The T.C. Jacoby Weekly Market Report Week Ending January 12, 2024
Cheese Market Outlook
- U.S. cheese exports reached the highest volume for the month in November, up 3% from the previous month.
- Record-setting shipments to Mexico offset softer demand from Japan and South Korea.
- The trade is hopeful that the trend will continue.
- Processors from Waupun to Warsaw to Waikato are boosting cheese output.
- New Zealand cheese output surged 7% in 2023 and is likely to hold steady in 2024.
- Processors are expected to funnel a larger share of the milk pool toward cheese production, prioritizing it over other dairy products.
Whey Market Outlook
- Whey exports fell 13.4% short of year-ago volumes in November.
- Slower shipments to China accounted for 97% of the decline.
- CME spot whey powder rallied 1.75ȼ this week to a nine-week high at 43ʼ.
- Class III futures jumped 37ȼ and March Class III rallied 17ȼ this week.
- CME spot nonfat dry (NDM) milk gained a little ground this week and closed at $1.185, up 1.25ȼ.
- U.S. NDM exports to all foreign markets were 2.7% lower than the 2022 pace, but year-to-date exports to Mexico were 18.1% greater than January through November 2022.
Butter Market
- Spot butter settled at $2.5675, down 0.75ȼ since last Friday.
- Class IV futures fell back, but are more than adequate to provide profits for those dairy producers who benefit from Class IV income.
USDA’s Corn and Soybean Forecasts
- USDA raised its estimate of the 2023 corn yield to a new record at 177.3 bushels per acre.
- The 2023 corn crop is officially the largest ever at 15.23 billion bushels.
- USDA also raised its assessment of U.S. soybean yields, which pressured soybean prices.
The dairy trade is experiencing a downturn in the cheese market, with U.S. cheese exports reaching their highest volume in November, up 3% from the previous month’s high. However, domestic cheese demand remains weak, but exports are starting to pick up. This has led to a rebound in Chicago, with CME spot Cheddar blocks and barrels rising 12.75 and 3.5 percent respectively.
The ceiling for cheese exports is likely far lower than dairy producers would like, as processors from various countries are boosting cheese output. New Zealand cheese output surged 7% in 2023 and is likely to hold steady in 2024, even as milk output retreats. In Europe, milk output is also expected to wane this year, but processors are expected to funnel a larger share of the milk pool toward cheese production, prioritizing it over other dairy products.
Whey exports disappointed in November, falling 13.4% short of year-ago volumes. Slower shipments to China accounted for 97% of the decline. Domestic demand looks much better, with American consumers being hungry for high-protein whey products. CME spot whey powder rallied 1.75 to a nine-week high at 43 degrees Celsius.
Class III futures have seen some strength in the spot markets, with February contract jumping 37 degrees and March Class III rallying 17 degrees, respectively. However, February Class III futures remain depressed, and futures forecast that Class III prices won’t be high enough to pay the bills until later this spring.
CME spot nonfat dry (NDM) milk gained some ground this week, closing at $1.185, up 1.25 degrees. NDM exports fell 4.1% short of year-ago volumes in November, the third straight month of year-over-year declines. Shipments to Mexico were respectable, but fell 5.4% below last year’s record-high volumes. There’s likely room for even stronger U.S. milk powder exports in 2024, as Europe and Oceania are likely to rein in output.
The butter market took a small step back this week, with spot butter settled at $2.5675, down 0.75 degrees since last Friday. The butter market is suffering from the typical post-holiday hangover, with many bracing for powerful winter storms that will temporarily disrupt foodservice demand. Class IV futures fell back, but they are more than adequate to provide profits for dairy producers who benefit from Class IV income.
USDA raised its estimate of the 2023 corn yield to a new record at 177.3 bushels per acre, up 2.4 bushels from December’s estimate. The 2023 corn crop is officially the largest ever at 15.23 billion bushels, thanks to crop genetics and modern farming advancements.
Original Report At: https://www.jacoby.com/market-report/cheese-exports-reach-all-time-high/
