The KDM Dairy Report 9/10/2022


Class 3 moves higher as some strength returns to the spot market as blocks and barrels head back above 1.90. Class 4 has also moved higher on tighter cream supplies as the heat in the west knocks down components and milk supply.  Feed has been an issue all year as cost of production has been at all time highs through out the country.  Finally lower milk production in Europe has started to pull world prices back up as GDT had there first positive price move in three months.

Weekly Spot Prices
Weekly Future Prices

Cheese: In the Northeast, milk is available for cheese makers to run busy production schedules. Some plant managers in the Northeast and West say labor shortages and supply chain delays are preventing them from running full schedules. Meanwhile in the Midwest, milk is less available than is typical on a short holiday week. Plant managers in the Midwest relay improvements in employee and staffing retention. In the Northeast and West, retail demand for cheese is unchanged this week. Pizza makers in the Northeast and West are purchasing more mozzarella cheese as they anticipate increased sales to football fans. In the Midwest, cheese curd producers say demand is very busy as inventories continue to move. Stakeholders in the Northeast say cheese inventories are available. Spot availability of cheese barrels and blocks is tightening in the West but remain available.  (USDA Cheese Highlights)

Butter: In the Northeast and West, cream demand is softening as some Class II cream users are reducing their production. Scheduled maintenance and downtime from some processors around Labor Day have contributed to lower cream multiples in the Central region. Some butter makers in the Northeast are utilizing loads of cream priced at lower multiples. In the West, butter makers are running active churning schedules, though some are limited by tanker availability and labor shortages. Central region butter makers say that most things are unchanged at the operational level. Steady demand for butter is present in the Central and West regions. Some Central region customers are hesitant, but butter sales have been holding steady ahead of the upcoming busy butter season. In the Northeast, butter orders are picking up amid tight butter inventories. Spot butter is tight in the West. Some contacts in the region are, reportedly, paring down the number of load deliveries to customers to help fulfill near-term commitments.  (USDA Butter Highlights)

Dry whey: The price range for dry whey contracted as prices moved downward on the top, while the bottom moved upward. Both ends of the mostly price series for dry whey shifted lower. Domestic demand for dry whey is unchanged, but international demand is strengthening. Despite a recent increase of dry whey exports, contacts say year to date dry whey sales are down compared to last year. Stakeholders say lighter interest from purchasers in Asian markets throughout the year have contributed to decreased international sales. Dry whey inventories are available for spot purchasing. Higher whey protein concentrates and permeate remain the focus of some drying operation schedules, limiting dry whey production. Some plant managers report labor shortages and delayed deliveries of production supplies are causing them to run reduced production schedules.  (USDA Dry Whey updates)

As some strength returns to the market the question is whether it will last.  Demand destruction occurred with ultra high inflation which brought the market lower from the peak in May.  Now that some relief is here with lower gas prices will demand rebound or are budgets stretched to tight for a sustained rally.  19s are too low but without strong demand out of China I do not see 25s back on the table.  Recomondation this week look to sell or buy put spreads if the market can push into the 22.00 range.  Look to DRP for class 4 as butter maybe starting to punch above its weight class.  Give your broker a call this week as there should be some oportunities to get covered in the next couple of months.