Archive for cheese market

Skyrocketing Milk Prices and Butterfat Levels Boost Earnings

Find out how rising milk prices and high butterfat levels are driving up dairy farmers’ profits. Want to know the latest trends and stats? Read our in-depth analysis.

Summary: Have you been keeping an eye on your dairy margins lately? If not, you might be in for a pleasant surprise. August has brought about some noteworthy improvements for dairy farmers, particularly those who have invested wisely in their marketing periods. Profitability has seen a much-needed boost, with milk prices soaring and feed costs holding steady. Curious about the specifics? Let’s dive into the cheese market, where block and barrel prices have hit their highest since October 2022, driven by a drop in cheddar cheese production. This tightening of spot supplies has resulted in firmer prices and unique challenges and opportunities for dairy farmers. And there’s more—while milk production is down, butterfat levels and butter production are smashing records. Cheese production in June dropped 1.4% from the prior year to 1.161 billion pounds, with cheddar production down 9% from 2023 and marking the eighth consecutive monthly decline. This allows dairy producers to capitalize on these quality advances while navigating the challenges of decreased milk quantities. But it’s not just about dairy: changes in crop yields for corn and soybeans also influence feed costs, shaping the broader landscape of your financial well-being. According to the USDA’s August WASDE report, lower soybean meal prices may benefit dairy businesses as feed is a substantial expenditure. In conclusion, higher milk prices and stable feed costs have created an optimistic scenario for dairy margins. The recovery in the cheese market and rising butterfat levels in the face of decreased milk output present complex but attractive options. Dairy producers must be vigilant and respond promptly to changing circumstances, as historically high margins provide ample space for increased profitability.

  • Dairy margins saw improvement in early August due to higher milk prices and steady feed costs.
  • Block and barrel cheese prices reached their highest since October 2022, mainly due to reduced cheddar cheese production.
  • Cheese production in June 2023 fell 1.4% from the previous year, with cheddar production down 9%.
  • Butterfat levels and butter production are at record highs despite the decline in milk production.
  • USDA’s August WASDE report indicates lower soybean meal prices, potentially reducing feed costs for dairy farmers.
  • The current favorable conditions in milk prices and feed costs offer a chance for higher profitability in the dairy industry.
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Have you observed any recent changes to your milk checks? You could be wondering why your earnings have suddenly improved. Well, it’s not all luck. Dairy margins have increased considerably in the first half of August, owing to rising milk prices and record butterfat levels. This increase boosts profitability and provides a much-needed respite from the constant feed expenses. But what is truly driving this favorable shift? Let’s go into the specifics and examine how these changes affect the dairy industry.

Surging Milk Prices and Steady Feed Costs: A Recipe for Improved Dairy Margins 

The dairy market is navigating a complicated terrain full of difficulties and opportunities. Dairy margins improved significantly in the first half of August, primarily due to rising milk prices. Due to solid cheese market dynamics, dairy producers are better positioned as CME Class III Milk futures rise. Even though feed prices have stayed consistent, this constancy has been critical in increasing profitability. The rise in milk prices and steady feed costs provide a balanced equation that improves total margins, allowing farmers to run their businesses more successfully despite continued problems.

Have You Noticed What’s Happening in the Cheese Market? It’s Been Quite a Ride Lately. 

Have you observed what’s going on in the cheese market? It’s been quite the trip lately. The CME Class III Milk futures have gained dramatically owing to a strong cheese market. Last week, block and barrel prices at the CME reached record highs not seen since October 2022. This increase is primarily due to a decline in cheddar cheese output, which has reduced spot supply and caused prices to rise in recent weeks.

Cheddar output, in particular, has been declining steadily, down 9% since 2023. This is the sixth straight monthly decline. Several variables contribute to this tendency, including high temperatures and persistent herd health difficulties associated with the avian flu pandemic. These factors have produced a perfect storm, drastically reducing cheddar yield.

Consequently, lower output has resulted in tighter spot supply and higher pricing. The drop in cheese output adds another layer of complexity to the market, making it critical for dairy producers to remain knowledgeable and adaptable. Are you ready for these upheavals in the cheese market?

