The KDM Dairy Report 2/6/2022


Another week of higher prices on cash, and class 3 only moved up marginally. Previous rallies saw strong buy side on the futures pushing the front months well above cash prices.  This time around buyers seem hesitant to push much above cash.  The bigger story this year is whey pushing all time highs and helping elevate the class 3 price.

Weekly Spot Prices
Weekly Future Prices

Cheese: The persistent narrative of supply chain limitations and labor shortages continues to burden cheese manufacturers across the United States this week, as an end in sight regarding these perplexities is unclear. What is clear is that cheese plants that are active are running fairly busy schedules, with balanced to available milk supplies. Spot milk prices in the Midwest ranged from $2 under Class to flat market. Compared to last year, spot milk prices during week five of 2021 were $8.50 to $5 under Class. Cheesemakers’ relay retail demand is generally healthy. Food service demand is somewhat quieter, and recent winter storms affecting school districts and restaurants are not expected to aid in more purchasing. Contacts also contend that teetering market prices have not enticed customers to take on anything outside of their short-term needs. This week, though, market prices have exhibited some steadily bullish resiliency. (USDA Cheese Highlights)

Butter: Cream is readily available across the Central and West regions, which is helping to fuel active butter production. In the East, where heavy post-snowstorm bottling pulls are moderating milk flows to balancing operations, butter production is steady to lower. Across all regions, some manufacturers continue to face labor pool issues, supply chain issues, and transportation delays. Availability remains limited for bulk butter inventories. Food service demand is softening. Retail sales are steady to slower. Strong export interest is present. Across the country this week, bulk butter overages range from 7 to 15 cents above market. (USDA Butter Highlights)

Dry whey: Prices for dry whey moved higher across both ends of the range and the mostly price series this week. The top end of the West dry whey price range moved above $.80 for the first time since July of 2007. Market prices for dry whey continued to push higher, increasing by 3.75 cents, on the CME, since last Wednesday. Strong pricing for higher whey protein concentrates is, reportedly, supporting higher dry whey prices. Demand for dry whey is steady to higher in both domestic and international markets. Spot inventories of dry whey are mixed. Some spot purchasers say that inventories are available, while others report some tightness. Dry whey production is steady to lower. Some plant managers report that labor shortages and delayed deliveries of production supplies have caused them to reduce production schedules. Dry whey production is further limited as drying operations are focusing on the production of higher whey protein concentrates and permeate. (USDA Dry Whey updates)

Whey remains tight as it sets all time highs.  At this point it is adding more then $3 to the class 3 price.  With that kind of lift it does not take a very high cheese price to hit some pretty good numbers.  There for 2022 class 3 price is going to hing on weather Dry Whey can hold on.  On a good year $18 to $19 prices are pretty good so I would look to lock in some of these numbers in the $21 to $22 range.  Fences are a good strategy at this point.  Buy the $21 put sell the $23 call for 30 cent.