Monthly Forecast – October 2022

• Modified cheese forecasts
  • Continued to reduce the block-barrel spread in 2023.
  • Increased 2023 Q2 forward forecast, given stronger demand from Mexico and South Korea.
  • Reduced 2024 price prospects given new capacity.
  • Lowered Feb23-Apr23 forecast, expecting worst-of-demand trends to manifest at that point in the year.
  • That is a $2/lb forecast in 2023 compared to $2.05-$2.08 this year.
• Increased 2022 and 2023 butter forecast.
  • Near-term new reports suggesting consumers buy holiday products early could lead to stockpiling activity that occurs in late October and early November – that could put pressure on the system forcing spot price higher.
  • Still expect imports to arrive in Q4 from India and New Zealand for AMF.
  • Given current futures, exports are feasible in early 2023 as prices are significantly lower than current spot prices.
  • As alternatives to butterfat remain expensive, it seems reasonable to expect that butter prices could be higher.
  • At current demand levels, US carry-out stocks likely end the year lower than last year – that could cause prices to lift by the end of January for the rest of the year.
• Still expect NDM/SMP prices to rise modestly into 2023, 2024, and 2025.
  • At the October GDT, most regions purchased more SMP than last year and the previous event in September. While prices are lower than the latest auction, prices are higher than a year ago, and more buying is happening.
  • There is still a lot of uncertainty about the amount of SMP that will come from Europe this fall and winter.
• No significant adjustments to the whey forecast compared to last month.
• All of the product modifications filtered into milk prices.
  • The forecast if for a lower Class I base prices into 2023 and stable.
  • Given the higher butter price, that is keeping Class IV above Class III by approximately $2/cwt through next year.