1/7/2024
Hope everyone had a good holiday, welcome to 2024. Milk outputs have increased and with bottling down for the holidays more milk moved into manufacturing. We continue to see steady volumes show up at the CME which has held the cheese prices in the low 1.40s. With schools back in session class 1 should pull some milk away from class 3 and 4 but demand has been lackluster over the last couple of months there for we are not likely to see prices rebound quickly.
Weekly Spot Prices
Weekly Future Prices
Cheese: In the eastern states, ample milk volumes available for Class III processing have been tempered by schools reopening. In the Northeast, production schedules are noted to be steady. Cheese inventories are comfortable. Some cheese plant managers relay bulk demand is very weak. In contrast, demand is somewhat steady in the Midwest, where contacts say cheddar sales at the retail level remain strong. Milk availability has reached seasonal highs over the past several weeks, and spot milk prices are reportedly as low as $8-under Class.
Market tones remain somewhat bearish. In the West, cheese demand is noted to be steady. Foodservice demand continues to be softer than retail demand. There are strong milk volumes available for Class III manufacturing. Spot loads of cheese are readily available. Demand from international buyers is moderate. (USDA Cheese Highlights)
Butter: Retail butter demand has weakened following the recent holidays. However, central region stakeholders indicate butter demand is meeting seasonal expectations. In the west region, some spot buyers report holding off purchasing at current prices. Some contacts say food service demand is weak. Spot loads of bulk butter are available. Cream is readily available throughout the country. Butter manufacturers are running strong to steady production schedules, with some actively churning seven days a week. Some butter makers indicate inventories are tighter compared to this time last year but are currently at comfortable levels. Bulk butter overages range from 1 to 8 cents above market, across all regions. (USDA Butter Highlights)
Dry Whey: Prices are unchanged for the range and bottom end of the mostly price series, while the top end of the mostly price series moved slightly higher. Some stakeholders say spot load availability is tight for the start of the new year. Domestic demand is steady. Preferred and nonpreferred brands are drawing activity from spot load purchasers. Export demand is moderate, but manufacturers relay interest is picking up with Mexican purchasers. Upward momentum from Asian purchasers remains limited. Liquid whey volumes are meeting drying needs of steady dry whey production schedules. Some manufacturers are focusing production lines on whey protein concentrates production instead of dry whey production. (USDA Dry Whey)
The class 3 market is still looking for a bottom. Spot market has been in the low 1400 range for that last couple of weeks and the longer it stays down there the lower NDPSR will go. At this point there is no indication that we have reached the bottom in the futures market. See graph above. Milk production and cold storage are both on the low end so a little uptick in demand should turn prices around. Recommendation, buy puts, I would not limit the top end in this range as it is bellow most producers cost of production but there still is another dollar drop in futures before we reach cash.
