Nonfat dry milk prices drop as milk output rises

by Ron Sterk
Share This:

Dairy product prices have been a mixed bag with values for benchmark nonfat dry milk dropping since mid-summer and cheese prices falling sharply since early August, but values for some dry products have shown surprising stability or even strength. Butter prices have fluctuated but generally are higher than expected. Milk production continues to climb, but at a slower pace in part due to summer heat.

In its August Livestock, Dairy and Poultry Outlook, the U.S. Department of Agriculture said it expected quarterly average prices for all milk, class III milk (used to make cheese), dry whey and cheddar cheese will peak in the current July-September quarter, with class IV milk (used to make butter and dry products), nonfat dry milk, and butter already peaked in the second quarter. In fact, those peak prices would be the highest forecast prices of any other quarter in the three-year period from 2010 through 2012, according to the U.S.D.A.

“Milk production will continue to rise both this year and next,” the U.S.D.A. said in its Outlook report. “Higher milk production and slower growth in exports will pressure prices in 2012. Increased milk production is the result of an increased number of dairy cows since milk output per cow is expected to decline due to high feed costs, with the past summer’s hot weather having a short-term negative impact in some regions.”

In its latest Milk Production report, the U.S.D.A. showed average milk output per cow declined by 3 lbs (1,796 lbs in July) from July 2010. Although small, it was the first monthly decline from a year ago in possibly seven years (depending on revisions), and compared with July 2010 output that was more than 50 lbs above the July 2009 level. Whether the per cow number stays below a year ago on a monthly basis or whether it was a result of hot July weather remains to be seen.

U.S. milk production was projected by the U.S.D.A. at 198.8 billion lbs in 2012, up 1.6% from 2011, at 195.6 billion lbs in 2011, up 1.5% from 2010, and estimated at 192.8 billion lbs last year, up 1.8% from 2009.

Meanwhile, milk product prices have been mixed coming into the fall, although a weaker tone has been evident for many.

Prices for high-heat nonfat dry milk (N.D.M.) declined about 15c a lb, or 10%, from mid-July to early September, and for low/medium-heat N.D.M. about 20c, or 13%. Because of the large volume of N.D.M. produced relative to other dry dairy products, price changes tend to influence other products, such as buttermilk powder or whey protein concentrate, to the degree substitution is possible. Prices for 34% whey protein concentrate dropped about 7c a lb, or 5%, and buttermilk powder about 20c, or 13%, during the same time as N.D.M. prices fell.

In its Outlook, the U.S.D.A. forecast prices for N.D.M. and dry whey will continue to drop for at least the next three quarters. For the year, the department projected the 2012 average N.D.M. price about 7% below the 2011 average, and the dry whey price about 13% below the current year.

But values for dry whey and lactose actually increased during the July-September period as N.D.M. prices fell, indicating other factors, such as strong domestic and export demand, than just N.D.M. prices and milk supply, were at play.

Manufacturers’ shipments of N.D.M. in July were up about 8% from June and outpaced July 2010 by 19%, according to the latest U.S.D.A. Dairy Products report. Inventories on July 31 were up about 2% from June but down 2% from a year earlier. Production of N.D.M. in the first seven months of 2011 was about 4% below the same period a year ago. Last week prices for all grades on N.D.M. were 21% above year-ago levels in the Central and East and at least 25% above in the West.

In contrast, prices for dry whey last week were 72% above year-ago levels and for lactose were 77% above. Production of both products was above year-ago levels for the January-July period, but opposite N.D.M., monthly production has been steadily declining compared with the same month last year. July 31 manufacturers’ stocks of dry whey were 11% below a year ago and of lactose were down 9%.

Last week N.D.M. prices ticked upward in some regions for the first time in nearly four months. Some suggested that signaled prices have bottomed since less milk will be available to dryers with the start of the new school year increasing demand for fluid milk, the U.S.D.A. noted in its weekly Nonfat Dry Milk report. At the same time, the U.S.D.A. also noted some manufacturers and resellers were sharply discounting N.D.M. to increase sales and keep inventories from building. If the U.S.D.A.’s 2012 forecast holds true, N.D.M. prices have more downward potential.

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.








The views expressed in the comments section of Food Business News do not reflect those of Food Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.