Monthly forecast – December 2023

Forecast updates

It should be noted Ceres has not yet incorporated FMMO changes into the 2025-2026 forecast. Given the current pace of the hearing, there seems unlikely to be any impact in 2024.

This week did little to significantly change the 2024 price outlook outside of some recalibration for spot markets.

Class III-Cheese-Whey:

  • Cheese demand is performing well and keeping up with last year’s pace, albeit with fewer exports. That modest decline in YoY exports shifted more volume to the domestic market and may by the culprit behind the meager fall cheese prices. Additionally, private-label cheese promotion has been limited as many retailers and processors look to recoup lost ground from last year.
    • The market is mainly balanced, but it may be that processors are holding more inventory than typical at this time of year – that is sending a bit more product to Chicago. If that is the case, there could be some reordering on tap ahead of Super Bowl.
      • Headed into the end of the year, US cheese is in a superior position to one year ago holding the lowest global price – that should allow US cheese to move beyond North America.
      • European markets are somewhat repaired, and prices are rising – that could keep more EU cheese at home, opening up some space for US and NZ exports.
      • But, New Zealand will continue to supply Australia and South Korea as they continue to market more cheese to replace lost volumes to China.
    • As a result, Ceres raised the Q2 2024 cheese price expectations modestly.
      • Reduced the Q1 2024 forecast and lifted 2H compared to the November forecast.
      • That pushed blocks up slightly – expecting a bit higher barrel price.
      • That would result in a tighter block barrel spread this year.
    • No significant changes to the whey and lactose forecast this month. The news from China is bleak and could mean less whey, permeate, and lactose demand. At the same time WPC80 demand is improved. That may mean that prices improve modestly, but not significantly compared to last year.
      • Flatlines prices near current levels. Higher stocks and faltering Chinese demand could keep those product prices under pressure.
      • Recent reports suggest a new, albeit modest, wave of African Swine Fever (ASF) is running through market – that is raising culling for smaller processors.
      • Larger processors are culling animals due to poor margins.
      • While the annual averages are similar – the 2024 forecast is higher and flatter compared to this year vs. the extremes from this year.

Class IV-Butter-NDM:

  • Raised the NDM forecast compared to last month – flattened the 1H forecast, but lifted the 2H forecast.
    • EU milk is declining faster than expected. US milk will likely remain behind this year in early 2024 – which could cause additional buying.
    • The impact of lost volumes in China should be muted as milk is lower and New Zealand found homes for more milk in 1) other products and 2) other countries.
  • Increased the 2024 butter forecast by raising the 2H prices. European prices are rising – which could provide the United States with opportunities to export.
    • That could mean a repeat of higher fall prices again – high prices this year did little to slow demand.

Class I-II:

  • This forecast keeps Class II the highest milk price next year and a candidate for de-pooling in most FMMOs.
  • Class I appears to be similar to this year (assuming no FMMO impact).
  • There were no major class price forecast changes compared to November.