Monthly Forecast Update – Jan. 2022

Forecast updates

  • Given the raucous start to 2022 – Ceres increased the forecast for nearly all dairy product prices – resulting in substantially higher milk prices for the duration of 2022.
    • Those prices will be subject to continued consumer acceptance of higher prices with few changes to purchases.
    • It is likely prices could ease into 2023, but with no new capacity on the horizon through 2023 price resets could be modest with many dairy products still showing higher annual averages.
  • Global milk production remains above the previous year, barely. Given current levels of demand, that is supporting year-end prices well above average.
  • Slower churning, during the final weeks of the year has translated into widespread concern about availability throughout 2022. That caused spot butter prices to rise.
    • It is likely there is less butter available to the CME spot market – that could keep prices elevated. While prices could ease from current levels on reports of some product availability – many are under committed and with higher exports and less churning expected in Q1 that could set the stage for substantially higher prices this year compared to the runs in 2014 and 2015.
    • Cream multipliers could remain elevated as there is a lot of competition, especially in the east.
    • These forecasts are compatible with world prices. Exports could slow, but that could take months longer for that to show up and may not be able to dull the impact of higher prices through 2022.
    • Increased the 2022 forecast to reflect that sentiment.
  • Cheese prices turned higher during the final trading days of 2021 with CME blocks rising above $2/lb to start 2022. While prices could ease after the seasonal demand period passes, it appears there could be stronger overseas demand and that could lift domestic prices.
    • Because the Michigan cheese plant will no longer be incremental, cheese prices could remain higher than last year.
    • The 2022 block-barrel spread could remain wide; however, if more cheese heads overseas that could reduce barrel production.
  • Whey prices could remain high during the first half of 2022 due to demand strength for WPC and WPI. That said, China’s whey imports slowed – that could wear on prices over a longer term.
    • Adjusted the 1H 2022 forecast higher.
  • No significant changes to milk powder forecasts.
  • All of these changes worked to increase the milk price forecast in 2022.