10/29/2021
Giving up the gains of last week. Despite steady demand from from both domestic and export markets the cold storage report showed an increase in cheese. This week saw steady demand but cash cheese dropped in price.
Weekly Spot Prices
Weekly Future Prices
Cheese: although labor issues persist, cheesemakers across the country relay busy production schedules as many plants operate at, or close to, capacity. Spot milk prices are reported to range from flat Class to $1.00 over Class III this week in the Midwest. Export interest is steady. Demand is stable to stronger across food service and retail sectors, although logistics and supply chain issues are still evidenced by delayed deliveries and/or partial fulfilment of orders. Block inventories are abundant, but barrels are less available. Block and barrel prices are still inverted. Cheese market tones are unsteady.
Butter: cream is tighter in the East and Central regions. Stakeholders worked to reallocate loads of Western cream following an incident that left a large manufacturer offline and unable to receive deliveries. Some butter makers, limited by higher cream multiples and staffing shortages, are running lighter production schedules. Plant managers are prioritizing print production to meet surging holiday demand, which has contributed to lower fresh bulk availability and higher bulk prices. Older inventories, however, are still available to meet near term needs, though contacts say that unsalted stocks are tighter than salted. Food service sales and retail orders continue to be steady. Butter market tones are bullish. Bulk butter overages range from 2 to 13 cents above market this week.
Dry whey prices were higher in most facets, but steady on the bottom of the range. Production has been stunted by labor shortages. Whey demand has remained steady, but a number of factors are pulling at the overall availability of dry whey. Higher production into high protein blends, which have been notably short on inventories for months, is one factor. Milk has begun to tighten up slightly in recent weeks. Additionally, as was mentioned, worker numbers have declined. Class III plant managers report overtime is the only way to process milk to meet customer needs. And, in some cases, whey processing gets hampered after cheese needs are met. Animal feed whey trading was moderately up from last week, as the prices moved up on the top of the range. Whey market tones are crystal clear, ringing bullish tones.
July 2022 class 3 milk futures
After a steep drop in the cash prices class 3 futures held steady on Friday. 2022 class 3 futures actual hit new highs on Friday with the average for 2022 above 1840. With class 4 heading higher on a tightening cold storage report, and Europe butter heading for the $3 mark there should be some support for class 3 prices. The disconnect between the class 3 and class 4 price has often lasted for more then 6 months so do not look for class 3 price to get pulled up by class 4 any time soon. I would look to the front half of 2022 for class 3 hedges. Look to buy the 1850 put sell the 1650 put and sell the 2000 call for 20 cent in the first half. Give us a call this next week and we can help tailor a hedge plan for your need.
