Except for Butter, Producer Milk Prices Show no Growth in the Last Decade

The prior post covered the amazing growth in the price of butter and butterfat.  This post will show the pricing of the rest of the dairy products, all of which are showing slow to no growth in pricing.  Butter and butterfat seem to be the only price positive dairy products.  

The June 11 post, covered domestic consumption of key dairy products.  Domestic consumption was down. We are now seeing the same thing in exports.  Our two largest dairy exports are nonfat dry milk (NDM) and whey.  Exports of both are down.  They are byproducts of butter churning and cheese production.

NDM is used to price Class IV skim milk and in turn also prices skim Class I and II.  The current price is $1.16 pound (Chart I).  The average price of NDM for the last 23+ years is $1.14 per pound so the current price is about the same as the last 23+ years.  

NDM is primarily an export product and is the largest U.S. export product.  Mexico is by far the largest importer of NDM, and their purchases have increased in 2023.  However, sales to SE Asia, our second largest market for NDM, are way down.  Overall exports of NDM are down slightly in 2023 YTD compared to the prior year.

Competitive prices are low in the global market.  The export market is volatile and over time the price of NDM has ranged from $.70 per pound to $2.10 per pound.  Since 2007, there has been essentially no sustained growth in the price of NDM.  Because NDM is really a byproduct of butter churning, its major market is international at prevailing global prices.

Chart I - Changes in NDM Prices

Cheese wholesale prices dropped drastically from 2015 to 2019 (Chart II).  When COVID appeared, prices spiced and then fell.  Currently cheese prices are at $1.66 per pound.  The average cheese price starting with the year 2010 to the present averaged $1.76 per pound.  There are minimal exports of cheese, so the price is controlled by production and domestic demand.  Over the last ten years there has been no major sustained growth in wholesale cheese prices.

Chart II - Changes in Cheese Prices

The price of dry whey, a byproduct of cheese making, is shown in Chart III.  The price of dry whey is used to compute the price of "Other Solids" in Class III milk.  Over the span of 23+ years, the price of dry whey has doubled.   Dry whey prices hit a record high of $.79 per pound in March of 2022, but have fallen back to $.38 per pound in May 2023.  Dry whey has not seen any sustained price growth in the last 10 years.

A little more than half of dry whey is exported.  China is by far the largest buyer of whey products, with SE Asia in second place.  Both are down slightly in 2023.  Overall whey exports are down by 8% compared YTD to the prior year.

Chart III - Changes in Dry Whey Prices

The commodities above influence the Class skim prices of producer milk. The current prices of the four Classes of skim milk are compared below to the average prices since 2010.  The price of skim milk has fallen.  The current prices of all four Classes are below the average prices since 2010. The skim prices for these milk classes reflect the low prices of the above commodities used to price skim milk.

Table I - Comparative prices for Slim Milk

Chart IV - Base Class I Skim Milk Prices Since 2000

Chart V - Base Class II Skim Milk Prices Since 2000

Chart VI - Base Class III Skim Milk Prices Since 2000

Chart VII - Base Class IV Skim Milk Prices Since 2000

U.S. milk production is very cost effective.

How are producers able to continue with no increases in the value of their milk?  Dairy producers are capitalists.  Capitalism is a brutal environment and those that survive must continually innovate or fail.  Over the 23+ years of this post, milk production has changed drastically.  There are economies of scale, there is science in breeding increasingly productive cows, there are diets feed that allow improvements in components and milk volume, there is equipment automation, and there is a lot of other hard work.  Some countries have taken steps to preserve the way of life in farming, which simply means that there are minimal improvements.  The U.S. production of milk is financially tough on producers and constant changes are necessary.  There are no government financial props or bailouts.