Monthly forecast update – Sept. 2022

  • Increased prices for cheese and reduced the block-barrel spread moving forward.
    • Still expect cheese prices to run above $2/lb one more time this year.
    • It is more likely toward the end of October/November.
    • US cheese prices continue to command a price advantage vs. New Zealand and Europe – that could keep exports moving well into 2023 and that may limit the number of Cheddar barrels on offer.
    • At the same time, higher butterfat prices could encourage more Cheddar barrel use in processed cheese.
    • Forecasting a price decline post-Super Bowl for a few months.
    • Reduced the block-barrel spread through 2025.
  • Expect a modest recovery for NDM/SMP headed into the fall based on higher NZ exports to China and reports of widespread drought that could cause China’s milk production to retreat next year.
    • While dairy is not a staple in China, lower output could cause companies to look to imports to balance supply.
    • US production increased in July, but that was contrasted with much lower output in July 2021. Still, that helps explain the recent sell-off.
    • Limited supply and policy to further limit dairy output could support NDM/SMP prices moving forward.
  • Believe US butter prices track higher through October, with prices resetting in November.
    • Internationally, butterfat prices are supported; however, expectations are for NZ prices to remain below US and EU values.
    • US prices could ease toward the end of the year based on fewer exports and higher AMF imports.
    • Still, expect prices to remain higher than futures forecast from 2023 forward, with prices averaging $2.50 or higher.
  • Whey prices could remain supported with a modest chance of higher prices into the end of the year. Although price increases could be limited due to reports of declining WPC80 and WPI prices headed into the fall.
    • With reduced natural gas availability in Europe – it remains a question whether whey will be dried or if it may be fed as a liquid this fall.
  • All of this has led to modestly higher milk prices through 2023 compared to the previous forecast.