The KDM Dairy Report 8/14/2021


Class 3 futures moved up strong this week as the Spot market climbed.  As schools get back into session and the August heat starts to take milk production lower, buyers are stepping back in to make sure they do not miss out on the lower prices.  This drove the blocks price up more then 17 cents and the barrel price up 14 cents on the Spot market.  There is still plenty of milk for manufacturing so domestic demand needs to stay strong and exports may need to pick up a little more to drive this market much higher.

Spot Market Recap
Futures Market Recap

Cheese producers in the East and Midwest regions are reporting milk availability is starting to shift lower.  Some cheese makers are using nonfat dry milk to fortify there cheese vats to maintain production.  Spot prices on extra loads of milk are still discount to class 3.  On the west coast demand has been steady in both food service and retail.  Export demand is strong as the US has lower prices then the rest of the world.  There is still a back log at the ports and trucks and containers are hard to come by.  This has lead to a build up of product in warehouses.  Overall the cheese market is steady to a little bit bullish.

Butter, milk and cream supplies are tighter this week.  Butter production varies as some plants focus on repairs while others are running full production schedules. Inventories are healthy as the East region maintains demand, while the Midwest and West coast both increasing on demand.   Bulk butter on the spot market is ranging from flat to 8 cents above the market.

Dry whey trading slowed this week with prices mostly holding steady.  Some brand specific demand met with higher prices but most was in the 50 cent range.  Production is starting to slow a little with less raw milk available.  Current inventory of dry whey is steady to growing.  Some producers have started to accept lower bids to move excess product.  There was a purchase by Mexico this last week but export demand has been hampered by the delays in transportation.  The overall market tone for dry whey is steady to weaker.

With lower milk production moving into manufacturing this last week there has been signs of prices moving higher.  The market is still concerned about the price spread between the blocks and barrels as historically that gap will close to 3 cents.  If blocks drop to meet barrels and weaker dry whey prices take hold we could see class 3 prices drop.  On the demand side that would help exports as the dairy market is already discount to the rest of the world.  If the back log on shipping can get sorted there should be an increase in exports.  Also, domestic demand should get a lift with kids returning to schools and the lunch programs getting into full swing.  I would look for pull backs this week to buy calls or take profits on sold futures.  Over all outlook on Dairy is slightly bullish at this time.