Jerry Dryer, editor of the Dairy & Food Market Analyst and chief market analyst for Rice Dairy in Chicago, admitted in Friday’s DairyLine that MPC imports are “occasionally displacing domestically produced product in the U.S.” but “occasionally we need them. There’s a deficit on some of these products.”

MPC is a product the U.S. didn’t even manufacture until the late 1990s because of the dairy price support program which provided manufacturers the option to make nonfat dry milk and sell it to the government as a market of last resort.

A fair amount of MPC is used by food companies for various applications, according to Dryer, because it has a lot of the lactose removed from it, whereas nonfat dry milk does not, “so MPC has a specific application and specific uses so it is sought after by some food manufacturers.”

U.S. MPC output last year amounted to about 88 million pounds, according to Dryer, who also reported that MPC imports in 2008 amounted to about 109 million pounds and the U.S. actually exported about 62 million pounds “so it’s one of those give and take products.”

Dryer said there is talk in the industry that MPC is being used in cheese manufacturing and displacing milk and while some of that may be true, he said, much of the ultra filtered milk that is used in cheese making is produced right in the plant, that is some of the water and lactose is removed before the milk goes into the vat so it does some replacing, he admitted, but “it’s a product that we need and just isn’t manufactured in an adequate supply in this country right now.”

When asked about the legality of using this as a food ingredient in the eyes of the Food and Drug Administration, Dryer was unsure but said it should be legal. “It’s milk with a little water and lactose removed,” he concluded. “It’s certainly a pure and wholesome product. There should not be any health issue related to it.”

Too much emphasis may be focused on reducing the milk supply and that may lead to milk shortages ahead, according to Jerry Dryer, editor of the Dairy and Food Market Analyst and chief market analyst for Rice Dairy in Chicago.

Speaking in Wednesday’s DairyLine broadcast, Dryer said a drop in demand is “what got us into this pickle, in terms of the economic crisis that consumed markets around the world and put a dinger in demand.”

But, domestic demand is very good, according to Dryer, based on the latest retail sales data covering March, April, and May.

Natural cheese sales were up 7-8 percent from a year ago, he said, there’s been a lot of promotion at retail, and people are eating at home more so that’s helped retail cheese sales. And, sales over the past year were up 3 percent, accordingto Dryer, “so sales have been strengthening the last few months.”

Food service cheese sales are also good, according to Dryer, as “the value menu is still important and it’s very cheese friendly at the McDonalds and Burger Kings of the world,” although high end restaurant sales may not be as good.

Dryer also says the dairy export side of the business is stronger than many expected, though it’s running about two thirds below a year ago but it didn’t absolutely fall apart and he’s optimistic that exports will improve as we progress through the year.

“Then why are dairy prices so low?” I asked. “Because we’re making more than the markets will absorb right now,” answered Dryer. Inventories were built late last year and were added to early this year, he said, “when demand wasn’t as robust as the numbers I’m showing you right now and it’s going to take us a while to chew through those inventories and it’s going to take a while to get demand back internationally at the level it was a year and even two years ago.”

So, yes it does come back to supply and Dryer said some production capacity needs to be “wrung out” but he’s concerned that too much will be lost because “We’ve been in this situation for so long that we may lose a big chunk of productive capacity and that would be tragic because, just about the time we lose a large chunk of it, we’re going to need it because demand will have recovered.”

Jerry Dryer, editor of the Dairy & Food Market Analyst newsletter and chief market analyst for Rice Dairy in Chicago, extolled the virtues of the export market in Wednesday’s broadcast. U.S. dairy exports are down significantly from a year ago, due to a struggling world economy, and, when asked if this thinking is realistic right now, he responded, “Maybe not this afternoon but it’s certainly realistic longer term.”

Dryer praised the New Zealand’s announcement Monday that it had sold about 160,000 metric tons of nonfat dry milk to China. It was probably at a “fire sale price,” he admitted, “But it means the inventory moved out and is not hanging over the market so there’s some opportunity for prices to begin firming up.”

Dryer also reported that a large U.S. cheese manufacturer will begin producing Gouda cheese and Gouda is what the world market wants, he said. World cheese supplies are not in the great abundance that butter and nonfat dry milk supplies have been, according to Dryer.

Dryer admonished U.S. manufacturers to produce what the world market wants. “The best defense is a good offense,” he said, “We’re dropping the ball there.”

A lot of people are grumbling about growing imports of milk protein concentrate and butter blends, according to Dryer, but both of them can be produced and should be produced in the U.S., he argued.

Some production has come on line, he admitted, but “We need to be producing the products the U.S. market wants as well. That’s the best way to prevent some of that imported product from coming into the U.S. Make the product here.”

Dryer says the government price support program is partly responsible for that not happening. The government is a guaranteed market for nonfat dry milk, for example, he said, and, if you can’t sell it anywhere else you can always sell it to the government.

If a company produces milk protein concentrate and can’t find a buyer, they have a problem, Dryer concluded, and “That has limited some of the innovation and competitiveness and sense of adventure that we should have had among manufacturers in the U.S.” For more dairy news CLICK HERE

There isn’t a lot of hard data available but dairy product demand is good, according to Jerry Dryer, editor of the Dairy & Food Market Analyst newsletter and chief market analyst for Rice Dairy in Chicago.

Reporting in Wednesday’s DairyLine, Dryer said food service sales are very good. There are signs that the restaurant business is lagging because of the recession, he admitted, but the cheese friendly side of the restaurant business is doing pretty well, such as the McDonalds, Hardys, and Carls Juniors of the world and, while same store sales are below a year ago, they’re still selling less expensive items off their value menus which are full of cheese.

Dairy exports are also down, he said, but not as much as a lot of people expected and Dryer expects recovery as the year progresses.

Retail cheese sales are very strong, according to Dryer, and for the three months of December, January, and February, natural cheese sales were up 4.4 percent from a year ago as more people spend more time eating at home.

This has also helped fluid milk sales and Dryer reports that retailers have aggressively promoted fluid milk and, in this kind of economy, cheese moves to the center of the plate. You have a grilled cheese sandwich or macaroni and cheese or other casseroles with cheese so its good for demand.

The category that’s struggling is pizza and Dryer explained that pizza people haven’t been very innovative or aggressive for a couple of years now. DMI has a cooperative effort with Dominos new line of pizza that has 40 percent more cheese on it, Dryer said, and hopefully that works well but there has to be some support for that and its going to take a little time to change peoples minds because they’re so used to getting mediocre pizza from a lot of the chains.