Weekly Forecast – Jan. 5, 2024

Forecast updates

It should be noted that Ceres has not yet incorporated FMMO changes into the 2025-2026 forecast. Given the current pace of the hearing, there seems unlikely to be any impact in 2024.

With the beginning of the new year, markets look very different compared to a year ago. In 2023, global dairy markets had to absorb 500 million pounds of lost whole milk powder (WMP) demand from China, which depressed markets for a time and was similar to the issues that plagued Europe when it lost similar exports to Russia. Within months, markets had to redeploy milk supplies to alternate products and other nations to offset the lost demand. What was different last year compared to 2014 is that the global milk supply remains similar to 2022 levels, whereas 2014 milk supplies surged.

CME Cheddar blocks markets are starting the year in the $1.40s/lb compared to over $2/lb last year. That could profoundly impact US cheese exports and potentially domestic demand. Butter began January in the $2.50s/$2.60s compared to $2.30s the previous year – again, a sizeable shift that could impact the outlook for butterfat this year. Interestingly, NDM and whey are very similar to last year.

Class III-Cheese-Whey:


  • There are few changes to the whey outlook. The news remains the same, suggesting that prices could hover in a similar range for most of 2024.
  • WPC80 prices remain elevated due to increased demand; however, new capacity is expected to ramp up throughout this year. While it may not be a top-tiered product initially, it still provides additional supply – that could cause prices to moderate.
  • China remains the largest feed outlet for US whey products, but with poor pork margins and seasonally high African swine fever (ASF) outbreaks – demand is somewhat limited. Throughout much of this year, China shifted imports to Belarus and Poland to manage costs, which remains a possibility this year and could temper price runs.


  • Reduced the cheese price outlook for Q1 2024. Retail promotion is still lackluster, and with the end of the demand season (Super Bowl) fast approaching, that may not mean lower prices, but it could result in stagnant prices.
  • Cheddar cheese remains the issue and is where the imbalance sits today.
    • Throughout this year, more American-style cheese, especially Cheddar cheese, will come into the market as new capacity continues to ramp up.
    • The 2022 per capita slide for Cheddar cheese consumption and fewer Cheddar cheese exports may have put pressure on prices, resulting in more products that moved to the CME.
      • The forecast considers that while there is more capacity this year, the current futures value of US cheese makes it a cost-effective alternative for international buyers. That could help move more cheese overseas.
      • Additionally, a lower start to futures markets may make domestic promotion more attractive. Consider that while spot markets declined, if retailers and other cheese users hedged in early 2023, cheese prices would be closer to $1.95/lb. Today, the 2024 cash-settled cheese futures average $1.77/lb – a sizeable difference vs. last year. Absent promotion may explain why cheese demand remained stationary for most of last year.
    • Stronger Cheddar exports tend to lead to higher prices as less cheese moves to spot markets. But it could take until Q2 to determine whether US cheese exports are up. Anecdotal reports suggest a good amount of interest in US cheese, but markets must confirm higher export volumes before they are likely to react.

That suggests that Class III could be less than Class IV throughout 2024. The Q1 Class III price may be in the $15/cwt range – which may impact farm margins and cause the slaughter rate to rise.

Class IV-Butter-NDM:


  • Butter prices and futures markets are off to a strong start to the year – even higher than last year. That suggests that, given current data, 2024 could be the third consecutive year where fall butter prices eclipse $3/lb.
    • More milk moving to American-style cheese could limit the amount of butterfat headed to butter churns.
    • Higher butterfat in milk could offset some of those reductions, but the cheese pull could mask those improvements. Additionally, that could take more expensive feed, something that current milk prices may not merit in some parts of the country.
    • Certainly, commercial disappearance slows when CME butter prices move over the $3/lb mark – but more groups may look to hedge their exposure given two back-to-back years of higher prices.
  • This year’s US butter trade patterns may likely remain similar to last year – therefore, no impact on domestic markets.


  • NDM markets are similar to last year – the difference in the market is beyond the latest China demand bust, which means that prices could increase this year.
    • More milk moving to American-style cheese could limit the amount of skim headed to driers – something that could support higher prices later this year.
    • China’s milk price is continuing to decline, which means that there is little incentive to increase output – that could bode well for exporters as China may need some supplemental WMP/SMP should demand begin to recover.
    • The rest of the world has absorbed lost demand from China, and more milk is moving to cheese. rising cheese demand could keep NDM/SMP/WMP somewhat limited and similar to last year – which could help lift prices.
    • Stocks did not rise substantially, meaning prices are more likely to increase if milk production remains in check.

That could keep Class IV prices between $19 and $20/cwt this year and a premium to Class III prices for another year. Since November 2021, Class III has been higher than Class IV only three times.

Milk Market

The holidays have gone, and most milk was handled with fewer issues. One difference during the last holiday season compared to 2022 was that Class III milk prices were substantially lower, and most were receiving milk. A year ago, milk receipts slowed as markets appeared poised to head lower, and processors sought to avoid the pitfalls of holding milk and cheese as prices reset. While milk backed up and there were sporadic reports of dumped milk, overall capacity and production were well balanced. With bottling picking up, most plants are operating at normal levels.

Another factor this year was that the milk discounts were less significant and lasted only a short time. Looking forward, US milk production gaps to last year could be meager. Current spot markets forecast Class III milk in the $14/cwt to $15 per range. As new capacity ramps up, that could mean fewer periods of discounts and even the possibility that more competition for milk – while new capacity is unlikely to affect the commodity prices – it could modify the basis in parts of the country.

