Weekly forecast update – May 21, 2021

Forecast updates
Class I June milk price announced.
Modest changes to Q2 pricing due to fluctuations in spot markets.
Given current markets no significant changes this week to the forecast.

Fluid Milk Market
USDA’s AMS announced the June Class I Advanced Milk price at $18.29/cwt. – that was $1.26/cwt. more than May and the highest price so far this year. Futures forecast the Class I price could continue to rise throughout the year with prices rivaling June or surpassing it.

US milk production totaled 19.3 billion pounds in April – that was 3.3% more than year-ago levels, according to the latest USDA milk production report. On a year-to-date basis, 2021 milk production is 2.5% more than the same period last year. Output per cow was 2,033 pounds. The milking herd expanded, up to 9.49 million head and 113,000 cows more than year-ago levels. 61% of new milk was from higher output per cow, with the rest coming from new cows. California, followed by Wisconsin and Texas, added more milk in April 2021 vs. 2020. In April, Florida and seven other states had unchanged to lower output vs. last year. Minnesota and Wisconsin leveled off in April.

Cheese Market
CME spot cheese prices eased this week, with blocks leading to the declines. In the end, CME blocks averaged $1.6135/lb., down 15.9¢ compared to last week. Cheddar barrels averaged $1.6375/lb. and 9.25¢ less than the previous week. Block volumes traded were similar this week to last week, but barrel volumes jumped to 46 loads changing hands compared to 19 last week. Overall, there are reports of more cheese and fewer orders than in recent weeks, but many are surprised that blocks reached back into the $1.50s this week. Once again, barrels are holding a premium to blocks with 2.4¢ spread.

Market news was quiet this week. Most of the information was coming in this week came from China and New Zealand. Global Dairy Trade (GDT) Cheddar cheese prices increased 1% to $4,321/MT ($1.96/lb.) Cheddar volumes were only 219MT – representing just a single day of CME block trading this week. China imported 15,340MT (33.8 million pounds) of cheese in April – that was 68% more than 2020 and the highest import volumes for April on record. Strong demand from China continues to support global dairy product markets – cheese included.

Butter Market
CME butter markets pushed higher this week, fueled by the USDA Section 32 bid due on May 25. Spot butter markets averaged $1.8535/lb, up 1.65¢ compared to the prior week. Trading volume increased to 15 loads this week – but still somewhat limited. Cream multipliers were mixed this week – with the Midwest higher, East unchanged, and the West lower. Some reported that there was a bit more cream headed to butter churns this week – but that ice cream demand looms large and is poised to increase over the next few weeks.

The Black-box restaurant same-store sales continued to improve up 6.84% vs. last year in April – that is a tremendous improvement; however, when considering the base comparison period – it doesn’t properly reflect that restaurants are still recovering. Foot traffic is still 4.2% below year-ago levels. That said, some restaurants are juggling delivery and take-out orders with new demand from on-premises dining. Most are noting labor is the biggest obstacle presently.

NDM/SMP

The CME NDM price eased again this week, with prices averaging $1.304/lb. – that was 0.85¢ less than the previous week. Trading volumes were similar. Seasonally milk powder output is higher, but demand from Mexico and Asia remains positive. Still, there is a little milk pushback from bottling as schools start to wind down. Some reports that western driers are busy, but most can handle the milk headed in presently. There are still reports of severe delays at western ports, which may keep some products available to spot markets.

GDT SMP volumes were higher at the May 18 event (4,587MT) than 4,257MT on May 4, providing more strength and price support in markets given the 0.7% increase despite more product on offer. Most of that volume moved into China – accounting for 72% of the total volumes.

China’s SMP imports skyrocketed in April. In total, China imported 78.8 million pounds of SMP – that was the most imported for an April on record. That level of demand will continue to support international markets.

Whey & Lactose Products
CME whey prices averaged 64.1¢, up 0.9¢ from the previous week on five trades. Dairy Market news prices moved were mixed with Central prices retreating 0.5¢ and western prices increasing 0.75¢. China’s whey imports surged to 146.5 million pounds – nearly 70% more than year-ago levels and the highest for April on record. That level of demand will provide nearby price support.