Monthly forecast – November 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, it seems unlikely that there would be any impact in 2024.

After reviewing the latest data, it seems that 2024 is modestly better than 2023, but for many products, there may be little daylight between the figures. While supply continues to support prices, a general lack of enthusiasm and macroeconomic concerns seem to temper price increases throughout 2024 unless something changes. At the same time, some of the woes of 2023 seem less likely to reoccur – like the Class III rout in Q2 2023. But, for now, the forecast expects Class IV to outperform Class III through much of 2023 as butter prices remain elevated and NDM improves on this year while cheese and whey are better, they are expected to be modestly higher compared to this year.

Class III-Cheese-Whey:

It seems unlikely that Q2 2024 will perform as poorly as this year. A year ago, US cheesemakers were flying high with record-setting exports and an expectation of a repeat this year. However, higher US prices compared to significantly lower New Zealand and European prices caused US cheese to stay home, resulting in significant amounts of uncommitted cheese in Q2 that moved to Chicago.

  • This fall, US cheese remains competitive in Mexico and Japan, but New Zealand seems to have dislodged US cheese into Australia and South Korea with little expectation that will change this year as New Zealand pivots away from WMP into China.
  • New cheese plants are slow to bring on commercially viable Cheddar blocks – that could allow others to fill that demand, but it may mean more processed cheese solids on the market in early 2024. Cheese quality should improve, but it still could take time.
  • New capacity may meet expanding per capita demand, making more cheese easily absorbed into the market.
  • Cheese closer to the five-year average may bring back promotion – which could bolster demand.
  • Higher Class IV milk – at the forecast levels – could pull milk from cheese vats tightening up supply later in the year.
  • Increased the whey forecast for 2024 forward – but kept the increases modest. There are demand concerns from China as that nation’s pork industry continues to struggle with margins that could reduce whey demand. Additionally, US stocks remain elevated. Higher WPC80 demand and lower production could keep solids to whey less than this year.

Class IV-Butter-NDM:

  • Class IV prices are forecast 2-3% more than this year. Currently, Ceres’ butter forecast is less than this year, but news that India’s butterfat could be tight at the start of next year may cause prices to lift quickly should New Zealand or European butterfat head to fill those shortfalls.
  • Given higher global butter prices – that could support US prices at higher levels at the end of the year and beginning of next year.
  • With consumers accustomed to higher retail butter prices – there is little to suggest similar butter prices will negatively impact demand. Additionally, more butterfat is moving to cheese as the new plants increase output, as expected in 2024.
  • NDM prices could likely increase given modest supplies and less milk headed to driers in 2024. While China’s WMP demand could remain muted, the world carries fewer stocks than last year, and cheese demand is more balanced. Cheese vats in Europe and New Zealand will likely pull milk away from driers in 2024.
  • While prices are likely to be higher, given SEA and Chinese economies, there could be modest demand and price-sensitive consumers – that could cap serious runs higher.
  • As always, weather will be a wildcard that could impact prices.

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). The skim prices in 1H 2024 are lower than this year – but 2H 2024 skim prices are forecasted higher than this year.