7/3/2023
Still dealing with an over supply of milk. Which is finding it’s way into cheese plants. With some decreased exports, we find the market scraping the bottom of the barrel at prices no one was expecting. With the current spot prices we are looking at 12.33 for a class 3 price and 17.78 for a class 4 price. Unfortunately, it does not look like demand is going to fix this market. A drop in production is what it is going to take. That just takes longer and is why the market has dropped as low as it has.
Weekly Spot Prices
Weekly Future Prices
Cheese: Milk is available for cheesemaking throughout the country. Some contacts in the Northeast say milk is being discarded. In the Upper Midwest milk surpluses are keeping cheese flowing into Class III plants, and cheesemakers say next week’s holiday is contributing to spot volumes of milk moving as low as $11 under Class. Cheesemakers are running active production schedules in the Northeast and West. In the Northeast, cheese sales are steady to strong. Contacts in the West report steady food service sales, but softening retail demand. Some contacts in the region note frozen pizza demand is below 2022 levels and say this is negatively impacting mozzarella cheese sales. Demand for cheese is busy in the Midwest, and some contacts report turning away new orders as they are nearly oversold. Cheese inventories in the region are not currently long. Meanwhile, Northeast cheese inventories are ample. Contacts in the West say spot loads of cheese barrels and blocks are available for purchasing. (USDA Cheese Highlights)
Butter: Cream volumes are available in all regions, and some contacts in the Central region note cream suppliers in the region are offering larger volumes ahead of the July 4th holiday. Butter makers are operating active schedules, as some continue running seven-day schedules. In the Central region, some butter makers say they did not anticipate running current busy schedules at this point of the year but cite strong cream availability as contributing to current butter production. Cream remains available for strong butter production in the West. Contacts in the West say Independence Day has contributed to retail demand picking up this week and anticipate increased food service demand next week. The impending holiday is also contributing to strong demand for butter in the East. Demand for butter is steady in the Central region, as some stakeholders report sales are seasonally increasing. Bulk butter overages range from 0 to 10.75 cents over market value. (USDA Butter Highlights)
Dry Whey: Both ends of the dry whey price range and mostly price series moved lower this week. Since last Wednesday, CME market prices for dry whey have declined by 2.5 cents. Spot purchasers say there is plenty of dry whey available, and some sellers are offering loads at lower prices then in previous weeks to reduce warehouse inventories. Cheesemakers are running active production schedules, leaving plenty of liquid whey available for drying. Manufacturers say dry whey production is strong, but some suggest the recent decline in dry whey prices may cause a drop in production in the coming weeks if it becomes more economical to find alternative uses for liquid whey. Dry whey sellers report steady to light demand from spot purchasers. (USDA Dry Whey)
Looking at the table above cow numbers were still increasing for the first three months of this year. Increasing cow numbers makes sense for individual farms when prices are going down because typically it lowers cost of production. The problem is when the market is already dealing with an over supply those extra cows compound the problem of over supply and the market reacted by diving even lower. The one bright spot is that beef prices are at all time highs, which is sending more cattle to the slaughter house. As the dairy herd contracts and the summer heat sets in production should drop. There will be no report for the next two weeks as I will be traveling, and KDM Trading will be closed on July 4th and 5th in observance of the 4th of July holiday. We wish all a fun and safe 4th of July.