Did You Know? Rising Butterfat Levels Amid Declining Milk Production 

Did you know that, although total milk output has decreased, butterfat levels in milk have increased significantly? This may appear paradoxical at first look, yet it is correct. Butterfat percentages have reached all-time highs, regularly outperforming previous year fat tests since June 2020. What drives this phenomenon?

While overall U.S. milk production is down 0.9% year over year through June, the lowest level in four years, the quality of the milk produced is impressive. Butter output in June increased by 2.8% from the previous year to 169.15 million pounds due to rising butterfat content, demonstrating the industry’s flexibility and resilience.

This increase in butterfat levels has given a silver lining among the difficulties. With butterfat percentages at an all-time high, dairy producers may capitalize on these quality advances while navigating the challenges of decreased milk quantities. This potential maximizes profitability and efficiency in processing, guaranteeing that each drop of milk produces the best possible return. The rise in butterfat levels enhances the quality of dairy products and provides an opportunity for dairy producers to adjust their production strategies to maximize profitability.

Ever Considered How Crop Yields Influence Your Feed Costs?

Let’s take a quick look at feed expenses and crop yields. Have you looked at the USDA’s August WASDE report? It’s quite an eye-opener! They have increased yield and production predictions for maize and soybeans. But what does this imply for us in the dairy farming industry?

For openers, predicted corn-ending stockpiles have decreased marginally. This is mainly owing to fewer harvested acres and increased predicted demand. Less maize will be available, which may keep feed prices flat or raise them somewhat.

Conversely, since July, soybean ending stockpiles have risen dramatically by 135 million bushels. This spike has placed downward pressure on soybean meal costs, giving your feed budget some breathing space. Lowering soybean meal prices may be beneficial since feed is a substantial expenditure for dairy businesses. How will you modify your feeding plan in light of these changes?

The Bottom Line

As previously discussed, higher milk prices and stable feed costs have produced an optimistic scenario for dairy margins. The current recovery in the cheese market and rising butterfat levels in the face of decreased milk output present complicated but attractive options. These options include adjusting production strategies to focus on high-butterfat products, optimizing feed plans to take advantage of changing crop yields, and closely monitoring market dynamics to make informed pricing decisions. Furthermore, shifting crop yields influence feed costs, emphasizing the need for strategic planning.

Dairy producers must be watchful and respond promptly to these changing circumstances. With historically high margins, there is plenty of space to strategize for increased profitability. How will you take advantage of these large profit margins? What techniques will you use to optimize your profits? We encourage you to share your strategies and learn from each other, as the answers to these questions guide your dairy operation’s future success.

Learn more: 

Is the Summer Heat Finally Over? Dairy Farmers See Milk Production Stabilize but Challenges Remain!

Is the summer heat finally over? Discover how dairy farmers see milk production stabilize and what their ongoing challenges are in the changing market.

Summary: As summer draws close, dairy milk production is stabilizing, but the market remains tight, especially for spot milk, which commands premium prices. Cream supplies stay restricted even though butter production has increased. There is a stark contrast in exports: butter has significantly risen, while nonfat dry milk (NDM) exports continue to struggle. Cheese prices have shown resilience after a dip due to fluctuations in milk supply. Whey prices, after reaching multi-year highs, are now declining. Meanwhile, grain and feed prices have seen volatility, impacting producer margins. Farmers must navigate these shifts as fall approaches to capitalize on any market opportunities amid ongoing uncertainties.

  • Spot milk remains in high demand, with premiums averaging $1.25 over Class III prices in the Central U.S.
  • Butter production increased by 2.8% yearly to 169.2 million pounds in June.
  • Despite higher butter production, cream supplies are tight, prompting strategies like micro-fixing.
  • Butter exports surged by 31.8% yearly, with notable demand from Canada.
  • NDM exports struggled with a 10% decline in June compared to last year.
  • Cheese production fell by 1.4% in June, with American types like Cheddar seeing the most significant drops.
  • Cheddar block prices recovered from $1.84/lb on Monday to $1.9575/lb by Friday.
  • Whey protein isolate production rose 34% yearly, while dry whey production decreased by 7.5%.
  • Grain and feed prices experienced volatility but ended the week lower, potentially benefiting farmer margins.
Tranquil Texas meadow at sunrise with hay bales strewn across the landscape

