The KDM Dairy Report 1/22/2023


Big crash in the spot market this week with a smaller then expected drop in Class 3 futures.  With big swings in the market the futures have become slow to respond.  Good domestic demand with football playoffs in full swing.  Export demand also improved from the previous weeks.  This could be do to lower prices and with a plentiful milk supply cheese will no be tight as we go into the spring.  Without a big pickup in exports we could see cheese sag into the spring.

Weekly Spot Prices
Weekly Future Prices

Cheese: Milk is available for cheese production throughout the country. In the Northeast and Midwest, spot loads of milk are being offered below Class prices, and some cheesemakers are reporting prices as low as $10 under class for the fourth week in a row. Throughout each region, cheesemakers are utilizing available milk to run busy production schedules. In the Northeast and West, stakeholders say retail and export cheese sales are steady, but football playoffs are contributing to increased mozzarella demand from pizza makers in food service markets. Demand for cheese varies in the Midwest: some contacts say demand remains quiet, while others, particularly retail cheddar and Italian/pizza style cheesemakers, are reporting an uptick in cheese sales. Contacts in the Northeast and West report loads of cheese are available for spot purchasing. Western stakeholders relay cheese barrel inventories are currently larger than blocks. Market tones for cheese are mildly uncertain, as Midwest cheesemakers note there is a lot of milk available and heavy cheese production, but demand for cheese varies across different plants.  (USDA Cheese Highlights)

Butter: Across all regions, cream is available for processing. In the West, cream multiples moved higher at the lower end with volumes being sold flat to market this week. Butter makers are utilizing available cream to run busy schedules. Some Central region contacts say they are currently catching up on their micro-fixing needs. In the East, butter makers say they are freezing bulk butter ahead of increased demand in the coming months. Retail demand for butter is strong in the region, and contacts note steady food service sales. Demand for butter is meeting seasonal expectations, in the Central region. Butter makers in the West report steady demand, though some say there is a hesitation from buyers to book loads further out than the current quarter. Spot loads of butter are available in the West, though contacts note unsalted butter inventories are tighter than salted. In the East, spot butter availability is tighter, as butter that isn’t being frozen is primarily being produced to meet contract needs. Central region contacts say more butter is becoming available, due to increases in cream availability and churning. This is, reportedly, contributing to softening bulk butter prices.  (USDA Butter Highlights)

Dry whey: Prices moved lower at the bottom of the range and across the mostly price series this week. Prices shifted upward at the top of the range, and contacts suggest this was due to variable contract price loads tied to certain indexes. Market prices for dry whey have slid lower on the CME, by 2.5 cents since last Wednesday. Some contacts suggest lighter demand from both domestic and international dry whey purchasers is contributing to bearishness in the markets. Dry whey production is strengthening, as some plant managers say lower prices for higher whey protein concentrates are causing them to focus more of their production on dry whey. Spot loads of dry whey are available for purchasing, and some contacts say strong production and light demand are causing inventories to grow.  (USDA Dry Whey updates)

The spot prices have put in new lows with a class 3 price in the $16s and the class 4 price in the $17s.  These number will not work for most farms if any.  The market does not always care and even if NDPSR never gets down there, the overall trend is down.  Recommendation, buy puts, $18 may not get you out of the red but it burns a lot less equity then $16.  If the futures do punch below $17 start buying calls.  Eventually, low prices cure low prices.