Monthly Forecast Update – Oct. 2021

Forecast updates

  • Demand remains robust, exports are moving overseas and global milk production is slowing – that could support 2022 prices as there are more opportunities for US exports assuming shipping issues are no worse than this year.
    • Milk supply declines from Europe and the potential for slower-than-expected Oceania output could strain current supplies as stocks are limited should demand remain near current levels.
    • Cooperative supply management efforts in the United States, Europe, and New Zealand have kept runaway on-farm expansion in check.
    • Further, there are financial issues for some dairy processors in California and New Mexico that could negatively impact output.
  • Supply-chain and rising costs will remain an issue in 2022 – raising the cost of producing milk and dairy products next year.
    • While no guarantee that milk prices will exceed production costs – there could be supply contraction that drives higher prices during 2H 2022 forward.
    • New cheese capacity should begin to arrive in late 2024/2025 (Hilmar/Leprino) that could cause domestic cheese prices to ease for a time 2024 forward – but that has yet to be seen.
  • Increased Q4 CME barrel cheese forecast
    • Raised prices based on recent higher spot trade – due to limited CME-spec product (that is expected to correct by November);
    • No substantial change to the block forecast for Q4.
    • Increased the 2022 forward cheese outlook – current demand and trends of flatter EU milk production could provide more opportunities for US cheese exports.
      • Kept 2022 near 2021 forecast 1H – increased 2H
      • Raised 2023 and 2024; however new cheese plants scheduled for 2024 could cap increases for a time.
    • Reduced the 2022 forward whey forecast
      • While WPC demand remains strong, reports indicate new contracts for whey could be closer to the mid-40s.
      • Given negative margins for Chinese hog processors – whey demand could ease a bit.
    • No significant adjustments to butter.
    • Adjusted NDM Q4 prices higher.
      • Raised seasonal low-point for 2022.
      • With little new capacity, more demand for cheese, and slowing global milk – that could keep NDM prices supported well above the five-year average (2010 to 2013 price levels).
    • These adjustments revised all milk price forecasts.