7/28/2024
July has been a volatile month with a rally to star and then a drop in the middle to now end putting in new highs for the year on most futures. The heat has set in and milk production continues to drop. Cow numbers look to be holding as the higher prices for class 3 and class 4 has farmers holding on to cows longer. Bird flu continues to rear its ugly head and from talking to farmers that had it run through their herds it is taking longer to get back to full production then the initial thought of 2 to 3 months. All this combined has tightened up the milk supply. The only question left is what demand is going to be come this fall.
Weekly Spot Prices
Weekly Future Prices
Cheese: Cheese production schedules continue to trend steady to lighter throughout much of the U.S. Contacts in the East region relay mixed production schedules. Some processors are running production schedules in line with recent weeks, whereas others share lighter production. Contacts share retail demand remains strong. Cheesemakers in the Central region note active production schedules despite tightening spot milk availability. Spot milk prices were reported at Class III to $1.50-over. Cheese demand is steady, and some contacts shared increased interest from customers in Mexico. Contacts in the West indicate seasonally weaker cheese production. Spot milk availability is limited, but manufacturers have shared enough milk is available to meet production needs. (USDA Cheese Highlights)
Butter: Butter makers are running active production schedules in the East and Central regions, but churning is seasonally light in the West. Cream volumes are tight or tightening throughout the country. Contacts in the East region note spot volumes of cream are limited. In the Central region stakeholders say cream is more available than typical for this time of year, though butter makers are purchasing cream volumes from the West to meet their manufacturing needs. In the West, salted butter loads are available, while unsalted butter inventories remain tighter. Central region butter inventories are also available. Demand for butter is steady to lighter, domestically, in the Central and West regions this week, though contacts in the West relay moderate international interest. In the East, retail demand has held steady while food service sales are steady to lighter. (USDA Butter Highlights)
Dry Whey: Dry whey prices are unchanged across all facets of the range and mostly price series. Demand is steady domestically. Demand from international buyers is moderate. Dry whey availability is tighter. Some manufactures convey their production will be less bound to contractual obligations starting in August. Liquid whey available for drying is decreasing as cheese production becomes seasonally weaker. That said, liquid whey volumes are adequate for current production needs. Dry whey production is lighter. Some manufacturers are focusing production on higher whey protein concentrates and isolates with their whey solids, rather than sweet whey production, due to continued market strength of the higher whey protein concentrates. (USDA Dry Whey)
Class 3 is well into the $21 range and I have been saying this was going to be the top of the range. With a steady draw down on cold storage and lower milk production, I would not try and buck the trend (which is bullish). Class 3 futures are heading higher and the market seems to want to keep pushing them in that direction. Recommendation, buy puts or put spreads. Keep the upside open for now.
