11 December 2023

6 minute read

By: Lee Williamson

Asia

Corey Geiger, the lead dairy analyst with CoBank, recently spoke to The Dairy Site’s Sarah Mikesell at the 2023 World Dairy Expo in Madison, Wisconsin in October in the US.

US dairy market update

“We'll start with World Dairy Expo is now 56 years old, and we had 107 buses of youth come to the grounds today,” said Geiger. “We have young people, and the dairy industry is dynamic and growing.”

Cheese continues to be the lead dairy product. People are eating their dairy in the US these days, and butter is booming, according to Geiger.

“Butter has a lot of different connotations,” he said. “We certainly have butter, the dairy product, which has been up about 18% since 2011. “

The US is in a butterfat deficit. From about 1950 to 2010, the average butterfat in the US dairy herd, based on USDA statistics, was 3.65% to 3.69%.

“Over 50 years, it sat in that little 5% window but since 2010, butterfat has leaped like a rocket ship,” he said. “It has gone from 3.69% to last year’s 4.08%.”

When comparing the big three exporters - New Zealand, the European Union and the US, butter is the most expensive in the US.

“We have butter imports coming in right now, which are a bit unique, but dairy farmers here in this country are making a lot of inroads in producing butterfat,” said Geiger.

Cheese is growing. The leading dairy product is mozzarella cheese which is due to pizza consumption in the US.

“In consumer markets, this year has been a little bit tough on the milk check front for US dairy farms,” he said. “I've been blessed to travel to well over a dozen dairy countries around the world and 48 states in the US.”

In the last five years, the US has done a good job of finding ways to protect and ensure dairy revenue for the producers, he said. This occurred through two projects. One was in the farm bill which allows for a dairy margin coverage program so farmers can ensure milk production.

“When we have these low milk price times, they have insurance to make their milk checks whole,” he explained. “From February to August, the first seven months in a row that program paid out this year. It is going to be a record payout already, and we have four months to go. It will pay about $1.2 billion.”

The average weight of dairy products in the US is measured by hundredweight. The average insurance payments right now are running about $3.90 per hundredweight, according to Geiger.

Contract revenue protection program

“There's a second program out there for dairy revenue protection,” he said. “So, farmers can buy insurance contracts by the quarter.”

The first quarter will be January to March; the second quarter is April to June. The payments so far in 2023 have been $330 million.

“So really what we're talking about is a period of low milk prices and high feed costs,” said Geiger. “But looks like the futures market is telling us that we're going to be coming out of that here in the fall of the year in the US.”

Globally, dried milk products are doing better. The dry products can be skim milk powder, whole milk powder, and all the whey proteins. They are doing well.

“Butter of course is doing well and there is a lot of cheese on the market right now,” Geiger said. “But the demand is strong on that front.”

US dairy exports

“Whenever I talk about the journey for the US dairy industry and exports, we’ve got to remember that the US came from almost nowhere. In 1995, the US was a non-player,” he said. “That's when the US Dairy Export Council came about and we started really thinking that we could, in the US, be global exporters.”

Now there are 9.4 million dairy cows in the US dairy herd, and 1.4 million of those cows are basically making products for the export market. That is how much it has grown since 1995.

“It's dynamic or we can put it a different way – five or six days every month, all the cows in the US are making dairy products for the global market,” he explained. “So, a big paradigm shift here.”

Mexico became the first $1 billion dairy market for the US, and Mexico has been buying a lot dairy products, but cheese specifically.

“The peso has been strong,” said Geiger. “A lot of currencies are a little bit depressed worldwide but not in Mexico. The Mexican economy is doing pretty well.”

Geiger spent time in Southeast Asia in June on a US Dairy Export Council trade mission. The dairy demand in Southeast Asia is really growing which includes areas like Vietnam, Malaysia, Indonesia, the Philippines and Singapore. This is because of the need for ingredients to incorporate dairy proteins into Asian cuisine.

Future of US dairy economy

“As an analyst, I am optimistic for the US for the long term,” said Geiger. “Dairy has a lot of investment taking place in this country.”

If you are in Europe or New Zealand, for example, a lot of processing assets are coming to the US from those countries.

“The US, over the last 20 years, has had a lot of what I would call foreign dairy investment in processing,” he said. “Agropur and Saputo, Canadian companies, have a lot of dairy plants in the US. Glanbia would be another one that is European, of course, but the US makes more milk every year.”

In the long term, Geiger says the US is going to be a major player on the dairy stage, because not only is it a great domestic market, but because of its ability to produce dairy products to export to other countries around the world. A lot of new processing plants are expected to come online in the US in the next two to three years as well.

“So, that'll be a dynamic change as well, but all in all, dairy worldwide, is a growth category,” said Geiger. “The amino acids found in dairy are the most complete known in humanity.”

Several years ago, Geiger went to Vietnam. He went shopping with some dairy women and they found some Ralph Lauren shirts for $2 to $3. He asked if they were knockoffs but was told they are made in Vietnam. In America, those shirts would have had security tags to prevent theft but not in Vietnam. In Vietnam, the product that had security tags was infant formula.

“Great infant formula made from New Zealand and the US because, just like the immigrants that came to the US over the years, these families wanted better for their children,” he said. “They're going to buy great dairy proteins so that their young people can grow up to be strong and healthy.”