Monthly Forecast – August 2023

Forecast updates

Cheese:

  • Increased block prices through the end of the year, given the rapid appreciation at the end of July.
    • Cheese less than 30-days is reported tight;
    • Milk in central states tightened up quickly and should remain that way until school milk is resupplied.
    • While this is a supply-side rally, the demand is unchanged to higher, meaning prices will be subject to periodic corrections lower.
    • Expect that as new cheese capacity ramps up, prices could tumble post-season (February 2024)
    • Markets could be subject to recalibration to retain export share – those resets are likely temporary.
    • Given current demand, USDA withdrawals, exports, and supply could mean higher prices through January.
  • Maintained a wide block-barrel spread.
    • While barrels are higher than Q2, the block-barrel spread could be wide.
    • There are more processed cheese solids available to the market due to new cheese capacity and onboarding.
    • While barrels could move up into the fall, they are unlikely to close the gap on blocks as they did last year.
    • As cheese operations stabilize, that could provide some support for barrels in early 2024

Butter

  • Increased butter price through November based on the higher spot price, tight cream and current stocks.
  • Stocks, given expected drawdowns in July, could be tighter than expected that could support higher prices through the holiday demand season.
  • There could be more upside during the holiday demand period – 10 to 25 cents. These will likely be spikes and short-lived.

NDM

  • Adjusted AUG/SEP prices – left other prices unchanged.
  • Less supply will reduce milk headed to NDM/SMP this fall.
  • Supply is likely to contract in August as school supply lines restock.
  • Internationally, demand is lifting, but it will be a slow and steady climb largely dependent on China.

Whey

  • Reduced prices through the end of the year on expectation of more whey hitting the market and significant slowdown in Chinese infant formula imports.
  • Additionally, an outbreak of ASF in SEA and China could spike culling reducing nearby feed needs.