The KDM Dairy Report 5/14/2022


NDPSR last priced in at $25.24 which is the highest it has been in the last couple of years.  With good demand in cheese and whey hold on in the high 60s class 3 has priced in some good numbers for May.  This does not look like it will hold and the futures in further out months have already started to drop. Expectations for whey is to hold in the low 50s.  Going from 68 to 50 on whey would be a drop of $1.08 on class 3.

Weekly Spot Prices
Weekly Future Prices

Cheese:  Labor shortages and delayed deliveries of production supplies are preventing some cheese makers from running full production schedules in the East and West regions. Despite this, production is strong as milk supplies are available for cheese makers. Demand for cheese is strong throughout the country, though some stakeholders in the Northeast and West note softer retail demand. In the West, contacts say that this decline in demand is being countered by strengthening food service demand. Curd demand is, reportedly, moving higher in the Midwest. Some Midwestern cheese makers say that they are able to reallocate loads of cheese to other customers when they become available due to cancellations or slowdowns. Cheese barrel inventories are tightening in the West, while blocks are becoming more available.  (USDA Cheese Highlights)

Butter:  Ice cream makers throughout the country are pulling heavily on cream supplies. Cream output is trending higher in the East, though butter makers say that availability is not increasing. In the Central region, some managers say that they are sourcing loads of cream from the West. In the Central and West regions, butter makers are running busy schedules as they work to build inventories. In the East, production schedules vary; some butter makers say that their production runs are limited by lighter than normal cream intakes. Some grocery store shoppers are, reportedly, purchasing less butter due to high prices. Food service demand is steady nationwide. Inventories of salted butter are mixed in the Central region, though unsalted butter supplies are slim. In the West, contacts report that loads of unsalted butter are becoming more available. Bulk butter overages range from 4 to 15 cents above market, across all regions. (USDA Butter Highlights)

Dry whey: Domestic demand for dry whey is steady to higher this week. Stakeholders say that some purchasers are showing more interest than they were when prices were higher earlier this year. Export demand for dry whey is unchanged this week. Regional dry whey prices saw mixed movement across the range and mostly price series. On the CME, market prices for dry whey have slid 2 cents lower since last Wednesday. Stakeholders say that there is plenty of dry whey available for sale on the spot market. Dry whey loads are facing delays due to port congestion and a shortage of available truck drivers. Some drying operations are running below capacity due to labor shortages and delayed deliveries of production supplies . Dry whey production is limited, as plant managers are focusing their time on the production of higher whey protein concentrates and permeate. (USDA Dry Whey updates)

NDPSR Calculated Prices from 5/11/22 Report

As class 3 has dropped cheese demand has continued to hold strong.  Whey has started to slip but this only represents $1 to $2 of the class 3 price.  Current NDPSR is pricing has class 3 at $25.23 with a 2 dollar drop from whey we are looking at 23.23 which is higher than most of the second half of 2022 and all of 2023.  With this in mind the recommendation this week is to go for put spread close to the money.  Look to capture the first $1.50 to $2.00 of the market if cheese slips some. Taking Sep 22 as an example at 2300 for a futures price, Buy the 2300 put sell the 2100 put for a cost of 55 cent.