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March Dairy Market Report


March 5, 2014

U.S. whey powder production plummeted in January 2014 to just over 69 million pounds reflecting the lowest production for the month of January in 27 years according to USDA’s latest Dairy Products report. In a typical year, whey powder production peaks in January or February; however, this year due to low milk and cheese production in the Midwest, whey production has fallen off. At the same time, manufacturers are continuing to divert whey solids from whey powder to higher value whey protein concentrates (WPC) and whey protein isolates (WPI). Although whey production continues to decline each year, milk prices and therefore input costs for whey products are still driven by the USDA’s Agricultural Marketing Service weekly National Dairy Product Sales Report prices which only surveys whey powder. Therefore, lower whey powder production and tighter supplies could support prices through the spring.

Clearly manufacturers produced considerable amounts of WPC with 25-49.9% protein in January as output topped 26.4 million pounds, just 1.9% less than December but 46% more than a year ago. As nonfat dry milk (NDM) and skim milk powder (SMP) continue to be in short supply, buyers who are able to substitute lower cost solids are using WPC. In several applications, WPC34 can replaced NDM as they have similar protein levels. WPI (90% protein or higher) output also rose to just over 8 million pounds, 2.4% more than December and nearly 23% higher than last year. Despite much stronger WPC and WPI output, stocks were still lower than a year ago levels suggesting sales are continuing at a strong pace. WPC (25-49.9%) stocks 21.9 million pounds in January, nearly unchanged from December, up 0.5% but still 18% less than a year ago. Similarly, WPI stocks came in just under 28 million pounds, 2.2% more than the prior month, but 5.1% less than January 2013.

Milk production has started to increase in western states as on-farm profitability continues to improve. This has led to increased NDM and SMP output with January combined production at 198.3 million pounds, up 8% vs. December and 4% more than a year ago. Similar to whey protein products, despite stronger production data, stocks remain well below a year ago levels currently. January NDM stocks were reported at 149.2 million pounds, 12.2% more than December, but still 25% less than last year.

Overseas demand for U.S. dairy products has yet to subside. As China continues to set monthly records for whole milk powder and SMP imports drawn mainly from New Zealand, the rest of the world is working to source dairy products from the European Union and United States. Once again the world is waiting to see China’s next move as growing milk supplies are continuing to be consumed leaving little ability to restock bare coffers.