Whey protein concentrate and lactose prices have been rising since the start of the year due to depressed production
Whey protein concentrate (WPC), a popular ingredient in infant fomulas and sports and nutrition drinks, and lactose, a milk sugar used in food processing, have been posting a price resurgence since the start of the year, primarily due to a dramatic reduction in output.
While higher prices are good for manufacturers of these products, their impact on Class III prices will be modest. However, WPC 25-49.9% and lactose prices could support whey prices for manufacturers who adjust their product mix, says Dorland, and that could provide some support to Class III prices.
Last year, U.S. manufacturers shifted the whey stream out of WPC (25-49.9% protein) and into other products. Total 2015 production of WPC (25-49.9) at 220.3 million pounds plunged 21.6 % below 2014 levels, according to USDA’s latest Dairy Products report.
“Total 2015 output of WPC 25-49.9% posted the lowest annual production level since record keeping began in 2003,” notes Sara Dorland, analyst with the Daily Dairy Report and managing partner at Ceres Dairy Risk Management, Seattle.
Since the start of the year, USDA’s Dairy Market News has reported strengthening WPC prices. As of the week ending February 5, WPC-34 prices averaged 57 cents per pound, up 4 cents or 7% from the last week in December.
Prior to this year’s burgeoning recovery, however, prices for WPC 25-49.9% had been driven lower by plunging nonfat dry milk prices.
“With readily available nonfat dry milk and skim milk powder pressuring prices to multi-year lows, manufacturers of WPC 25-49.9% protein likely shifted whey streams into alternative channels,” says Dorland. “Production of WPC 25-49.9% protein, which is a viable substitute for both nonfat dry milk and skim milk powder, likely succumbed to pressures commensurate to the milk powder markets.”
As a result, output of other whey products, such as sweet whey powder, WPC 50-89.9% protein, and whey protein isolate all showed higher year-over-year production in 2015, compared to 2014 output, she adds. Sweet whey power output in 2015 climbed 12.5%, while WPC 50-89.9% protein output rose 6.2%, and whey protein Isolate soared 20%.
Year-over-year production of lactose, a co-product of WPC production, also fell last year. Lactose production declined 7% in 2015 to 1.054 billion pounds. Although 2015 lactose production was less than 2014 output, it was still higher than 2013 production, notes Dorland.
“Constrained lactose production coupled with strong exports of lactose have worked to reduce U.S. 2015 carryout stocks to 103.6 million pounds, which is a steep 22% drop compared to the prior year and the lowest level since November 2013,” says Dorland.
As with WPC 25-49.9%, DMN has reported strengthening lactose prices since the start of the year. With prices of both WPC 25-49.9% and lactose moving higher, the nation’s whey stream could once again shift toward these products, Dorland adds.
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