The KDM Dairy Report 6/3/2022


Cash went down futures went up.  Strange week in the markets for dairy with futures and cash heading in opposite directions.  This could be do to the fact that NDPSR is holding in at all time high prices, and futures are now sitting in-between NDPSR and cash.  As whey has started to rebound this week futures price look a little more doable but there is a long ways to go as class 3 cash is still coming in at $23.24.

Weekly Spot Prices
Weekly Future Prices

Cheese: Throughout the country milk is available, allowing cheese producers to run active schedules. Contacts in the Midwest and West continue to report that they have labor shortages. Some plant managers in the West say that those shortages and delays to production supply deliveries are causing them to run below capacity. Cheesemakers in the Midwest say that they are busy trying to keep up with strong seasonal demand for curd and processed cheese. Retail demand is steady to lower in the Northeast but unchanged in the West. Export purchasing is strong, as contacts in the West say that they are receiving orders for loads to ship to Asian markets in early 2023. Spot inventories are available in both the Northeast and West regions. Market prices have moved lower throughout the last two weeks, on the CME; some contacts in the West suggest that marginally larger inventories of cheese in cold storage, compared to month ago and year ago levels, may be contributing to bearish market movements.  (USDA Cheese Highlights)

Butter: Cream is available across all regions. Contacts in the West say that demand has picked back up following Memorial Day weekend. Butter makers throughout the country say that staffing shortages are reducing their butter output. Stakeholders in the Central region say that increased cream availability has allowed them to spend more time on churning rather than micro-fixing bulk butter. In the Northeast, butter inventories are trending downward compared to this time last year. Meanwhile, loads of salted and unsalted butter are available in the West. Demand for butter varies throughout the country, but market tones remain firm. Contacts report some bullishness in butter markets as they anticipate higher demand and tighter inventories in the fall.  (USDA Butter Highlights)

Dry whey:  The price held in the range and mostly price series for dry whey contracted this week. Contacts report that prices near the top of the range are tied to certain indexes, while prices near the bottom represent spot sales. International demand for dry whey is lackluster as stakeholders say that sales to Asia have been below expectations. Dry whey demand is steady in domestic markets. Delays to load deliveries are occurring due to port congestion and a shortage of available truck drivers. Dry whey inventories remain available for spot purchasing. Liquid whey is plentiful as cheesemakers are running busy schedules. Plant managers say that dry whey production is unchanged, though some note that they are focusing their schedules on the production of higher whey protein concentrates and permeate.  (USDA Dry Whey updates)

Prices have held that last couple of weeks as cash and dropped.  World production is lower and world prices are quite a bit higher than they are in the States.  This has lead to good exports and kept cold storage from ballooning.  Demand is a little softer on the domestic front and we could see prices start to slide as inflation takes a bite out of consumers buying power.  Recommendation this week is to sell, and look to buy calls on drops in the market.  This strategy can require a large margin account.  DRP or put spreads are also a good strategy for those who do not want to risk capping the upside.  Give us a call and we can tailor a hedge plan for you.