As 2022 ended, reported stocks of various dairy products were starting to climb, setting the stage for an oversupplied market in the new year. Manufacturer stocks of nonfat dry milk (NFDM) were reported at 256 million pounds, the highest level this time of the year since 2018. Stocks were up 3.3 percent from October and up 12.9 percent YOY. Dry whey product stocks were up 22 percent YOY in November, whey protein concentrate stocks were 12.6 percent higher, and lactose inventories were 13.1 percent higher.

With one more month to report for calendar 2022, 2023 will likely start with robust inventories that will only rise with the traditional start of flush. Demand appears sluggish at best, with fears of recession growing even as milk output continue to eclipse levels seen in H1 2022.

Although the herd has only recovered about half of its losses since May 2021, higher yield and growth to date will be sufficient to produce more milk in H1 2023. With production higher, demand uncertain, and manufacturer stocks of most dairy products rising quickly—in an environment of high inventory management costs—further softening of prices seems likely in coming months.

NFDM prices have broken past 12-month lows. Butter, too, is sliding lower, with peak holiday demand now in the rearview mirror.

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CME nonfat dry milk futures

Source: DTN, McKeany-Flavell
Posted by: Information Services
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