The KDM Dairy Report 1/29/2022


Another bite at the apple.  After a big drop last week class 3 futures came roaring back up.  This pushed second and third quarters over $21 and fourth quarter over $20.  This lines 2022 to be the second highest year we have on record be hind 2014 when we averaged $22.40.  With grain prices also moving higher the profitability for dairy farms is not as high as 2014 but we should still see expansion in areas that have plant capacity.  The bigger question is, does demand for dairy products still out pace supply at these elevated price levels.

Weekly Spot Prices
Weekly Future Prices

Cheese: Lower cheese demand notes are being reported throughout the country. Cheese makers say this is a response to the seesawing market tones of recent weeks. Buyers are more inclined to use the wait-and-see approach, as market price movements are, for the most part, at the end of another bearish week. Milk is steadily to abundantly available for cheese production. However, cheese plant managers are still dealing with workforce shortages, and in some cases, plants are simply running fewer days due to limited employee numbers. Therefore, milk is not spread out as much. Spot milk prices ranged from $3 to $1 under Class, compared to $8.50 to $4 under Class this time last year. Western contacts say block and barrel cheese inventories are accessible. (USDA Cheese Highlights)

Butter: Cream is available for butter makers. Ahead of spring holidays, butter production is trending steady to stronger. Output, however, is hampered at some facilities due to labor issues and delayed production supply deliveries. Bulk butter inventories remain tight. Some end users report paying hefty premiums to secure spot loads, but others are trying to hold out for a price drop. Domestic demand is unchanged across sectors. Interest from international markets remains strong as well. Butter market tones are unsettled as butter prices face downward pressure after weeks of bullishness. Across the country this week, bulk butter overages range from 8 to 15 cents above market. (USDA Butter Highlights)

Dry whey prices continued their upward trajectory. Loads are clearing in the middle $.70s. Milk is readily available for cheese production, but cheese makers continue to have difficulties regarding staffing shortages. Producers remain focused on production of the higher protein concentrations. Animal feed whey prices moved higher this week. After somewhat slow market movements in recent weeks. Dry whey market tones are bullish.  (USDA Dry Whey updates)

The roller coaster ride after a drop last week dairy rebounded this week.  The underlying strength of class 3 milk futures is the whey price.  Even though the cheese price has dropped close to 20 cents by the middle of last week futures only dipped below $20 for a short time.  This is from the continued push higher in the whey market, bringing those prices to all time highs.  Current cash price for Dry Whey is $0.84.  At this price you only need an average cheese price of $1.77 to be at $20 class 3 price.   If whey demand burns it self out on these high prices futures is going to have a hard time holding current prices.