class IV skim milk and declining exports lower prices. Skim Class IV milk has decreased from $14.82 per cwt. in April 2023 to the current price of $9.13 per cwt. As the skim milk is worth less, the profitability of churning butter decreases. That may have an impact on the volume of butter churning.
Summary
Unfortunately, exports of all dairy products used to price producer milk have downward trends in 2023 and 2024. That reduces demand. In the case of butter, the decrease in exports of NDM/SMP can result in limited churning production which lowers inventories and increases butter prices.
One Response
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