The Oct. 4 USDA Dry Products report showed that stocks of human-grade nonfat dry milk (NFDM) declined 7 percent, down 20 million lbs from July to August. Stocks at the end of August were 266 million pounds, the lowest carryout for the month since 2016 and down nearly 50 million pounds YOY.
It is important to highlight that this number will likely fall further in coming months, as is typical during fall. If history is any indication, manufacturer stocks will decline further over the next three months, and inventories will likely set new five-year lows this fall. In direct response, prices for NFDM have been gradually firming up on the Chicago Mercantile Exchange, up a good 10 to 15 cents per lb in the past month.
Butter and cheese production were also both reported lower for the month, not surprising given that the herd has been in decline as farmers cull to take advantage of higher beef prices. Slaughter rates have been running higher over recent months as dairy operations have reduced herds in response to lower milk prices. That, in turn, is crimping milk supply and reducing total output. Unquestionably, 2024 will be starting with a smaller herd than 2023, which will constrain total milk supply.
The full version of this commentary appeared on our IQ platform Oct. 5, 2023. Further information, statistics, and pricing for the dairy market are available to IQ subscribers.Learn more about becoming a subscriber.
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