Weekly forecast – Sept. 15, 2023

• Forecast updates

  Weekly updates:

  • No significant changes this week – updated for spot markets, some adjustments to whey and lactose.
    • Raised whey and lactose as prices are rising slowly and lactose stocks remain less than a year ago.
  • Reduced OCT and NOV spot cheese.
  • No changes to butter.
  • Reduced SEP DMN NDM prices.

  Milk Market

  Weather is starting to moderate, but bottling demand remains elevated this week, and milk remains tight and somewhat limited to manufacturing in Central states. Cooler evenings and less humidity should allow milk to steady after months of weather-impacted results. Seasonally, milk is still headed to its low point, but milk should start to show signs of weekly improvement. That stronger bottling demand keeps pressure on those looking for additional milk and has premiums returning to the market – at least for now. Some discussions suggest that base plans may be easing in parts of the country and seasonally as cooperatives seek additional milk to make nearby commitments.

  Overseas New Zealand began reporting the El Nino forecast for the 2023/24 season. It tends to cause hot and dry weather conditions during the second half of the season. There is no guarantee that the weather system will impact weather, but a strong El Nino has caused droughts. Additionally, reports from Ireland indicate dairy producers are protesting as subsidy payments are delayed, and they may need to eliminate dairy cows to comply with the EU’s new land-applied nitrate limits. Overall, the news suggests that milk could tighten a bit more globally.

  Cheese Market

  Block and barrel prices pulled back on reports that spot cheese was a bit more available this week. Barrels had an up-and-down week with prices averaging $1.8165/lb, down 4.1¢ from last week; block trading also moved around quite a bit this week; prices averaged $1.901/lb, down 4.9¢ from the previous week. That caused the block-barrel spread to tighten to 8.45¢ this week. Reports this week indicate a bit more cheese was aggressively offered at spot sessions. This is when companies are looking to book exports for Q4 2023, which may also impact spot trading. US Q4 2023 futures are a bit higher than global cheese prices. Overall, milk availability is regional, which could impact output through the fall until milk output starts to increase seasonally.

  ERS announced July 2023 domestic commercial disappearance of cheese at 1.13 billion pounds – 2% higher than a year ago. YTD cheese commercial disappearance is running 0.4% less than last year. While US net trade volumes are running 38 million pounds less than a year ago – the 103 million pound domestic increase has more than offset that decline. That provides some context to the anecdotal reports over the spring and summer – the domestic market was in good shape, but lost exports wound up in Chicago – temporarily depressing prices. That level of demand can absorb approximately 240,000 pounds of incremental cheese daily.

  Butter Market

  CME spot markets reached up to $2.77/lb mid-week before pulling back by the end of the week. There has been a distinct pattern – lower Mondays and Fridays and higher prices mid-week. That was indicative of this week’s spot pattern. CME butter averaged $2.727/lb, up 1.7¢ compared to last week. 33 loads changed hands this week, less than the previous week, but still a solid amount of butter traded. Reports indicate that some processors are looking for butter as they are short of needs but that western processors can still supply products as needed. This week’s cream seems tighter than recent weeks – even out west. That seems to keep a persistent bid in the market as processors are looking to keep up with early holiday build and demand. Cream multipliers increased this week, possibly limiting fresh cream to churns.

  ERS released the 2022 fluid beverage consumption levels at 43.45 billion pounds – 2.4% less than a year ago and the lowest since 1975. While overall demand continues to slide, some reports indicate whole milk, lactose-free, and ultra-filtered milk continues to expand. Whole milk consumption increased to 16 billion pounds and 1.3% more than a year ago. Flavored milk demand also increased, up 3.1% in 2022 vs. 2021. The largest losses came from the low-fat and skim categories. Eggnog dropped 9.8% in 2022 vs. 2021 – that followed an uptick in 2020 and 2021.

  Also, ERS announced July 2023 domestic commercial disappearance of cheese at 1.13 billion pounds – 2% higher than a year ago. YTD cheese commercial disappearance is running 0.4% less than last year. While US net trade volumes are running 38 million pounds less than a year ago – the 103 million pound domestic increase has more than offset that decline. That provides some context to the anecdotal reports over the spring summer – the domestic market was in good shape, but lost exports wound up in Chicago – temporarily depressing prices. That level of demand can absorb approximately 240,000 pounds of incremental cheese per day.

  NDM/SMP

  NDM spot prices were slowly lifted throughout the week as news supporting demand continued to roll into markets. CME NDM averaged $1.1075/lb, up 3.06¢ from the previous week, with 12 loads changing hands. This week, the New Zealand Pulse auction also lifted, suggesting next week’s GDT could also be higher. Reports this week are mixed – with some reporting more domestic interest, but that overseas interest is still lukewarm. While CME futures moved up throughout the week, markets still appear wary of possible declines as markets are taking a wait-and-see approach; next week’s GDT may help provide nearby market direction. Otherwise most market participants may wait to see New Zealand and China’s trade data for August.

  ERS announced NDM’s July 2023 domestic commercial disappearance at 68.9 billion pounds – 11.1% higher than a year ago. YTD NDM commercial disappearance is running 6.1% ahead of last year. Given expectations of tighter milk and lower NDM values vs. Class III skim, it is possible that more NDM could move into cheese vats this fall – that could help lift domestic consumption. It is possible that processors reloaded on low-cost NDM over the past few months, driving better demand.

  Ireland’s dairy industry is headed for a cliff. As of January, Irish dairy producers must reduce nitrogen spread on land from 250kgN/ha to 220kgN/ha. That means that Irish dairy producers must find more land to spread their slurry or reduce their herd size to comply. Subsidies account for 30% of Irish dairy producer income; distribution of those checks is on a two-week delay due to technical issues related to the new CAP plan. Ireland’s government sought legal remedies to the CAP nitrogen limits but was unsuccessful – now they are stating compliance is necessary. That is causing protests. The Irish Farmers Association (IFA) indicated that the farms in derogation are small-to-mid-sized farms – the cost of spreading slurry over more land through acquisition or rent would make them unviable, according to a Farmers Weekly article.

  Whey & Lactose Products

  CME whey prices remain in a tight trading range with prices moving a few cents this week . CME whey averaged 29.75¢, down 1.56¢ from the previous week. DMN Central mostly whey averaged 29¢, up 1¢ from the previous week. Western mostly whey averaged 32.5¢, down 0.5¢ from the previous week. Lactose continues to appreciate, up 1.5¢ to 24.5¢ this week. EU whey prices are reportedly steady to higher – that could be supportive to markets. The concern remains the availability of whey powder due to lackluster exports.

  ERS announced July 2023 whey commercial disappearance at 58.6 million pounds and 47.4% more than last year. YTD domestic commercial disappearance are up 16% vs. last year. July 2023 WPC commercial disappearance at 23.2 million pounds and 1027% more than last year. YTD domestic commercial disappearance are up 181% vs. last year. That seems to confirm reports of improving demand. Overall reports indicate that lower WPC80 export prices are helping to drive overseas interest and demand.