U.S. dairy trade has shown trade surpluses for 41 consecutive months. June U.S. dairy exports were valued at $596 million, an all-time June record and up 35.5 percent from June 2012. June marked the twenty-seventh month out of the past 28 in which exports exceeded $400 million and equaled 16.5 percent of total U.S. milk solids production. For CY-2013 (January-June) U.S. dairy exports accounted for 50 percent of nonfat dry milk/skim milk powder produced in the U.S., 5.9 percent of cheese, 7 percent of butter; 52 percent of dry whey, and 74 percent of lactose.
Dairy Product Inventories: The latest USDA Cold Storage Report showed inventory increases in July for American cheese (+5.0 percent, 704.5 million pounds) and total cheese (+5.4 percent, 1,152.1 million pounds) as compared with July 2012. Both inventories were records for the month of July and total cheese set an all-time high. July marked the eighth consecutive month total cheese inventory was above 1.0 billion pounds. July butter inventory was 26.2 percent above July 2012 at 295.8 million pounds, marking the twenty fourth consecutive month butter inventory was above the same month last year and setting an all-time July record for butter inventory.
Outlook: Dairy market fundamentals continue to trend on the bearish side. NASS no longer reports cow numbers, at least for the remainder of FY-2013 (through September), therefore no one really knows if the national herd is growing or declining. My suspicion is that it is at least stable and perhaps growing slowly based on healthier producer margins so far in 2013. Also, milk output is being boosted since the U.S. dairy herd is certainly getting younger due to the fact that since the beginning of 2011 349,600 more dairy cows have been slaughtered compared to the same month the previous year. Dairy producer margins are much better than this time last year (+27.8 percent higher IOFC) encouraging dairy producers across the country to increase milk output. This upward trend in milk output may gain even more steam this fall as feed prices in December, using the USDA formula, are forecasted to drop 16 percent (-$2.02/cwt. of 16 percent protein dairy feed) as compared with December 2012. Class I sales are picking up as schools are beginning the new school year and cooler fall weather is right around the corner so component levels will be recovering. Cheese and butter wholesalers are looking to replenish stocks given the current low prices as they prepare for the fall holiday sales season. However, cheese and butter inventories remain at record levels and promise to remain so until, and if, a brisk fall holiday sales season is experienced in 2013.