Have you felt the high summer heat strain your cows and your patience? This summer has been a trial by fire for dairy producers, with high temperatures disrupting milk production. The persistent heat stressed out herds and taxed resources, causing productivity drops and narrowing margins. However, as the season progresses and temperatures stabilize, the question remains: are we through, or are there more challenges ahead? Despite some reprieve from the extreme heat, many dairy producers are still dealing with the effects. Tight milk supply and increasing prices exacerbate the continuing issues, keeping everyone on their toes as demand patterns change at the end of summer and the start of autumn. Your perseverance in the face of these hurdles is highly admirable.

ProductJune 2023 Production% Change Year Over YearSpot Price (End of Week)
Milk$1.25 over Class III prices
Butter169.2 million lbs+2.8%$3.0975/lb
Nonfat Dry Milk (NDM)188.3 million lbs-15.1%$1.20/lb
Cheddar Blocks1.161 billion lbs-1.4%$1.9575/lb
Dry Whey-7.5%$0.5625/lb

Can You Feel It? The Subtle Shift Signaling the End of Summer 

Could you sense it? The slight change in the air indicates the end of summer. Dairy producers around the country are breathing a sigh of relief as the blazing heat starts to subside, returning milk production to normal seasonal levels. However, not everything is going well just yet.

In certain parts of the nation, persistently high temperatures are reducing milk supply, creating a challenge to producers. Despite this, the business is resilient, with farmers working to satisfy demand. The spot milk market is very competitive, with producers paying a premium for more fabulous cargoes. For example, spot premiums in the Central United States are averaging $1.25 more than Class III pricing, up from last year.

This tight milk market is exacerbated by impending bottling facilities preparing for the school year. The strain is on, and as a dairy farmer, you probably feel it physically and metaphorically. How are you handling these fluctuations? Do these changes affect your production and costs?

Spot Milk Becomes the Season’s ‘White Gold’ as Demand Skyrockets

MonthClass III Milk Price ($/cwt)
May 2024$18.23
June 2024$18.06
July 2024$18.84
August 2024$19.30

Spot milk remains a popular item as the summer comes to an end. Many places have limited supply, forcing firms to pay a premium for more shipments. How much more, you ask? Dairy Market News reports that spot premiums in the Central United States average $1.25 over Class III pricing. That’s a 25-cent increase from last year. This increase is not a coincidence; it directly results from the persistent heat and humidity wreaking havoc on milk production. Given these challenges, it’s no surprise that demand and prices are soaring as the autumn season approaches.

The Never-Ending Demand: Cream Supplies Stay Tight Despite Butter Production Boost

Despite an increase in the butterfat composition of the milk supply, cream supplies have been somewhat limited this summer. It’s a mixed bag; although greater component levels have increased butter output, the availability of additional cream loads remains limited. Butter output in June increased by 2.8% yearly to 169.2 million pounds. Nonetheless, butter manufacturers nationwide strongly need an increased cream supply to satisfy production demands. The need for cream is never-ending—as soon as it rises, it’s gone, leaving everyone hungry for more.

The Resilient Butter Market: Stability Amid Seasonal Shifts 

Week EndingButter Market Price ($/lb)
June 7, 2024$2.75
June 14, 2024$2.85
June 21, 2024$2.90
June 28, 2024$2.95
July 5, 2024$3.00
July 12, 2024$3.05
July 19, 2024$3.10
July 26, 2024$3.07
August 2, 2024$3.09
August 9, 2024$3.10

The butter market has remained remarkably stable despite the periodic ebb and flow. The spot price at the Chicago Mercantile Exchange (CME) finished at $3.0975, down 0.75¢ from the previous week. While these data point to a relatively steady industry, there are still worries regarding future demand. With the baking and holiday season approaching, stakeholders will be watching closely to see whether retail activity picks up to match the expected increase in consumer demand. Will the market remain stable, or will there be a mad rush to buy more stocks? Stay tuned as the next several months expose the fundamental dynamics at work.

