By Lee Mielke

U.S. dairy exports were record high in 2021 but hit some headwinds in December. Starting with our biggest category, nonfat-skim milk powder exports totaled 127 million pounds, down 3.9 percent from December 2020, but they were up 10.7 percent for all of 2021.

Speaking in the Feb. 14 ‘Dairy Radio Now’ broadcast, HighGround Dairy’s Lucas Fuess said the decrease is “a concerning sign that possibly signifies that logistical and shipping issues are finally negatively impacting the ability of U.S. exporters to move product overseas.” He adds that volume was down 27 percent from November, “even as global demand remained firm into the end of the year with prices continuing to climb in the absence of available product from key global exporters. Mexico remained the top destination but volume was down 2 percent.”

Cheese exports totaled 68.4 million pounds, up 20.1 percent from a year ago, with YTD up 14.2 percent. HGD says December was the sixth consecutive month cheese topped exports of a year ago and set a new record on a calendar year basis. The largest year over year gain was in cheese moving to Mexico, up 17 percent.

Butter totaled 7.6 million pounds, up 19.6 percent from a year ago and up 110.7 percent YTD. Dry whey exports fell to 31.8 million pounds, down 16.3 percent from December 2020, but 5.6 percent ahead of 2020 overall, as it appears China’s hog herd has been rebuilt.

December was a 23-month low for dry whey exports, weakest of any month since January 2020, according to Fuess. Chinese market share fell from 53 percent last year to just 27 percent this year, and volume was down 58 percent from a year ago.

The increased dairy product prices drove the value of December exports to just under $595 million, up $90 million from a year ago.

Exports for all of 2021 totaled 5.93 billion pounds, up 10 percent from 2020, and value hit a record $7.7 billion and accounted for more than 17 percent of U.S. milk production.

Fuess said it’s encouraging for farmers to see product leave our shores and not weigh down our markets, depressing prices, but he warned that, with 2021 being such a great year, it may be difficult to match in 2022. Continued good exports and robust domestic demand should keep prices well supported, he concluded.

The strong export data drew praise from the National Milk Producers Federation, U.S. Dairy Export Council and the International Dairy Foods Association, all of whom decried current backlogged port conditions and supply chain challenges.

We have plenty to sell despite December milk output being down 0.1 percent from 2020. The December Dairy Products report showed cheese output totaled 1.156 billion pounds, up 3.0 percent from November and just 0.1 percent above December 2020, but output for all of 2021 totaled a record 13.6 billion pounds, up 2.8 percent from 2020.

airy product prices were mostly higher the second week of February. The Cheddar blocks held at $1.90 per pound for four sessions, then gained 0.75 cents Friday to close at $1.9075, 35 cents above a year ago.

The barrels saw a Friday finish at $1.91, up 1.50 cents on the week, 42 cents above a year ago, and 2.50 cents above the blocks. There were 2 sales of block and 10 of barrel.

The Feb. 4 Dairy and Food Market Analyst reported that foodservice sales are beginning to improve again as the latest COVID-19 surge dies down. Dairy Market News said Midwestern cheesemakers reported stronger customer demand the previous week but, as January progressed and prices fell, customers began to pace their orders. The recent bullish movements brought the buyers back. Cheese production is busy though some plants still face employee shortages. Spot milk prices were discounted around $1 under Class, according to DMN.

Retail demand for cheese is steady in the West while food service demand continued to decline. Many restaurants in the region continue to operate with reduced hours or are closed due to COVID concerns and labor shortages. International cheese demand is strengthening as U.S. prices were below European prices. Loads of cheese continue to face delays due to a shortage of available truck drivers and exports continue to face delays from port congestion. Spot inventories are meeting current demand. Milk is available for cheese producers to run busy schedules though some are still dealing with labor shortages and delayed deliveries of production supplies, DMN said.

The USDA lowered its estimate for 2022 milk production in its latest World Agricultural Supply and Demand Estimates report, blaming lower dairy cow numbers. The Cattle report estimated the Jan. 1 dairy cow inventory almost 1 percent below 2021 and the number of replacements 3 percent lower.

2021 production and marketings were estimated at 226.3 and 225.2 billion pounds respectively, up 100 million pounds on production from last month’s estimate, and unchanged on marketings. If realized, 2021 production would be up 3.1 billion pounds or 1.4 percent from 2020.

2022 production and marketings at 227.2 and 226.1 billion pounds respectively, down 500 million pounds on both. If realized, 2022 production would be up 900 million pounds or just 0.4 percent from 2021.

Annual product price forecasts for cheese, butter, nonfat dry milk, and whey were raised from the previous month, based on current prices, lower expected milk output, and tightening stocks. Cheese was projected to average $1.90 per pound in 2022, up 2.50 cents from last month’s estimate, and 22.5 cents above the expected 2021 average.

Butter was projected at $2.39 per pound, up 9 cents from a month ago and 65.75 cents above 2021. Nonfat dry milk and whey were projected to average $1.6650 and 70.50 cents per pound respectively, up 40 cents and 13.1 cents respectively from their 2021 averages.

Class III and IV milk prices were raised. Look for the 2022 Class III to average $20.30 per hundredweight, up 65 cents from what was expected a month ago.

That compares to a $17.08 average in 2021. The Class IV price was projected at $22.30, up $1.40 from a month ago, and compares to $16.09 in 2021.

U.S. dairy margins “strengthened sharply to start the year,” according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC., “as a continued surge in milk prices combined with a mild correction in the feed markets to boost projected profitability.” The W said that “The milk market has caught fire from a perfect storm of declining global production at the same time as demand for dairy products soar,” and cited the record November export data, up 17.3 percent from 2020 and 60 million above the previous record set in 2017.

Increased exports of nonfat dry milk has helped to support Class IV prices, according to the MW. “The USDA announced price in December of $19.88 per cwt., up $6.46 from 2020 and the highest announced price in seven years. In addition, Class IV futures were trading above $22 per cwt. in each of the next four months.