Dairy Processing - September/October 2022 - 64

COMMODITIES
UPWARD
trends
The size of the market for cultured dairy products is growing.
by Nate Donnay | nate.donnay@stonex.com
T
he first processed dairy products consumed by humans
were likely cultured dairy products some 8,000 to
12,000 years ago. Nobody has quite pinned the exact
date down yet. Production started at a very small scale, but
the size of the market for cultured dairy products is now
enormous and growing.
During 2021 the US produced 4.7 billion pounds of yogurt,
up 5.2% from 2020, and 1.5 billion pounds of sour cream, up
2.3% from 2020. But the number that seems to be catching the
most attention right now is the record high price of milk that
is going into cultured dairy products.
In the US most cultured dairy product makers are
operating in areas that are covered by Federal Milk Marketing
Orders (FMMOs), which set a minimum price for milk each
month. Milk going into these products is classified as Class
II milk. The Class II milk price set new record highs in June,
64 SEP-OCT 2022 | DAIRYPROCESSING.COM
July and August with the year-to-date average price also at a
record high, up 62.5% from last year.
We've had two companies recently asking about how they
can hedge their Class II milk costs, and it's clear why they are
showing an interest.
TIGHTENING STOCK PRICES
While it seems strange to the uninitiated, the price that
cultured dairy product makers pay for the milk they use is tied
to the price of butter and nonfat dry milk (NFDM). The price
of butter is used to calculate the value of fat and the price
of NFDM is used to calculate the value of protein and other
solids (mostly lactose) in the milk. Most of the increase in the
Class II milk price this summer was driven by rising butter
prices that hit a new record high in September.
We came into the year with butter stocks already on the
stock.adobe.com

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Dairy Processing - September/October 2022

Table of Contents for the Digital Edition of Dairy Processing - September/October 2022

Dairy Processing - September/October 2022 - Intro
Dairy Processing - September/October 2022 - 1
Dairy Processing - September/October 2022 - 2
Dairy Processing - September/October 2022 - 3
Dairy Processing - September/October 2022 - 4
Dairy Processing - September/October 2022 - 5
Dairy Processing - September/October 2022 - 6
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Dairy Processing - September/October 2022 - 8
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