Executive Summary U.S. dairy product production figures provided by USDA were recently updated with values spanning through Dec ’16. Highlights from the updated report include:

• Dec ’16 U.S. butter production declined on a YOY basis for the third consecutive month, finishing 6.7% below the previous year and reaching a three year seasonal low.
• U.S. cheese production remained strong during Dec ’16, increasing on a YOY basis for the 45^th consecutive month and finishing at a record high volume for the month of December.
• Combined production of U.S. nonfat dry milk and skim milk powder remained higher on a YOY basis for the eighth consecutive month during Dec ’16, increasing by 6.7% to a new record seasonal high for the month of December.

Additional Report Details Butter – Production Declines on a YOY Basis for the Third Consecutive Month, Finishes Down 6.7% According to USDA, Dec ’16 U.S. butter production of 163.8 million pounds increased 9.6% MOM on a daily average basis but remained lower on a YOY basis for the third consecutive month, finishing down 6.7%. The YOY decline in butter production was the largest experienced in over two and a half years on a percentage basis. Overall, butter production declined to a three year low for the month of December while the seasonal increase in butter production was less than the ten year average November – December increase of 12.4%. Declines in butter production were widespread and led by the Western U.S. (-8.4%), followed by the Central U.S. (-5.7%) and the Atlantic U.S. (-2.8%). ’15-’16 annual butter production finished up 3.6%, reaching a new record annual high, but is down 5.5% YOY throughout the first quarter of the ’16-’17 production season. Cheese – Production Reaches Record High for the Month of December, Finishes up 1.3% YOY Dec ’16 total U.S. cheese production of 1.05 billion pounds increased on a YOY basis for the 45^th consecutive month, finishing 1.3% above the previous year and reaching a new record high production level for the month of December. Cheddar cheese production of 303.1 million pounds increased 3.5% YOY while other-than-cheddar cheese production increased 1.3% YOY throughout the month. The YOY increase in cheddar cheese production was the second largest experienced throughout the past 15 months. ’15-’16 annual cheese production increased 2.2% to a new record high, despite cheddar cheese production declining by 0.1% throughout the period. Total cheese production is up an additional 2.0% YOY throughout the first quarter of the ’16-’17 production season. Dry Whey – Production Remains Sharply Lower YOY, Finishes Down 13.3% Dec ’16 U.S. dry whey production of 79.6 million pounds increased 5.7% MOM on a daily average basis from the 22 month low experienced during the previous month but remained lower on a YOY basis, finishing down 13.3%. The YOY decline in dry whey production was the largest experienced in over two and a half years on a percentage basis. In addition to lower dry whey production, combined whey protein concentrate (WPC) and whey protein isolate (WPI) production remained lower on a YOY basis declining by 6.3% throughout the month. Combined WPC and WPI production has declined on a YOY basis over 24 of the past 25 months through December. Combined dry whey, WPC and WPI production declined on a YOY basis for the tenth time in the past 11 months during Dec ’16, finishing down 10.8%. ’15-’16 annual dry whey production finished up 3.3% YOY, however combined production of dry whey, WPC and WPI declined 1.2%. Dry whey production has declined 4.6% YOY throughout the first quarter of the ’16-’17 production season while combined production of dry whey, WPC and WPI is down 5.2%. NFDM/SMP – Combined Production Finishes at Record Seasonal High, up 6.7% YOY Dec ’16 U.S. nonfat dry milk (NFDM) production of 156.0 million pounds increased 17.8% MOM on a daily average basis and 3.2% YOY, finishing higher on a YOY basis for the fourth consecutive month. Skim milk powder (SMP), which is more suited to the requirements of most global markets, increased on a YOY basis for the 14^th consecutive month, as production of 51.6 million pounds finished 18.7% above the previous year. Overall, Dec ’16 combined production of NFDM and SMP increased 6.7% on a YOY basis, finishing at the highest December figure on record. Combined production of NFDM and SMP has increased on a YOY basis over eight consecutive months through December. ’15-’16 annual combined production of NFDM and SMP finished 2.1% lower as a 8.3% decline in NFDM production more than offset a 24.1% increase in SMP production. ’16-’17 YTD combined production of NFDM and SMP has rebounded by 8.1% throughout the first quarter of the production season. Overall, skim milk powder production increased most significantly YOY on a percentage basis during Dec ’16, followed by total powder production, while dry whey and butter production declined most significantly on a percentage basis throughout the month.