Butter’s Star Rises While NDM Fades: A Tale of Two Exports 

MonthButter Exports (million pounds)NDM Exports (million pounds)
June6.8134.4
Year-over-Year Change+31.8%-10%

Butter and nonfat dry milk (NDM) exports present a stark difference. Butter’s success has been nothing short of amazing, with exports up 31.8% in June, primarily due to rising demand from Canada. In concrete terms, it amounts to up to 6.8 million pounds sent overseas.

However, NDM exports are failing. They fell 10% compared to the same month last year, resulting in the lowest June volume since 2019. The United States shipped just 134.4 million pounds of NDM in June.

While a strong market drives butter exports, the NDM industry struggles with low demand. This lackluster performance has kept NDM spot prices relatively stable, preventing a substantial surge. Furthermore, the year-to-date results for NDM exports are down 11.6% from the previous year.

The NDM Puzzle: Low Supply Matches Tepid Demand, Keeping Prices Static

Week EndingNDM Spot Price ($/lb)
August 9, 20241.20
August 2, 20241.24
July 26, 20241.22
July 19, 20241.25
July 12, 20241.18
July 5, 20241.21

The supply and demand dynamics for nonfat dry milk (NDM) have been intriguing. Demand has been tepid, but so has the supply. In June, combined production of NDM and skim milk powder totaled only 188.3 million pounds, marking a significant 15.1% decrease from last year. However, this decline hasn’t yet led to a price surge, primarily because demand hasn’t picked up its pace. 

The spot price for NDM seems trapped in a tight range. Despite last week’s brief price rally, the NDM spot price dipped on four out of five trading days, losing 4 cents over the week to close at $1.20 per pound. During this period, 27 powder loads were traded, a notably high activity, with 17 loads moving on Tuesday alone. The low supply and weak demand keep everyone guessing when the market might see a dynamic shift.

Cheese’s Comeback Story: From Dips to Resilience and Everything In Between

ProductBeginning of Week Price (Aug 5, 2024)End of Week Price (Aug 9, 2024)Price Change
Cheddar Blocks$1.84/lb$1.9575/lb+10.75¢
Cheddar Barrels$1.93/lb$2.005/lb+7.5¢

Recently, cheese markets have shown to be quite resilient. Despite a decrease to $1.84/lb on Monday—the lowest since May—cheddar block prices returned to $1.9575/lb on Friday, representing a 10.75¢ rise from the previous week.

Overall, cheese exports started to drop in June. U.S. exporters delivered 85.7 million pounds of cheese overseas, a 9.1% rise yearly but lower than prior months’ record highs. Mexican demand remained strong, with 31.6 million pounds shipped, but down from May’s record of 40.4 million pounds.

Production data also show a slight decline. June witnessed a 1.4% year-over-year decrease to 1.161 billion pounds, with American cheeses, notably Cheddar, bearing the brunt of the downturn. Despite these obstacles, the cheese market’s essential stability remains, providing a bright spot in an otherwise complicated environment of shifting pricing and variable export levels.

Whey’s Wild Ride: From Multi-Year Highs to a Slow Descent 

Week EndingSpot Price per Pound (¢)
August 9, 202456.25
August 2, 202461.00
July 26, 202458.00
July 19, 202453.00
July 12, 202455.75
July 5, 202460.00

Despite prior highs, the dry whey market has significantly decreased this week. From Tuesday to Friday, the spot price progressively declined. By the end of the week, it had been reduced to 56.25¢ per pound, down 4.75¢ from the previous Friday.

Several causes have contributed to the current decline. Reduced cheese production has had a substantial influence on the whey stream. As cheese manufacturing slows, the supply of whey—a byproduct—dwindles. Manufacturers are also concentrating more on high-protein goods such as whey protein isolates, with production up 34% yearly in June.

Furthermore, export demand for whey remains high. Recovering pork prices in China has sparked a rebound in hog breeding, increasing demand for dry whey and permeate as piglet feed. This strong demand has helped to maintain market tension even as prices fall. The following weeks will indicate whether these dynamics have stabilized or continue distorting pricing.

Let’s Talk Grains and Feed: Did You Notice the Recent Jolt in Corn and Soybean Futures? 

