The KDM Dairy Report 1/14/2022


Another week of strong class 3 future prices.  New highs were put in early in the week with a sell of on Thursday and Friday.  Blocks and barrels closed the gap that they have had with barrels ending the week higher then blocks.  Powder push higher this week moving class 4 prices to record numbers even with butter slipping a little bit.  All in all dairy prices are strong for 2022.

Weekly Spot Prices
Weekly Future Prices

Cheese block prices on the CME took a step back on Thursday.  As the gap between barrel and block prices narrows, cheese market is more supported. Milk is still available throughout the country, but Midwestern contacts say this may be short-lived. Winter storms are expected to impact transportation over the weekend and early into next week, and crimp overall on-the-farm milk output. Current prices ranged from $4 under to flat. Truckers are reportedly short in all regions, with the Western region stating that it is starting to effect production. Barrel producers in the Midwest say demand is active. As the football season culminates, retail cheese demand is steady to growing, but current cheese supplies range from snug to balanced.

Butter Highlights: cream supplies are available in the West, while tightening in the Central region. Despite waning demand in the Central region, some purchasers in Midwest states are, reportedly, looking for available loads of cream from the West. In the East butter production has slowed this week. Butter makers in the Central region say that they are running busy schedules, despite COVID related worker shortages. Delays to production supplies and labor shortages are also causing butter makers in the West to run below capacity. Butter inventories are tight in both the Central and West, though manufacturers in the East say that inventories are sufficient to meet near-term market needs. Demand for butter is strong across all regions. Bulk butter overages range from 8 to 18 cents above market throughout the country.

Prices dry whey continued to climb following a very active trading week. The low end of the range is supported and expected to remain strong. Supplies have been notably tighter on limited production, either due to shifts of production into premium high protein blends such as WPC 80% and whey protein isolates or due to simple shorthandedness in cheese plants. Class I demand is strong and has begun to pull from their milk supplies at certain plants. Generally, dry whey market tones are bullish.

Class 3 Prices for the last 16 years

Every year is a little different with 2022 setting up to be the best class 3 and 4 prices on record.  Dairy products are tight world wide which has continued to push exports higher.  Domestic demand is strong and staffing shortages and winter weather is effecting production.  Those are the fundamental reasons that the market has pushed higher, but the bigger elephant in the room is there is technical buying right now.  Technical buy is basically buy because the price graph is pointing higher.  Right now the graph on class 3 futures is pointing strait up and therefore there are technical traders buying this market.  If you are a hedger on class 3 this gives you an opportunity at some really good numbers, but it also means that the futures prices can push way past where they would have otherwise gone.  Recommendation this week is to get covered if you have not already, and hold on for a bumpy ride.