Weekly forecast update – Mar. 11, 2022

Forecast updates

• No significant changes to the forecast this week – adjustments to MAR for spot markets.
• Prices remain elevated, especially Class II and IV.
• Adjusted 1H 2022 buttermilk powder prices.
• Made modest adjustments to whey prices to better reflect reported prices.

Fluid Milk Market

The spring flush is underway with several states reporting seasonally more milk than the previous weeks. That will help provide more milk to manufacturing and should provide a bit more cream to churns and skim to milk powder driers. Spring break is underway and that will roll through the country causing school milk demand to slow down – that will push more milk to manufacturing compared to last year. Additionally, as April approaches, school demand will continue to ease – that along with widespread spring conditions could cause milk to seasonally rise. There could be year-over-year differences – especially as it relates to school milk as demand has been more this year compared to last year so winding demand down, while similar to pre-pandemic patterns, could appear larger than the past two years.

One question was whether USDA would renew the free meal program for the summer and next school year. This week’s budget funding excluded allowances for free school meals. The free meal program was attributed with remove the stigma of free meals resulting in more uptake. That was viewed favorably by dairy and agriculture in general. Unfortunately, it was a program that was removed from the budget.

Cheese Market

CME spot cheese markets turned lower at the end of the week after barrels and blocks pushed to $2.085/lb and $2.2323, respectively. In the end, blocks averaged $2.208/lb, up 14.25¢ vs. the previous week. Barrels averaged $2.0525/lb, up 10.65¢. Barrel trading remains elevated while blocks only traded six times. Reports continue to suggest that demand remains positive with a good amount of cheese headed overseas. However, by package type there appear to be differences – 40# blocks tight; 640# blocks available; 500# barrels day-to-day.

US January 2022 cheese imports totaled 29.3 million pounds – down 0.2% compared to last year, but 7.3% less than December on a daily average basis. Imports were unchanged from last year, but there was a shift from where the cheese was purchased.

Imports from Italy, France, and the United Kingdom were higher. Imports from Switzerland, Germany, and Nicaragua were lower.

Cheese exports in January totaled 65.1 million pounds – 4.5% more than last year and 13.3% more than December on a daily average basis. That was the most of a January on record. Exports to Mexico and Australia increased, up 73% and 81.5%, respectively. Cheddar cheese exports jumped up 73% more than last year – that may explain some of the recent reports of tightness. Grated cheese exports increased 21% above the same period the previous year. Processed cheese dropped 0.4% year-to-year.

Butter Market

CME spot butter prices ease into the end of the week, but prices remain mostly above the $2.70/lb mark. Spot butter averaged $2.7335/lb, up 5.65¢ compared to the previous week. Reports indicate that the cream multiplier also increased as demand jumped up week to week. Anecdotal reports suggest that processors are getting an early start on Easter holiday preparation and that is drawing cream away from churns once again. That is early and cream demand is expected to pick up as Easter grows closer. That could keep churning somewhat more limited this spring than compared to the past two seasons – a factor that remains supportive to prices.

US January 2022 butterfat exports totaled 10.9 million pounds, 53% more than last year and 2.3% higher than December 2021 on a daily average basis. That was the third-best volume for January, behind 2008 and 2014. Most butterfat stayed in North America, heading to Canada and Mexico – up 66% and 400%, respectively. More butter moved to Bahrain, South Korea, and Saudi Arabia also.

US January 2022 butterfat imports totaled 9.3 million pounds, up 33.4% compared to last year but 27.2% less than December 2021 on a daily average basis. Imports from Ireland were up 68.8% compared to the previous year. Imports from India and New Zealand were lower – fewer AMF imports continue to support domestic production and another draw for butterfat this year. Given elevated prices – that could mean more consistent AMF production in the future.

NDM/SMP

Spot CME markets remain elevated but eased into the end of the week. By comparison, overseas SMP prices continue to increase. That is common during the first half of the year, US prices can lag Europe and New Zealand prices and then later catch up. European and New Zealand prices are tracking toward $2/lb – that could provide support for US NDM/SMP prices. CME NDM averaged $1.848/lb, 1.85¢ less than the previous week. While Dairy Market News NDM prices ease, the western price fell at a faster pace than central prices. For a time, spring flush could push more milk to driers – that could cause prices to moderate.

US January 2022 NDM/SMP exports totaled 130.9 million pounds – that was a slower start than the last two years but still better than the five-year average. Exports were 5.5% less than last year but 3.1% more than last year. Exports to Mexico fell by 14.6% compared to last year, which is a concern given the volume that heads to that country nationally. Declines to Mexico were nearly wholly offset by higher exports to the Philippines – up 31%. Volumes throughout SE Asia were mixed, but higher exports to China helped to keep the region primarily positive.

Whey & Lactose Products

CME whey markets have held at 75.75¢ for the last six sessions – it appears markets are comfortable at that level as some product traded. This week CME dry whey prices averaged 75.75¢, 0.45¢ more than the previous week. DMN central whey was unchanged at 78.25¢; western whey prices declined 1.25¢ to 77¢ this week. Prices appear somewhat stable and European prices are rising. That should support prices between 65-75 cents through the spring months.

US whey exports dropped 33% in January compared to last year with exports totaling 26.7 million pounds. Most of those declines came from China with volumes falling nearly 66% below the pace set last year. There were some improved exports to Canada, but those were not enough to offset the losses to China. Fewer exports to China could put some downward pressure on price.