DateCorn Futures (DEC24)Soybean Futures (DEC24)
August 5, 2024$4.02/bu$10.25/bu
August 6, 2024$4.01/bu$10.22/bu
August 7, 2024$4.00/bu$10.18/bu
August 8, 2024$3.99/bu$10.10/bu
August 9, 2024$3.97/bu$10.08/bu

Let’s discuss cereals and feed. Did you see the recent spike in maize and soybean futures? Monday’s market pandemonium spiked, but don’t get too excited—it didn’t stay. By Thursday, DEC24 corn futures had dropped to $3.97/bu, down nearly a cent from the previous week’s closing. Soybeans settled at $10.0825/bu., down roughly 20¢ from last Friday.

Despite the market instability, the drop in grain and feed costs is encouraging. Lower pricing might offer producer profits the boost they urgently need. When your inputs are less expensive, you may boost your earnings. Could this imply brighter days for your bottom line? We will have to wait and see.

Brace Yourself for Fall: Market Dynamics and Environmental Factors That Could Shake Things Up 

As we enter the winter months, dairy producers can expect a combination of market dynamics and environmental variables. The recent stability of milk output suggests that things are returning to normal, but don’t get too comfortable. Experts believe that demand for spot milk will stay strong owing to increasing bottling operations once schools resume. This might keep milk premiums high, reducing profit margins even further. Cream supplies are anticipated to remain limited, especially as butter production increases. While this may benefit butter producers, people relying on cream can expect continued shortages and increased prices.

Do not anticipate a significant increase in nonfat dry milk (NDM). Prices will remain stable as supply and demand are in a holding pattern. However, there is a ray of light as several Southeast Asian regions see growing demand. Despite recent turbulence in global stocks, cheese markets seem to have stabilized. The present prices are stable, but increased prices may ultimately reduce demand. Keep a watch on exports; they’ve dropped but remain robust, especially in Mexico.

Finally, the grain and feed markets have seen short rises before returning to their previous levels. This change may reduce feed prices, which is always good news as we approach a season in which every penny matters. Dairy producers should be careful. The market is a complicated web of possibilities and problems, ranging from limited cream supply to steady cheese pricing and fluctuating grain markets. Prepare for a tumultuous few months, and keep an eye on market signals to navigate this complex terrain effectively.

Surviving the Roller Coaster: How Dairy Farmers Can Profit Amid Market Chaos 

The current market circumstances have critical economic ramifications for dairy producers. Price fluctuations in milk, butter, cheese, and other dairy products may substantially influence farm profitability. As spot milk becomes the season’s ‘white gold’, with manufacturers paying premiums for more loads, milk sales income may rise. On the other hand, tighter supplies may put farmers under pressure, particularly in the heat of late summer. High butter prices provide some comfort but create concerns about future demand as retail activity for the baking and holiday season gradually increases.

So, how can farmers deal with these economic challenges? Diversify product offers to ensure consistent cash sources. Instead of focusing on a single dairy product, diversify into butter, cheese, and whey protein isolates. Diversification may protect against price volatility in any particular category. Stay informed about industry developments and export prospects. Recognize demand increases in Southeast Asia for milk powder or rising butter demand from Canada to use resources more wisely.

Invest in technology and process upgrades to boost manufacturing efficiency. Use data analytics to forecast trends, stress-resistant feed to keep yields high during harsh weather, and invest in sustainable practices to satisfy regulatory requirements. Farmers may effectively handle economic changes by taking a proactive strategy that includes diversification, trend research, and strategic investments.

The Bottom Line

As we go through these cyclical adjustments, essential conclusions emerge. Milk production has mostly returned to normal. However, regional heat remains a cause of disturbance. The struggle for spot milk heats up, with cream and cheese markets showing mild resistance. Butter production expands after the summer, but NDM fails to gain momentum. Despite price volatility, the cheese business has experienced a spectacular recovery, although grain and feed costs vary, reflecting the more significant market uncertainty. So, what does this mean for you, a dairy farmer? It is essential to remain alert and adaptable. Are your operations prepared to endure market swings and capitalize on new opportunities? Stay informed and adaptive, and keep an eye on market trends. The dairy industry is continuously evolving; being prepared might make a difference. What strategies will you use to flourish in these uncertain times?

