The KDM Dairy Report 12/17/2021


After a strong couple of weeks the class 3 market is starting to level off.  Blocks ended up a couple of cent and barrels end up down a couple of cents.  January and February dip on Friday, but the rest of 2022 and 2023 ended near the top of there ranges.  These are good numbers for most dairy farmers so I do not expect milk production to slow as we go into the new year.  Therefore it is up to demand to hold these future prices or push them higher.

Weekly Spot Prices
Weekly Future Prices

Cheese: in the North east milk supplies have tightened.  Cheese markers are keeping active schedules.  Demand is strong in both food service and retail.  There is adequate cheese inventories to meet demand.  In the Midwest retail orders are strong.  Most cheese plants are running hard to catch up after being closed for maintenance last week.  Spot loads for milk are running slightly over class 3.  On the West coast international demand is strong with notable interest in the Asian markets.  Block inventories have been tight with barrels more available.  Overall the cheese market has a bullish tone.

Butter: Strong milk sales that reroute volumes from balancing plants and tight cream supply are suppressing butter production in the East region.  In the Midwest cream is tight some suppliers are shipping it in from the west. Inventories are shrinking with good demand.  In the west cream is available as some loads get shipped east.  Demand is seasonally strong and spot loads of butter are limited.  Bulk butter is ranging from 5 to 15 cents over the CME price. Butter market tone is bullish.

Dry Whey prices shifted into bullish territory again on solid demand for the high-protein blends.  Managers are ramping up production as spot milk becomes available.  International demand is strong with notable purchases coming from the Asian markets.  Dry whey production is continuing to focus on the high protein concentrates and permeate as these have the highest profit margin even though they lower production.  Dry whey market tone is bullish.

Another good week for dairy with a little bit of a sell off in the front months.  Right now the updates are running bullish but the dairy market does not typically stay in the $20 range for too long.  Recommendation, look to get covered for most of the year.  Buy the 1950 put sell the 1750 put sell 2200 call, all for around 15 cents, March through October.  Give us a call next week and get going on your hedging for 2022.  This is the last report for this year, thanks for reading and have a Merry Christmas / Happy Holidays, and we will catch up in 2022.