The KDM Dairy Report 9/30/2022


A big gap has been forming between the blocks and the barrels this last couple of weeks, as it stretched to nearly 30 cents before coming back a little on Friday.  With strong exports but domestic demand slowing the market is trying to find a direction.  For the last couple of weeks the front months have been bouncing between $22 and $19.

Weekly Spot Prices
Weekly Future Prices

Cheese:  In the Northeast and West, milk is available for steady cheesemaking. Meanwhile, contacts in the Midwest say milk volumes have been declining over the past few weeks. This decline in milk availability is contributing to some down time at Midwestern cheese plants. Demand for cheese is softening in the East but remains healthy throughout the Midwest. In the West, retail demand for cheese is declining while steady demand for cheese is present in food service markets. Strong international demand persists in the West, as contacts say domestically produced loads of cheese are priced at a discount to loads produced in other countries. Spot purchasers in the Northeast say loads of cheese are available. Cheese barrels are tight in the Midwest but less available than blocks in the West. Some contacts suggest this is contributing to the inversion of the block barrel price relationship on the CME. (USDA Cheese Highlights)

Butter: Cream volumes are available to meet production needs in the West. In the Central region, some butter makers say cream loads are being sold at multiples in the middle/upper 1.20s this week. Contacts in the Northeast say some butter makers are opting to sell loads of cream to cream cheese and eggnog producers, in lieu of churning. Some regional butter makers say they are not currently churning. Butter makers in the West are running busy production schedules, though some plants are closed for scheduled maintenance this week. Meanwhile in the Central region, butter makers are operating busy production schedules to try and keep up with the strong regional demand for butter. Demand for butter is building ahead of the holiday season in the Northeast and West. (USDA Butter Highlights)

Dry whey: This week dry whey price range and mostly price series moved lower. Contacts report stagnant sales of dry whey in domestic markets. Meanwhile, international demand is steady to higher. Some purchasers in Asia have increased their orders of dry whey in recent weeks. Sales to Mexico are steady as some purchasers are booking loads of dry whey to send to customers in Q4 of 2022. Spot purchasers say some loads of dry whey are being sold at lower prices to prevent inventories from building. Liquid whey is available for drying operations to run steady production schedules. Some plant managers report they are unable to run full schedules due to labor shortages and delayed deliveries of production supplies. (USDA Dry Whey updates)

Class 3 has been declining from the peak in May, and with September going to finish in the 19s it will be the first month below $20.  As cost of production has gone higher throughout the country with the highest in the West with numbers in the $22 range, staying below $20 for too long is going to start to push dairy farms out of the business.  With demand declining domestically going back to the May highs is unlikely.  Therefore, look for the market to be a little range bound.  Recommendation: Look to sell above $22 and look to take profits in the $19s.