6/23/2024
Weakness in the dairy market as cheese drops back down to the $1.90 level. Long term demand still a question for many end users with first quarter export numbers better then expected and second quarter a little lighter. This mainly has to do with price movement as first quarter the US market was below world prices and second quarter the US market has been above world prices. With milk production continuing to decrease I expect cheese price to remain in this range.
Weekly Spot Prices
Weekly Future Prices
Cheese: Cheese production schedules are variable throughout the U.S. In the Northeast, steady farm level milk production and lower Class I demand has allowed some cheese manufacturers to run at full capacity. In the Central region, contacts share cheese production is in line with recent weeks. Spot milk prices ranged from $2- to $1-under Class III. For week 25 of 2023, though, the spot milk price range was $11- to $3.50-under Class III. Some cheese processors have shared that they are waiting to purchase spot milk loads until the Independence Day holiday. In the West, cheese production is steady to lighter. Milk volumes have become tighter throughout the region, and some plants reported unexpected downtime. Export cheese demand is steady. (USDA Cheese Highlights)
Butter: In the West, domestic butter demands for both the retail and food service sectors are steady. For the Central and East regions, no changes in domestic butter demands from the prior week are conveyed for either the retail or food service sectors. Although cream availability continues to tighten at various paces across the nation, butter manufacturers indicate cream volumes remain ample for processing needs. Butter production schedules are mostly steady. That said, a few manufacturers indicate churns will go down for lengthy maintenance projects prior to months end. Some stakeholders say unsalted bulk butter is tight. Bulk butter overages range from 1 to 10 cents above market, across all regions. (USDA Butter Highlights)
Dry Whey: Dry whey prices moved higher on both ends of the range. The mostly price series is unchanged. Domestic demand is mostly steady. Some stakeholders convey spot load interest has been more intermittent than contractual interest for Q2. Amongst industry sources, export demand varies from steady to moderate. Cheese production is keeping ample amounts of whey solids in the stream for production of sweet whey and whey protein concentrates. Dry whey production paces are generally lightening with seasonal milk output
decreases and continuing strength in whey protein concentrate markets. Although dry whey stocks are tighter, loads are available to meet spot buyer needs. (USDA Dry Whey)
With cow numbers staying below the five year average and the number of replacements getting tighter milk production is not likely to grow. As heat and humidity has hit much of the US that will further decrease milk production. Over production is not going to be an issue this year and the market is unlikely to see the lower numbers seen in the beginning of the year. With that said demand is going to be the driver for the rest of this year. Right now it is holding the class 3 market in a $19 to $21 range. Recommendation, Buy $21 calls look to pay 30 to 50 cents for them.