Learn more: 

Cheese Prices Surge to New Highs Amid Milk Market Strain and Regional Disruptions

Find out why cheese prices are climbing. Learn how milk market issues and local disruptions are affecting your favorite dairy products. Get the details here.

Another day of positive growth in the cheese market. Higher CME spot prices have led to a significant increase in block values, reaching the highest level since August 2023. With futures finishing 6.4 cents higher at $2.1390 a pound, it has driven the August all-cheese price to fresh life-of-contract highs. While milk output is a concern in certain cheese-making areas, the overall market is showing promising signs.

CommodityCurrent PriceChangeHighest Price Since
Block Cheese$2.1390 per pound+6.4 centsAugust 2023
Spot Blocks$1.9825 per pound+$0.0450
Barrel Cheese$2.0225 per pound+$0.0125
Butter$3.0900 per pound-$0.0150

Leading Chicago’s dairy market activity today:

  • With four shipments sold, spot blocks increased to $1.9825 per pound, gaining $0.0450.
  • Barrels likewise rose to $2.0225 per pound, earning $0.0125.
  • The lone red on the board was butter, which slid to $3.0900, down $0.0150.

Stability in the dairy market is evident as Class III futures improved, with contracts for third quarters concluding at $21.28 per hundredweight, up $0.45 for the day. Simultaneously, adjacent Class IV contracts remained steady at $21.35, indicating a balanced market.

Though steady from last week, Midwest spot milk prices this week averaged—$1.50, significantly above last year’s price of—$7.75 and the five-year average of—$2.73. Cow comfort still presents difficulties in many areas of the United States, resulting in limited supply.

Summary: The cheese market has seen positive growth, with higher CME spot prices leading to a significant increase in block values, reaching the highest level since August 2023. Futures finished 6.4 cents higher at $2.1390 a pound, driving the August all-cheese price to fresh life-of-contract highs. Despite concerns about milk output in certain cheese-making areas, the overall market is showing promising signs. Chicago’s dairy market activity saw spot blocks increase to $1.9825 per pound and barrels to $2.0225 per pound. Class III futures improved, with contracts for third quarters ending at $21.28 per hundredweight, up $0.45. Midwest spot milk prices averaged $1.50, significantly above last year’s price and the five-year average of $2.73.

Butter Prices Surge and Plummet: A Wild Week in Dairy Markets

Discover the rollercoaster ride of butter prices this week. Why did they surge and then plummet? Dive into the latest trends and market insights in dairy.

Get ready for a wild ride in the dairy marketButter prices hit a spring high last Friday but plunged early this week, causing traders and buyers to wonder if such price jumps are sustainable. 

“Butter values plunged early this week after hitting a new high last Friday. Traders spent the long weekend debating if prices should surpass previous years when today’s production, imports, and stocks are all higher than in 2022 and 2023,” noted market analysts. 

This butter price rollercoaster impacts the broader dairy industry. From cheese to whole milk powder and whey, these price shifts affect other dairy products. In this article, we explore the latest trends and key factors shaping the dairy market’s present and future.

Dairy ProductAvg PriceQuantity Traded (4 wk Trend)
Butter$3.02449
Cheese Blocks$1.823114
Cheese Barrels$1.95508
Non-Fat Dry Milk$1.16759
Whey$0.403111

Butter Prices Tumble After New Spring High, Sending Shockwaves Through Dairy Market

After notching a new spring high last Friday, butter values plunged early this week. Buyers, driven by fears of tighter supplies and higher fall prices, initially pushed the market to new heights. However, despite strong domestic consumption and increased international demand, the current production, imports, and stocks are higher than in previous years. 

The anticipated spring flush in milk production failed to alleviate supply chain issues, adding to market volatility. Traders spent the long weekend debating whether current prices justified the recent highs. This resulted in a steep selloff on Tuesday morning as traders rushed to offload holdings, causing a brief but sharp decline in butter prices.

