By Lee Mielke

Cheese vats were busy in January. You’ll recall that USDA’s preliminary data reported January milk production at 19.1 billion pounds, down 1.6 percent from January 2020. The January Dairy Products report shows which products got shorted and it wasn’t cheese. Total output hit 1.168 billion pounds, up 1.8 percent from December and 2.8 percent above January 2021. And, a lot of that went into the cooler, according to USDA’s Cold Storage report. In fact, total stocks were up 3 percent from January 2021.

Wisconsin produced 291.9 million pounds of the January total, down 0.9 percent from December but 2.8 percent above a year ago. California vats provided 194.6 million pounds, up 3.A percent from December but 7.4 percent below a year ago. Idaho added 87.1 million pounds, down 1.3 percent from December, and 0.8 percent below a year ago.

Italian cheese totaled 489.1 million pounds, up 0.9 percent from December and 1.7 percent above a year ago. American type cheese, at 479.6 million pounds, was up 4.7 percent from December and up 1.1 percent from a year ago. Mozzarella output totaled 379.1 million pounds, up 1.1 percent from a year ago.

Cheddar, the daily traded cheese at the CME, totaled 337.4 million pounds, up 9.7 million pounds or 3.0 percent from December’s output, which was revised down 6.9 million pounds, and was down 9.5 million pounds or 2.7 percent from January 2021, fourth month in a row to be below the previous year.

Churns produced 195.2 million pounds of butter, up 15.2 million pounds or 8.4 percent from December, but 14.4 million pounds or 6.9 percent below a year ago, seventh consecutive month below a year ago. Stocks were down 33 percent from a year ago.

January yogurt output totaled 374.9 million pounds, up 2.8 percent from a year ago. Dry whey production climbed to 80.3 million pounds, up 2.6 million pounds or 3.3 percent from December, but 3.7 million pounds or 4.4 percent below a year ago.

The report was viewed as slightly bearish, however StoneX stated in its March 7 ‘Early Morning Update’: “Given the recent increase in dairy cow slaughter levels, declines in milk collection in Europe, yields in the U.S., and poor weather in New Zealand and Australia, any increase in milk production will likely take longer than we anticipated. This stall in production levels likely has a far bigger long-term impact in the market than dairy product production numbers being slightly higher than we expected.”

The Unite States still has plenty for U.S. and global consumption. HighGround Dairy’s (HGD) Lucas Fuess reported details of January export data in the March 14 ‘Dairy Radio Now’ broadcast. Technical difficulties interrupted the usual posting to the USDA website, he said, however HGD secured data from an alternative source, though it may be subject to some revision.

Cheese exports totaled 65.1 million pounds, up 16.5 percent from January 2021, highest January volume since 2014, according to Fuess, and that despite the port congestion issues that have been plaguing the industry.

Those issues have impacted nonfat dry milk a lot more, he said. Powder exports totaled 131 million pounds, down 5.5 percent, down for the second consecutive month regardless of the strong global demand. He said he believes that demand will remain strong and support the price and does not think the United States will price its way out of the market despite the rise in U.S. prices.

January butter exports totaled 7.8 million pounds, up 24.8 percent, and dry whey amounted to 26.8 million pounds, down 33.8 percent.

HGD said, “The exports showed weakness across a wide swath of products, but strength in cheese, butter and lactose was encouraging. Tough prior year comparable volume coupled with port congestion will limit the ability of exports to show impressive strength in the coming months,” HGD warned. “Significant volume will continue to leave the U.S. as demand remains firm and U.S. prices remain a value buy,” HGD concluded.

Meanwhile, the USDA again lowered its estimate for 2022 milk production, citing lower dairy cow numbers and slower growth in milk per cow, and raised milk price projections in the latest World Agricultural Supply and Demand Estimates report.

2022 production and marketings were estimated at 226.0 and 225.0 billion pounds respectively, down 1.2 billion pounds on production. If realized, 2022 production would be down 200 million pounds or 0.1 percent from 2021.

The fat basis import forecast was lowered on lower expected imports of cheese and butterfat products, while exports were reduced on lower shipments of whole milk powder and whey. The skim-solids basis import forecast was raised, primarily as higher imports of milk proteins more than offset weaker cheese imports. The export forecast was reduced on weaker expected sales of whey products and skim milk powders, according to USDA.

Price forecasts for cheese, butter, nonfat dry milk and whey were raised from the previous month, based on current prices, lower expected production, and continued demand strength. The higher product prices resulted in both Class III and Class IV milk prices being raised.

Cheese is now projected to average $2.03 per pound in 2022, up 13 cents from last month’s estimate, and 35.55 cents above the 2021 average. Butter was projected at $2.5750 per pound, up 18.5 cents from a month ago and 84.25 cents above 2021.

Nonfat dry milk was projected at $1.74 per pound, up 7.50 cents from last month’s estimate and 47.1 cents above the 2021 average. Whey is projected to average 71 cents per pound, was up a half cent from last month’s estimate and 13.6 cents above the 2021 average.

The 2022 Class III milk price is projected to average $21.65 per hundredweight, up $1.35 from what was expected a month ago, and $4.57 above the 2021 average of $17.08. The Class IV average was projected at $23.70, up $1.40 from a month ago, and $7.61 above the 2021 average of $16.09.

Butter producers continue to report accessible cream from within the region and the West. Seasonal milk yield increases will likely push extra cream onto the spot market, DMN said, but spring holiday-focused processing of dips, whips, cream cheese and other staples could keep cream availability in check, if not tighten it. Some butter makers say they are in somewhat good shape regarding fall stocks but others are not. Staffing shortages remain a hurdle to full capacities but that varies plant to plant. DMN said, “There are a number of questions pertaining to Ukraine and Russia. As fuel prices quickly increase, plant managers and others say hauling costs will add another barricade to smooth running operations.”

Cream demand is steady to higher in the West. Inventories are available but tightening, as butter and ice cream makers ramp up production for spring. Food service butter demand is trending higher, thanks to warmer weather and loosening COVID restrictions. Demand is also increasing in food service, as grocers purchase more for upcoming spring holidays. Export demand for butter is strong. Higher international prices and tight inventories are contributing to higher prices. Butter producers are running busy schedules in the region, but labor shortages and delayed production supplies continue to prevent full capacity.