Weekly forecast update – Feb. 4, 2022
Forecast updates
- Increased the Q2 forward Class I, II, and IV prices. That was the result of increasing the NDM price Q2 through early 2023
- Reduced 2023 NDM forecast.
- Modest increases to the Central and Western buttermilk.
Fluid Milk Market
USDA announced the January Class III and IV milk prices at $20.38/cwt and $23.09/cwt, respectively, and $2.02 and $3.21 higher than December 2021, respectively. That was the highest-Class IV milk price since August 2014. Futures forecast modestly higher Class IV milk prices through the spring; Class III prices range from $20 to $21 for the rest of 2022. Given Class IV is $2/cwt more than Class III in some months – that could result in a Class I base that is less than Class II and IV milk prices. That may lead to depooling opportunities for Class II and IV processors throughout the spring. Depooling tends to result in lower milk prices to dairy producers.
Cheese Market
The cheese yo-yo continued this week. After prices moved lower, they turned higher into the end of the week. This time, barrels gained more than blocks causing the block-barrel spread to narrow to 0.5¢ by Friday. Cheddar blocks averaged $1.8695/lb, 11¢ more than the previous week with a single load trading. Cheddar barrels averaged $1.8325/lb, 15.25¢ more than the previous week. After spot markets started to move higher futures followed suit with prices forecasting mid-to-upper-190s.
USDA released December production figures this week. In December 2021, the United States produced 1.16 billion pounds of cheese – 0.13% more than the previous year. In 2021, US cheese production was 3.1% more than 2020 after adjusting for leap day. Upper Midwest states and California started slowing output in December 2021 compared to the previous year. Cheddar cheese production was 334.6 million pounds, 4.2% less than the same period in 2020. 2021 Cheddar cheese output was 2.4% more than 2020. December 2021 Mozzarella production was 371.3 million pounds – 3% less than 2020; 2021 Mozzarella output was 1.3% more than 2020.
Butter Market
CME spot butter markets fell this week with prices averaging $2.4855/lb – 4¢ less than the previous week with 18 loads changing hands. There are still rumbles that old crop butter is making its way to the CME and that may be keeping brokers as buyers on the sidelines – trying to avoid owning older butter that won’t be eligible for trade in a few weeks. Weather disruptions caused the milk to move in different directions this week with some plants taking extended downtime during severe winter storms. That sent more discounted cream to butter churns over the past two weeks – that may be helping to put short-term pressure on markets.
USDA released US December 2021 butter production at 180.1 million pounds – 13.2% less than the same period in 2020. 2021 US butter production was 3.6% lower than 2020 after adjusting for leap day. During December, California’s output dropped 3.2% compared to 2020; New York was 81% lower. With the production data, that left days of production on hand at 34 days – the lowest since December 2019. That helps explain the sudden butter market price appreciation.
NDM/SMP
CME spot NDM prices declined mid-week but increased on Friday, returning to where markets began on Monday. In the end, prices averaged $1.8160/lb, 2.75¢ more than the previous week. The February 1, Global Dairy Trade (GDT) auction resulted in higher SMP and WMP, up 2.1% and 5.8%, respectively. SMP price increases are slowing while it appears WMP is playing some catch-up.
USDA released NDM and SMP production for December 2021 this week. December 2021 NDM output totaled 166.4 million pounds and 20.1% less than the previous year. California production dropped 6.3% in December 2021 compared to 2020. SMP production was 38 million pounds and nearly 25% lower than 2020. While 2021 NDM production was 1.4% more than 2020, SMP was 18.6% less. Again, the year-over-year change along with stronger exports likely explains NDM prices rising to levels not seen since 2014 – that is pushing Class I, II, and IV skim values higher.
NDM 2021 carry-out stocks totaled 243.9 million pounds – 15.3% less than 2020. It was the lowest carry-out stock since 2019. November to December, NDM stocks expanded 17 million pounds – less than the past two seasons, but higher than the five-year average for that period.
Whey & Lactose Products
CME spot whey prices decisively moved into the mid-80s this week with prices averaging 85.5¢/lb, 1.75¢ more than the previous week. That was another new record for CME prices – but gains are starting to slow. NDPSR and Dairy Market News (DMN) are above 70-cents/lb. Price increases could slow unless WPC80 and WPI90 prices move higher still. Presently, whey prices are starting to compress higher value-added product margins. Although the current WPC80 and WPI90 can support prices in the 70s – 80 whey will likely require additional price hikes. Stronger whey prices continue to increase the Class I and III skim prices.
US December 2021 whey powder production was 75.9 million pounds – 5.3% less than 2020. Annually, 2021 whey powder production was nearly 3% less than 2020. WPC (25-49.9% protein) December 2021 output was 14.5 million pounds – 12.7% less than 2020. WPC (50-89.9% protein) December 2021 output was 28.5 million pounds – 7.3% more than 2020. WPI December 2021 output was 10.7 million pounds – 2.4% less than 2020.
US 2021 carry-out whey stocks totaled 58.3 million pounds – 11% lower than 2020. WPC (25-49.9% protein) 2021 stocks were 25.2 million pounds – 5.2% lower than 2020. WPC (50-89.9% protein) 2021 stocks were 44.9 million pounds – 23.5% more than 2020.