Monthly Forecast – May 2023

Forecast updates

Worries about inflation and recession seem to be influencing markets today – some believe consumers will continue to ration purchases and seek value implying higher prices may be met with reduced demand. IRI scan data seems to support sentiment – velocity slows when prices or promotions decrease. But, one sector with significant inflation is travel, which is due to capacity limitations – presently, demand exceeds supply, driving airfare and hotel prices higher. While milk is plentiful, widespread reports indicate that US and EU processors are dipping into stocks to keep current with demand. Projections indicate that there will be a surge in travel this summer that could exceed pre-pandemic levels – and that could drive foodservice demand. Budget-conscious travelers could look to for smaller trips closer to home, but that still means people on the road – all things that point to more robust foodservice demand this summer. That said, much like last year, Labor Day could abruptly end the season as consumers return to their budget-conscious ways. Still, there is bad news spreading for white-collar workers as layoffs continue, banks are still a wild card and a recession looms toward the end of the year.

Cheese forecast updates:

  • Reduced barrels and increased the block-barrel spread for the remainder of the year.
  • Blocks reduced May, but largely maintained the price trends from recent forecasts.
  • New cheese plants are starting up, but it could take until Q1 2024 before the new capacity is available to markets.
  • Stronger foodservice and export demand could lift prices later this year.

Butter forecast updates:

  • Increased the butter forecast. Given the recent declines in stocks, which was unusual, that could stunt the butter build.
  • While more butterfat is available and outside oil markets have eased, that could still support prices during the fall demand season.
  • Butter has been supported through the build in the low $2.30s, meaning prices will likely rise into the year’s second half. That lift could be more modest than last year.

NDM forecast updates:

  • No significant changes – updated for spot markets.
  • Still expect prices to lift into the second half of the year as milk production growth moderates and more milk moves to cheese vats.

Whey forecast updates:

  • Reduced lactose, whey, and WPC into 2024 as more capacity comes online.