Executive Summary U.S. dairy product production figures provided by USDA were recently updated with values spanning through Dec ’17. Highlights from the updated report include:

• Dec ’17 U.S. butter production increased 4.2% YOY, finishing higher on a YOY basis for the fifth time in the past six months.
• U.S. cheese production finished higher on a YOY basis for the 57^th consecutive month during Dec ’17, increasing by 2.6% to a record seasonal high for the month of December. U.S. dry whey production increased on a YOY basis for the tenth time in the past 11 months, finishing up 6.1%.
• Combined production of U.S. nonfat dry milk and skim milk powder increased on a YOY basis for the second consecutive month during Dec ’17, finishing up 1.7%. U.S. nonfat dry milk production increased 5.4% YOY throughout the month, more than offsetting an 8.8% decline in skim milk powder production. Skim milk powder has declined on a YOY basis over five consecutive months through Dec ’17.

Additional Report Details Butter – Production Increases YOY for the Fifth Time in the Past Six Months, Finishes up 4.2% According to USDA, Dec ’17 U.S. butter production increased 4.2% YOY, finishing higher for the fifth time in the past six months. YOY increases in butter production were widespread regionally and led by the Central U.S. (+6.2%), followed by the Western U.S. (+3.0%) and the Atlantic U.S. (+1.9%). ’16-’17 annual butter production declined 1.9%, finishing at a six year low, however ’17-’18 YTD production figures have rebounded by 3.3% YOY throughout the first quarter of the production season. Cheese – Production Reaches a Record Seasonal High, Finishes up 2.6% YOY Dec ’17 total U.S. cheese production finished higher on a YOY basis for the 57^th consecutive month, finishing up 2.6% to a record seasonal high for the month of December. Cheddar cheese production increased 3.2% on a YOY basis throughout the month while other-than-cheddar cheese production finished 2.3% above the previous year production volumes. ’16-’17 annual cheese production increased 3.0% to a record annual high as cheddar cheese production finished 4.9% higher, while ’17-’18 YTD production figures are up an additional 2.8% throughout the first quarter of the production season. Dry Whey – Production Increases YOY for the Tenth Time in the Past 11 Months, Finishes up 6.1% Dec ’17 U.S. dry whey production increased 6.1% YOY, finishing higher for the tenth time in the past 11 months. Combined whey protein concentrate (WPC) and whey protein isolate (WPI) production also remained higher on a YOY basis throughout Dec ’17, increasing by 2.6%. Combined WPC and WPI production had declined on a YOY basis over 20 of the past 25 months through the end of 2016, prior to finishing higher throughout the past ten months. Combined dry whey, WPC and WPI production remained strong throughout Dec ’17, finishing up 4.8%. ’16-’17 annual dry whey production increased 1.3% YOY while combined production of dry whey, WPC and WPI finished up 4.6%. ’17-’18 dry whey production is up an additional 4.3% YOY throughout the first quarter of the production season while combined production of dry whey, WPC and WPI is up 3.7%. NFDM/SMP – Higher NFDM Production Offsets Lower SMP Production, Total Production up 1.7% Dec ’17 U.S. nonfat dry milk (NFDM) production increased 5.4% YOY, finishing higher for the eighth time in the past nine months. Production of skim milk powder (SMP), which is more suited to the requirements of most global markets, finished lower on a YOY basis for the fifth consecutive month, however, as production declined 8.8%. Combined production of NFDM and SMP finished higher on a YOY basis for the second consecutive month during Dec ’17, increasing by 1.7%. ’16-’17 annual combined production of NFDM and SMP increased 4.1% to a record annual high as production of both products finished higher. ’17-’18 YTD combined production of NFDM and SMP is up an additional 0.2% throughout the first quarter of the production season. Overall, dry whey production increased most significantly YOY on a percentage basis during Dec ’17, followed by nonfat dry milk and butter, while skim milk powder production experienced the largest YOY decline in production throughout the month.