Protein powder demand has been the front and center focus for dairy markets lately despite supply pressure as continued high milk production looms over the markets. Over the last week, Dry Whey climbed to 88.50 cents per pound in the spot market Tuesday, crushing the all-time high from February 2022 of 86.75 cents. All while Grade A Nonfat Dry Milk spot price inched its way higher to $2.27 per pound, approaching the all-time high of $2.2950, set just this spring.
While the U.S. has an abundance of raw milk supply, NDFM supply is currently limited due to demand for high-protein products like whey and whey protein diverting milk to Class III. Export demand has also been strong due to the NFDM lows set back in July and August causing many other countries to secure purchases with the U.S. at that time as there are many areas of the world seeing dairy shortages. Milk has also been diverted to Class I for schools, causing a supply chain bottleneck as the market tries to figure out what school demand will be after the government started allowing whole milk back in schools. This left less product available for drying.
Protein-rich products have been the main focus as they generally have the highest margin rates so manufactures have placed a higher priority on sending milk supplies that direction and only leaving what’s left for drying. This has been the perfect storm to allow NFDM to rally near historic highs.
The only caveat to watch with NFDM is the old adage that high prices cure high prices. Currently the United States is significantly higher priced that many alternative international competitors and as we saw when the record high was placed in May, the market can come down just as fast if not faster than it can rally.
Dry Whey has also had its time in the sun as eluded to above. Exports are the key driver to the market’s strength. Shortages of whey powders around the world increased U.S. demand as our production increased nearly 10 percent year over year.
The main message is that GLP-1s, diet culture, and world demand have put protein consumption on the forethought of consumers. New product creation as well as marketing has developed a niche market that is here to stay. High milk production in the United States allowed for innovation to create new demand for products that will hopefully be here to stay.
Sarah Jungman is a commodity broker with AgDairy, the dairy division of John Stewart & Associates Inc. (JSA). JSA is a full-service commodity brokerage firm based out of St. Joseph, MO. Sarah’s office is located in Winterset, Iowa and she may be reached at 515-272-5799 or sjungman@jpsi.com.
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