Cheese Market

In post-holiday trading, CME spot Cheddar markets were up, down, and unchanged. By Friday, blocks bulled back again while barrel declines were modest – that caused the block-barrel spread to close to 2.5¢ – the weekly average spread was 3.63¢. Cheddar block averaged $1.4563/lb, up 3¢ compared to the previous week due to higher prices at the beginning of the week. Cheddar barrels averaged $1.42, down 1.13¢ compared to the prior week. Barrels traded 26 times, with most of those trades book-ended the week. Several bids were left on the board daily, suggesting more interest at current levels. Higher spot barrel trades don’t bode well for US exports as that product tends to balance lower exports. At current spot values, CME cash-settled cheese futures are overvalued and could continue to decline unless spot markets pick up over the next two weeks. Tremendous carry remains in the market providing opportunities for anyone looking to age cheese.

In November 2023, the United States produced 1.16 billion pounds of cheese – 0.66% more than a year ago. That put YTD output up 0.3% compared to 2022. While production recovered in the west and Southwest, output slowed in the Upper Midwest, Ohio, and Vermont. Cheddar cheese production totaled 322.6 million pounds – 0.4% less than last year, but up 1.1% on a YTD basis. All reporting states reported less output during the month. Mozzarella production was 380.7 million pounds and down 0.9% compared to 2022. It appears California and Wisconsin opted for Mozzarella compared to Cheddar during the month. Other American-style cheese production shot up 3.1% to 146.8 million pounds. Cream cheese was also higher at 92 million pounds and 5.7% more than in 2022. Those two shifts likely offset declines in other cheese varieties.

Butter Market

In post-holiday trading, butter started very high at $2.685/lb. While international prices would support a higher start to the year, anecdotal reports of widely available cream and heavy churning in the final weeks of 2023 seemed to run afoul of higher prices. By the end of the week, butter prices dropped back into the $2.50s. While prices may have been too high at the beginning of the week, current data suggests that prices during the year’s first half could be much higher than a year ago. CME butter averaged $2.6488/lb, up 2.63¢ compared to the previous week on 11 trades. There are still many concerns about butter availability later this year that may have some looking for deals. That, along with the early Easter build – could make it challenging for prices to fall as far as they did a year ago. However, slumping demand could push prices lower for a time. Cream multipliers in Central states popped back up, but for the third consecutive week, western cream multipliers were below 1.0 and the lowest since the onset of the pandemic.

USDA reported that US November 2023 butter production is at 165.2 million pounds – 3.7% less than in 2022. That put YTD 2.5% more than the same period in 2022 – but most of those increases came at the start of the year. California produced 8.4% less butter than the previous year; Pennsylvania was down 4.6%. With less butter produced, that suggests the November inventory build was the result of slowing demand.


Spot CME NDM markets remained somewhat stable this week. Prices averaged $1.1763/lb, up 1.13¢ compared to last week. Drying picked up during the holidays as bottling slowed due to school closures. Seasonally, Northern Hemisphere milk powder production will remain elevated as the Southern Hemisphere declines into the end of the season. More milk will move to cheese vats in Texas throughout the year – that could pull milk away from driers. While Class IV is paying more than Class III – it is unlikely that those with cheese plants will run them at less than 80% capacity. Last year, global milk powder markets managed through another Chinese bust cycle, suggesting that this year should be poised for a modest price recovery, especially as more US milk moves to cheese and global milk growth stagnates. Futures are predicting a similar price trajectory.

In November 2023, the United States produced 115.7 million pounds of NDM – 28% less than a year ago, with California (-41%), Wisconsin (-53%), and Pennsylvania (-21%) all reporting double-digit declines compared to last year. With flat to declining milk production, more milk when to cheese supports the forecast statements that driers will likely be deprived of product this year. SMP output was 57.9 million pounds and 18% more than a year ago – that tends to indicate a shift from NDM to SMP and higher exports as very little SMP is consumed domestically. MPC production was 5% more than in 2022 and 15.4 million pounds – again, that suggests less NDM to make more MPC.

Manufacturers’ stocks of NDM totaled 208.9 million pounds on Nov. 30, 2023 – 17% less than the same period in 2022. That was 54 days of production on hand – higher than a year ago, with lower overall stocks suggesting a very fresh store of milk powder compared to 2022.

Whey & Lactose Products

Whey markets traded in a wider range this week – but prices are still hovering near the 40-cent level, with few market indications to suggest prices would deviate from that level anytime soon. Post-holiday reports from Europe suggest similar price levels for European whey products. CME whey averaged 40.13¢, up 1.75¢ compared to last week. The midpoint of the Central DMN was 40¢, up 0.25¢ from the previous week. The midpoint of the Western DMN was 44¢, up 0.5¢ from the last week. Again a relatively stable path forward. Futures expect prices to lift – given current news – stable appears more likely.

US November 2023 whey production totaled 67.5 million pounds – 6.4% less than the prior year. WPC (25-49.9% protein) output was 12.3 million pounds and 16.8% less than in 2022. WPC (50-89.9% protein) output was 27 million pounds and 7.5% more than in 2022. WPI output was 10.5 million pounds and 16.4% more than in 2022. Higher WPC/WPI prices are starting to pull more whey.

Manufacturers’ whey stocks were nearly 73 million pounds on Nov. 30, 2023 -22% more than in 2022 – despite lower production stocks continued to build, suggesting exports could be on shaky ground. WPC (25-49.9%) stocks were 26.4 million pounds and 17.5% more than the previous year. WPC (50-89.9%) stocks were 49.3 million pounds and 11% more than the previous year.