The USDA’s February Dairy Supply and Utilization report provided a look behind the markets.

Speaking in the April 22 Dairy Radio Now broadcast, HighGround Dairy economist Betty Berning said butter jumped out from it. “We knew butter exports were down in February,” she said, “And we heard reports of robust demand stateside as part of the narrative as to why butter prices were pushing $3 per pound,” but when looking at this report, we learned that domestic usage and exports were down.

Butter usage totaled 161.2 million pounds, down 6.3 percent, as domestic usage fell 4.9 percent. No surprise that exports were down 35.2 percent. HGD adds that February inventories were healthy as well indicating that neither high demand nor lack of supply were behind the elevated price.

Cheese consumption totaled 1.15 billion pounds, down 1.5 percent from February 2023, with domestic consumption down 3.5 percent. American style was down 7.3 percent.

Cheese exports totaled 95.5 million pounds, up 27.2 percent, led by the other-cheese variety, up 27.6 percent, and a new all-time high, according to HGD. “Low prices on the CME spot market, which have been heavily discounted to Europe since November 2023, likely helped spur additional sales.”

Nonfat dry milk utilization, at 182.3 million pounds, was up 2.4 percent but only because February 2023 was the weakest for the month since 2019, according to HGD. Berning said domestic consumption was down almost 3 percent, so exports carried the day, despite reports of struggling international demand. She adds that it remains to be seen if those exports remain strong.

Dry whey utilization, at 66.8 million pounds, was down 3.2 percent. Exports were down 5.6 percent. HGD says dry whey exports have been down since March 2023, with the exception of January 2024. Domestic demand wasn’t great either, said Berning.

USDA announced the May Federal order Class I base milk price at $18.46 per hundredweight, down 72 cents from April and $1.11 below May 2023. It equates to $1.59 per gallon, down from $1.68 a year ago. The five-month I average is at $18.58, down from $20.12 a year ago and $22.81 in 2022.

The USDA’s latest Livestock, Dairy, and Poultry Outlook reported, “Consumer Price Indexes for selected dairy products were year-over-year lower in March, while the indexes for overall prices and food prices show that the inflationary pressures are lingering. Of note, the Consumer Price Index for all dairy products has been year-over-year lower since September of last year.”

The latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC reports, “Dairy margins were mixed over the first half of April, strengthening slightly in nearby periods following a price recovery in cheese and the Class 3 Milk market while deferred periods held steady.

“The feed market was relatively flat with USDA releasing the April WASDE report which did not cut corn ending stocks as much as expected despite increased projected usage. The cheese market caught a bid with block and barrel prices rallying to the highest level in six weeks at $1.61 per pound, and lower prices in first quarter may have renewed export interest,” the MW stated.

U.S. cheese remains the least expensive in the world, according to the MW. “Mexico has been a bright spot for U.S. export demand. February dairy product exports totaled 501.1 million pounds, up 5.5 percent from 2023 after adjusting for leap day and the first time that February shipments have exceeded 500 million pounds, with cheese exports of 95.6 million pounds, up 27.3 percent from last year including 36.6 million pounds to Mexico.

“Domestic demand has been more lackluster, as January demand was down 2.8 percent from 2023 while demand in February slumped by more than 4 percent after adjusting for leap year. U.S. demand for American-style cheese has been particularly weak, down nearly 6 percent in January and February compared to the first two months of 2023. Butter demand by contrast has been robust, with the market hitting an all-time high for April at $2.97 per pound despite ample stocks and rising production from increased milkfat content, as buyers fear tighter supplies later in the year,” the MW stated.

The 40-pound Cheddar blocks closed the third Friday of April at $1.68 per pound, up 14.50 cents on the week, fourth consecutive week of gain and the highest CME price since Nov. 7, 2023, but 7 cents below a year ago, as traders anticipated Monday’s March Milk Production report.

The 500-pound Cheddar barrels finished Friday at $1.66, 8.75 cents higher, 10.75 cents above a year ago, and 2 cents below the blocks. CME sales amounted to 23 loads of each on the week.

Dairy Market News reports the spring flush is here as milk levels near their peak in parts of the Western U.S. and trend seasonally higher in the East and Midwest. “As cheese market tones show further signals of life, the same is being said among contacts regarding demand,” says DMN “Customers are trying to get ahead of increasing market price points.” Cheese supplies are available in the Midwest but are not at levels of concern. Spot milk availability shifted lower and Mid-Week prices ranged $3- to $1-under Class III. A year ago, they were $11- to $4-under Class, according to DMN.

Manufacturers note strong cheese production in the West as plenty of milk is seasonally available. Cheese stocks are also readily available. Demand is steady to moderate and international buying is steady to stronger, particularly from southern neighbor purchasers. Sources indicate immediate to short term sales continue to be more prevalent than sales for deliveries past second quarter. Some processors report that production is outpacing demand, warns DMN.

CheeseExpo was held this week in Milwaukee and StoneX stated that the takeaway from Expo is that something around $1.60 per pound cheese is a good market clearing price today. Demand for fresh cheese is reportedly improved however, “sustainability of demand is the key to holding prices up. Further price strength for spot cheese will begin to usher in a change in the 2024 trend of modest pops in price that don’t last.”

CME butter climbed to $2.94 per pound Tuesday but backed off to close Friday at $2.92, unchanged on the week but 52 cents above a year ago, on eight sales.

Midwest butter makers report summer/fall inventories are in fair shape. Churning has been robust with plentiful cream. For the second consecutive week, spot cream multiples were below 1. Butter demand is steady.

Updating the avian or bovine influenza outbreak, StoneX economists Nate Donnay and Dustin Winston stated this week, “The detection of avian influenza in the U.S. dairy herd has helped to firm market sentiment, but hasn’t had a big impact on prices. As of April 16, the USDA confirmed infections on 26 farms, but we think the true number is closer to 100.

“Now that the mystery disease has been identified, and there isn’t any treatment for it, some farmers are choosing to handle it quietly. That means the confirmed number of cases from the USDA probably won’t be a good indicator for how widespread the problem is and the impact will show up in prices first, and then eventually in the milk production data.”