The KDM Dairy Report 12/11/2020


The rumor mill is running wild.  This week we had a big push higher, culminating with a limit move up on Friday to then turn around and sell off by the end of the day.  Leaving futures pretty flat from the close on Thursday.  I can only guess that a  rumor of further government buying was pushing the market.  As of the time I am writing this post there has been no announcement.

Spot Market Recap
Futures Recap

Cash cheese price looks like it put in at least a temporary bottom this week with barrels adding four and a quarter cents and blocks adding three and a quarter.  Class three futures also showed some life uplifting, ending up as much as a dollar in February.  

Cheese updates this week were again on the negative side and the consistent theme in all three was plenty of milk production.  Spot loads sold for as low as 3 to 6 dollars under class in the Midwest.  Furthermore, cheese inventories have grown in recent weeks.  That is what made the futures movement surprising with its gains,  The bright spots in the updates are that pizza sales have grown in the West and Midwest but that still does not offset the food service overall is soft in tone.

Butter churns have been active this week as cream has become more available, which is starting to add to storage.  This was a reversal from the past 2 months as we had seen a draw down on butter in storage.  The USDA did announce plans to buy $50 million in butter at the end of last week which gave the market some lift but by Friday the euphoria had worn off and butter futures were down 3 cents on futures to end the week.


My advice still has not changed from a few weeks ago.  With the prices improving floor pricing is getting into ranges that most farmers could live with.  Overall the market’s tone is negative with increased production and traditional demand not as strong as it has been in previous years.  Do be careful of capping off the top though.  As we have seen this week, the market can have strong moves with little or no real reason why.  I think the market is generally on edge after this last year.   With the government buying, we can put in all time highs and as soon as it stops, the bottom falls out.  As always, talk with your broker or adviser to figure out the best hedge plan for you and your operation.  If we can be of assistance, please give us a call.