Monthly Forecast Update – June 2022

Monthly Forecast Update

• Overall global milk slowdowns and environmental policy are keeping the dairy products and milk price forecasts elevated through 2024. While a potential recession will become a weight on prices, it seems likely that environmental policy and higher feed prices could keep milk prices from returning to the teens over a prolonged period.
  • Feed prices retreating from the $7/bushel corn level could allow milk prices to decline.
• Class III milk forecast remains mostly unchanged from the previous month with few exceptions
  • Reduced the JUL22 forecast for block and barrel cheese resulting in a lower JUL22 price
    • Blocks and barrels are trending lower;
    • There have been some export slowdowns reported;
    • Retail sales in May 2022 were lackluster – that could cause cheese stocks to build somewhat in June 2022.
    • Combined that would work to pressure the July 2022 Class III milk price lower.
  • Increase Class IV milk price. 2022 forecast now tops out at $27.24/cwt in September.
    • Raised the butter forecast through September – cause a steeper decline expecting some retail slowdown compared to last year.
    • Additionally, expect 2H trade to reverse with more imports from New Zealand and fewer exports as US butter holds a sizeable premium to New Zealand presently.
    • At the same time, fewer US stocks and a slowly recovering global milk could keep the butter price from dropping until later in the year.
    • Ceres forecast 2023 and 2024 butter prices closer to a $2.25 – $2.35 range.
  • Those shifts are raising the Class I milk price with 2023 and 2024 expected to decline.
  • Class II could be the highest milk price should the Class IV forecast come to fruition.
  • Ceres expects that CME blocks and barrels will set a new record this year.
    • Still forecasting prices to decline into 2023 and 2024 but remaining above the five-year average until new capacity in Texas comes online
    • US trade is tracking one billion in exports for the first time, which could keep US cheese prices well supported.
  • Ceres expects butter could exceed $3/lb for a short time headed into the holiday season; however, an expectation of a trade reversal and retail slowdown resulted in a sharp correction lower in Q4;
  • Ceres expects NDM/SMP prices to rise into the fall on better commitments from New Zealand and slow to respond milk production.
    • Prices could correct toward the second half of the New Zealand milking season – a return to the $1.50 to $1.60/lb level.