By Thursday, butter buyers showed renewed enthusiasm, aiming to avoid higher costs in the fall. Their robust willingness to pay $3 or more per pound lifted spot butter prices close to last Friday’s peak. Ultimately, spot butter closed the week at $3.09, reflecting strategic foresight in securing their dairy needs early.

Cheese Market Adjusts as Domestic Demand and Export Dynamics Shape Pricing Trends

The cheese market faced a notable pullback this week, driven by shifts in domestic demand and export dynamics. Retailers have boosted domestic interest by promoting lower-priced cheese bought earlier in the year, moving significant volumes. However, the balancing act between competitive pricing and strong export sales remains delicate. 

Early 2024 saw strong export activity, especially in February and March, helping to keep inventories in check. Yet, fears are growing that $2 cheese could deter future international buyers, pushing the market to find a sustainable and fluid price point. As a result, cheese is expected to stay above January through April levels, despite recent corrections. 

This week, CME spot Cheddar blocks fell 6 cents to $1.81, and barrels dropped 4 cents to $1.94, marking the market’s ongoing efforts to effectively balance supply and demand.

Mixed Results at Global Dairy Trade Pulse Auction Highlight Market Divergence

The Global Dairy Trade (GDT) Pulse auction showed mixed results. Whole milk powder (WMP) prices climbed to their highest since October 2022. Meanwhile, skim milk powder (SMP) prices dipped after last week’s gains. This highlights differing trends within the dairy sector.

Nonfat Dry Milk Prices Show Slight Dip Amid Bullish Futures Market Projections

This week, nonfat dry milk (NDM) prices dipped slightly, with CME spot NDM falling 0.75ȼ to $1.1675. Futures, however, remain bullish. June contracts hover around $1.17, but fourth-quarter futures trade in the mid-$1.20s, targeting $1.30 by early 2025. The market anticipates tighter milk supplies and reduced output, awaiting a demand-driven rally to intensify the upward trend.

Whey Market Defies Dairy Commodity Downtrend with Robust Performance and Rising Prices

Amidst a general decline in dairy commodities, the whey market has shown striking resilience. CME spot whey powder rose by 1.5ȼ this week to 41.5ȼ, hitting a two-month high. This surge is driven by robust domestic demand for high-protein whey products. Processors are focusing on these segments, reducing whey for drying and tightening supply, thereby lifting prices across the whey market.

Class IV and Class III Futures Reflect Dynamic Dairy Market Shifts and Supply Concerns

This week saw noticeable shifts in Class IV and Class III futures, driven by changes in the cheese market and broader dairy supply concerns. Class IV futures dropped, with most contracts ending about 60ȼ lower since last Friday, putting May and June contracts in the high $20s per cwt, and July to December above $21 per cwt. 

In contrast, Class III futures showed mixed results. The June Class III fell by 41ȼ to $19.47 per cwt, still an improvement for dairy producers after months of low revenues. Meanwhile, July through October contracts increased by 20 to 60ȼ, indicating market expectations for $20 milk. 

Cheese market trends are key here. Domestic demand is up, driven by retail promotions, and exports remain strong, keeping inventories stable. Yet, there’s concern about maintaining export momentum with potential $2 cheese prices. Finding a balanced price to keep products moving is critical. 

For dairy producers, these developments offer cautious optimism. Near-term futures show slight adjustments, but expectations of tighter milk supplies and higher cheese demand provide a promising outlook. The rise in Class III contracts suggests a favorable environment, backed by strong cheese demand and strategic pricing for exports.

Spring Flush and Seasonal Dynamics Raise Concerns Over Future Milk Supply Tightness

The spring flush, holiday weekend, and drop-off in school milk orders have resulted in ample milk for processors. However, higher prices signal concerns about potential rapid supply tightening. According to USDA’s Dairy Market News, milk was spread thin last summer with more tankers moving south, and a similar situation is expected in summer 2024, although overall milk access has been lighter this year than in the first half of 2023. This suggests that immediate milk abundance might be quickly offset by long-term supply constraints.

