The KDM Dairy Report 9/18/2022


Low volume on the Spot market this week with only 3 trades all week on blocks.  Prices were 14 cents higher but there were no trades on blocks after prices push above $2.00.  Weekly updates do report cheese shocks starting to tighten up but still available for spot purchases. Milk Production and Cold Storage is out this week, from estimates both Milk Production and cheese in Cold Storage should be higher for then last year.

Weekly Spot Prices
Weekly Future Prices

Cheese:  Cheesemakers in the Northeast and West say milk volumes are declining, but are still sufficient for their current processing schedules. In the Midwest, contacts note prices for extra loads of spot milk are at Class or slightly over. In the Northeast cheese inventories are available, but contacts report inventories are tightening in the Midwest and West. Some barrel producers say they are concerned with current production capacity and if they will meet end-of-year holiday demands. Pizzamakers are purchasing more mozzarella cheese in the Northeast and West. Overall food service demand is mixed. Some restaurants report operating reduced hours due to labor shortages, while others are reportedly limiting their menu offerings. Export demand is strong. Contacts in the West say domestically produced loads of cheese are priced competitively to other countries, contributing to increased international demand.  (USDA Cheese Highlights)

Butter: In the Northeast and West, cream demand is strong and spot availability is limited. Butter makers in these regions say this is contributing to reduced butter production. Meanwhile in the Midwest, cream volumes are tightening, and higher multiples are preventing some butter makers from purchasing additional loads. Midwestern butter makers are focusing their time on micro-fixing. Spot butter inventories are tight, and contacts in the Northeast and Central regions are concerned about butter availability as retailers are preparing for the Q4 holidays. Demand for butter is strengthening in Western retail markets as some grocers are increasing their orders ahead of the baking season. In the Northeast region, some purchasers are concerned that record high butter prices will cause retail demand to soften.  (USDA Butter Highlights)

Dry whey: The bottom of the dry whey price range moved lower, while the top of the range moved higher this week. Demand for dry whey is steady in domestic markets. International demand is trending higher, as contacts note increased interest from purchasers in Asian markets. Dry whey inventories are available for spot purchasing. Drying operations are running steady production schedules, utilizing available volumes of liquid whey. Labor shortages and delayed deliveries of production supplies remain and reduced production schedules.  (USDA Dry Whey updates)

Class 3 jumped higher last week as some strength came back into the market, and this week Class 3 held onto it’s gains.  The spot market moved higher this week with a jump of 14 cents on the blocks and 15 cents on the barrels.  This jumped moved class 3 spot up to $21.  With very few contracts traded it is hard to say if the NDPSR will reverse course and start heading higher.  If not the futures are on the high side to finish out 2022.  Recommendation, look to sell class 3 futures over $22, or Buy $21 put sell $19 sell $23 call for 20 cents Nov 22 – Feb 23.