10/8/2021
Class three futures just not quite getting over that next hurdle. As spot prices moved higher this week on barrels closing the price gap with blocks. November class 3 futures push into the high 18s. Demand is still good as dairy prices push up to the level of world prices. Finally the class 4 prices of the last two years are proving to be too low for many dairies as reports of farms going out of business have increased in butter/powered areas.
Weekly Spot Prices
Weekly Future Prices
Cheese: Milk production this week is steady with spot loads at a discount from .25 to 1.25 below class. Cheese plants for the most part are running seven days a week with some plants taking time out for scheduled maintenance and updates. Staffing shortages have also slow production. Cheese demand is running strong with domestic demand from food service and retail running unchanged. Interest from the export market is steadfast. Cheese inventories are adequate for current contracts and spot needs. The overall tone in the market is stable to bullish.
Butter: Cream is tighter then previous weeks with the Midwest plants looking to the west for extra loads. This has slowed production at some plants as trucking shortages still persist. Butter inventories are adequate for near term needs. Food service is mixed with a drop in demand as summer ends. Retail demand is steady to higher. Butter market tone is stable this week.
Dry whey is pricing in a narrower range this week. There is moderate trade activity. Inventory is available. Production schedules are active. International demand is strong with orders coming from both China and Mexico this week. The shortages in truck drivers and congestion at the ports have continued, which are causing delays. The market tone for dry whey this week is steady.
Dairy markets are starting to stall. With the end of summer and vacation season coming to a close, travel has slowed. Business travel has not come back and filled in this gap and the hospitality businesses are feeling the pinch. This has also hurt restaurants as food service is seeing a dip. Retail has picked up and so have school lunch programs. This has held the dairy market relativity stable this week, but it is starting to show some cracks in an otherwise bullish market. If you have not started hedging for 2022 it would be a good time to start. Most of the year is in the 18 dollar range on class 3. I would suggest selling some. Also the market has been relatively stable which brings down option prices. Puts or put spreads would work well, and DRP would be choice; for any one that wants to leave the upside open. Give us a call and we can help with any of your marketing needs.
