Monthly forecast update – June 2021

• Reduced the Class I milk forecast for Q3 2021 vs. last month due to modestly lower cheese outlook and recent decline in spot CME cheese prices that will lower the July Class I advanced milk price. Other months are relatively similar; however, Class I Q4 2022 did drop for similar reasons – lowered commodity prices for later in 2022.
• Ceres lowered the Class III milk price forecast for Q3 2021. Higher spot prices in May triggered the forecast increase last month; this price level is more consistent with recent performance but still reflects expectations for more robust demand (have not yet factored in the new USDA buying program released on June 4).
• We increased the Q3 2021 Class IV milk price on expectations of higher SMP prices. Given the strength in world demand and slowing output, the United States should remain competitive in the export market. Current data suggests that demand from China should continue into the second half of this year – the relative strength will depend on progress Asia makes toward reopening and resumption of business and leisure international travel later this year.
• Overall, Ceres still expects better 2H 2021 prices that could continue into Q2 2022. As economies reopen, post-pandemic consumers are showing a willingness to spend and consume at levels that could support higher prices for a time. That said, inflation remains a concern, as is labor shortages as employers look to fill open positions.
• Retail sales will continue to ease as people resume dining out of home and travel; however, expectations are for sales to remain better than 2019 levels.
• Presently, milk supply is keeping pace with demand; however, if supply begins to exceed demand or demand eases, prices lower yet this year.
• African Swine Fever (ASF) remains a genuine concern in China. While there is debate about the severity of this outbreak – higher culling to curb the spread of the disease could negatively impact whey demand and eventually prices. Given lower stocks in April – prices appear supported near current levels into Q3.
• Ceres expects international prices to remain strong and for New Zealand WMP to increase at the start of the 2021/22 season. EU and NZ SMP remain elevated but for now, appear stable through most of 2021.