U.S. Dairy Products Production Update – May ’14
Butter – Lower Production, Tight Stocks Continue According to USDA, U.S. butter production continued to lag behind last year’s production through March. Butter production has declined YOY for five straight months, with March ’14 U.S. butter production ending 9.0% behind ’12-’13 production. The 9.0% YOY decline in butter production was the largest YOY percent decline in over four years. ’13-’14 YTD butter production is 4.2% lower than the previous year through the first half of the production season. Lower production has resulted in a significant decline in domestic butter stocks. Butter stocks declined to a 24 month low in December before rising seasonally from January to March. March ’14 butter stocks ended 30.1% below the previous year’s level. Cheese – YOY Production Increases Slightly, Cheddar Continues to Lag YOY U.S. cheese production increased for the 12th straight month, as March ’14 production registered a 1.0% YOY gain. Last month it was reported that U.S. cheese production decreased slightly, however February ’14 production was revised higher in the May production report. Total U.S. cheese production remains 1.7% ahead of last year through the first half of the ’13-’14 production season, despite production being hampered by lagging cheddar cheese production. U.S. cheddar cheese production declined 2.4% YOY in March and is 1.2% behind ’12-’13 production YTD. Cheddar cheese lost market share of total U.S. cheese production for the fifth straight year in 2013 (Jan-Dec) and production has declined YOY in five straight months. Dry Products – Dry Whey Production Trend Continue, Powder Production Trend Reverses U.S. dry whey production continued to decline, with March ’14 production down 24.9% YOY. The March ’14 YOY decline in dry whey production was the largest in over 25 years. U.S. dry whey production has declined YOY in ten of the past 11 months with an average YOY decline of 7.5% as U.S. manufacturers continue to shift toward higher-value whey protein products including whey protein concentrates (WPC) and whey protein isolates (WPI). WPC and WPI production increased 10.8% YOY and 10.6% YOY, respectively in March ’14. Total March ’14 dry whey, WPC, and WPI production declined by 12.1% YOY. Despite decreased production, March ’14 U.S. dry whey stocks were up 4.7% from last month, at 59.3 million lbs. Although March ’14 dry whey stocks were down 23.7% YOY, stocks were 7.0% higher than the five year average March dry whey stocks. The trend of increasing SMP production and decreasing NFDM production continued the reversal that developed last month. March ’14 U.S. NFDM production increased 11.0% YOY and 10.5% over the five year average March NFDM production. The YOY increase was only the third in the past 12 months and the largest in 21 months. March ’14 U.S. SMP production declined 10.4% YOY, which was the second YOY decline in a row after 18 straight months of YOY gains. March ’14 combined production of NFDM and SMP was 5.7% higher than the previous year. SMP production as a percentage of total NFDM and SMP production experienced record highs early in the ’13-’14 production season, but has declined significantly in the past two months. SMP production is more suited to the requirements of most global markets; however plants typically convert milk into NFDM during periods of strong production because SMP does not have to be standardized to 34% protein. California, the leading powder producing state in the U.S., increased milk production by 3.7% YOY and NFDM production by 22.5% YOY in March ’14. In comparison, U.S. NFDM production outside of California increased by a mere 2.2% YOY in March. California accounted for 47.7% of NFDM production in March, up from 43.1% a year ago. Recent increased NFDM production has led to a significant increase in stocks. March ’14 U.S. NFDM stocks were up 17.9% from last month, at 214.0 million lbs. Although March ’14 NFDM stocks were down 7.8% YOY, stocks were 18.6% higher than the five year average March NFDM stocks. See the table below for a summary of key U.S. dairy product production in March ’14.