Bird Flu, Heifer Shortage, and Herd Dynamics Pose Multifaceted Challenges for 2024 Milk Production

The dairy industry is grappling with several critical issues that could disrupt milk production for the rest of the year. Key among these is the persistent bird flu, which continues to affect herds in major milk-producing states like Idaho and Michigan and is now spreading into the Northern Plains. 

Compounding the problem is the ongoing heifer shortage. Dairy producers are finding it increasingly difficult to keep their barns and bulk tanks full due to limited availability of replacement heifers. The high demand has driven up prices, leading some producers to sell any extra heifers they have, though this only temporarily eases the shortage. 

At the same time, dairy cow slaughter volumes have plummeted as producers retain low-production milk cows to maintain or grow herd sizes. While this strategy aims to increase milk output, it involves keeping less efficient cows longer, which could hinder overall growth. These challenges together create an uncertain outlook for milk production in the months ahead.

Farmers Navigate Weather Challenges to Meet Corn Planting Goals Amid Future Market Volatility

Intermittent sunshine gave farmers just enough time to catch up with the average corn planting pace. As they dodge showers and storms, some in fringe areas may switch crops, while others might opt for prevented planting insurance rather than risk fields for sub-$5 corn. The trade remains cautious, gauging the wet spring’s impact on yield and acreage. However, the moisture might be welcome as we approach a potentially hot, dry La Niña summer. Consequently, July corn futures dropped nearly 20ȼ to $4.46 per bushel, and soybean meal plummeted $21 to $364.70 per ton.

The Bottom Line

This week, the dairy market experienced significant shifts, with butter prices dropping sharply before partially recovering, reflecting ongoing volatility. Cheese prices also declined, although strong domestic demand and exports helped stabilize the market. Interestingly, whey prices bucked the trend, driven by robust demand for high-protein products. 

Looking forward, the dairy market is set for continued fluctuations. The spring flush and current weather conditions are creating short-term abundance, but concerns over milk supply tightness are already influencing pricing. The combined effects of bird flu, heifer shortages, and keeping lower-yield cows highlight the challenges for dairy producers. As these issues evolve, they will shape market dynamics throughout 2024. Stakeholders must remain vigilant and adaptable, as milk production constraints and demand pressures could test the market’s resilience.

Key Takeaways:

  • Butter prices experienced a sharp decline early in the week, following a new spring high last Friday, leading to market reassessment and volatility.
  • Cheese prices retreated due to shifts in domestic demand and concerns over the sustainability of export sales at higher price points.
  • Mixed results at the Global Dairy Trade Pulse auction highlighted market divergence, with whole milk powder values increasing and skim milk powder prices retreating.
  • Despite a slight dip in nonfat dry milk prices, futures market projections remain bullish, anticipating a rise in values due to tighter milk supplies.
  • The whey market outperformed other dairy commodities, showing robust demand and rising prices amidst an industry downtrend.
  • Class IV and Class III futures markets reflected the dynamic dairy market shifts, with fluctuations in pricing due to current supply concerns.
  • Seasonal dynamics and spring flush raised concerns over future milk supplies, as high temperatures and declining school orders impact availability.
  • Challenges such as the bird flu and heifer shortage continue to pressure 2024 milk production, complicating the supply chain and market equilibrium.
  • Farmers navigated adverse weather conditions to meet corn planting goals, reflecting broader agricultural market volatility and future crop yields’ uncertainty.
  • Overall, dairy markets faced significant price fluctuations and supply chain challenges, underlining the importance of strategic planning and market adaptation.

Summary: Butter prices reached a new spring high last Friday, but plummeted early this week, raising concerns about the sustainability of these prices. Current production, imports, and stocks are higher than in 2022 and 2023, posing challenges for dairy producers. The anticipated spring flush in milk production failed to alleviate supply chain issues, adding to market volatility. Butter buyers showed renewed enthusiasm to avoid higher costs in the fall. Spot butter closed the week at $3.09, reflecting strategic foresight in securing dairy needs early. The cheese market faced a pullback this week due to shifts in domestic demand and export dynamics. Retailers promoted lower-priced cheese bought earlier in the year, moving significant volumes. Balancing competitive pricing and strong export sales remains delicate, and fears that $2 cheese could deter future international buyers push the market to find a sustainable price point.

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