Weekly forecast – Mar. 10, 2023

Forecast updates

Modest changes to Q1/Q2 2023 prices based on spot markets.

• Reduced March/April block cheese price.
• Adjusted barrels in April.
• Adjusted the MAR23 butter price up slightly based on spot markets.
• Adjusted NDM prices lower – high-heat also.
• Adjusted Central whey prices up and WPC prices lower.

No significant changes to later periods.

Milk Market

Anecdotal reports indicate there is plenty of milk and that dumping is happening with regular frequency. That said, the amount of milk dumped may not be significant – it may be more the frequency that resulted in the comments. Discounts are still widespread – especially in Central states. With winter conditions keeping spring away from western states, it may delay the onset of the spring flush. But with spring break rolling through the country, bottling demand is less than in previous weeks. School milk could add to pressure this spring as milk queued up for new cheese capacity lingers in the system. Dumping and discounts could intensify in April and May before the new cheese capacity comes online.

Cheese Market

CME Cheddar barrel bids moved the markets up this week, while block offers caused the market to turn lower. That closed the block-barrel spread to 13.1¢ – the lowest spread since November 2022. Barrels averaged $1.7015/lb, up 13.4¢ from the previous week. Blocks averaged $1.8325/lb, down 8.35¢ from the previous week. Futures markets were mainly stable as the shifting spot price has done little to affect the average price. Still, CME cash-settled cheese futures are higher than NDPSR price forecasts based on spot markets – that implies that futures could decline or that spot prices would need to increase to support the current futures prices forecast. Given reports that barrel may be supported for a bit, but that blocks are headed to cold storage could make rising averages challenging.

US January 2023 cheese exports were strong and second only to 2014 levels. Exports totaled 75.2 million pounds and were 15.5% more than last year. Last year was impressive volumes reaching nearly one billion pounds in exports. If the start to the year is any indication, that would be the level of demand needed to keep the domestic market balanced and prices supported throughout the year. Fresh cheese, including Mozzarella, had a slow start, down 9.5% compared to last year. Cheddar exports continue to soar, up 37.6%, and a likely reason why higher production did not wind up in cold storage. Mexico accounted for 26% of total volume, with exports up 20.8% compared to last year. US exports were higher to several countries – with South Korea the only decline in the top 10 exporting regions.

US January 2023 cheese imports were 30.6 million pounds and 4.3% more than the previous year. Imports from Italy and France were less than last year. Imports from other European countries is higher, offsetting those other declines.

Butter Market

Spot butter and futures trended lower at the start of the week. CME spot prices averaged $2.337/lb, down 5.7¢ from the previous week. While prices are over ten cents lower than at the end of February, US butter prices still hold a premium to other regions. Global Dairy Trade (GDT) butter and AMF prices declined on March 7, down 0.3% and 1.8%, respectively, from the previous event. An AMF price of $1.94/lb on an 80% butterfat equivalent is sufficient to keep imports elevated – as in January. Reports indicate that cream is still widely available but that preparation for the Easter holiday has pulled some cream away from churns. Post-holiday cream returning to churns could put additional pressure on nearby prices. USDA reported that cream cheese production in the east has slowed, making more cream available. With trade reversing and production increasing, stocks could continue to expand unless domestic consumption increases. That could take further price declines to recover from last year.

US butterfat exports were 9.5 million pounds in January 2023, 12.9% lower than last year. Despite the slower performance, it was still a strong showing for butter. Exports to Canada increased 48% compared to last year, partially offsetting declines elsewhere. Export to Australia did not happen – a sizeable change. Exports to Mexico were down 35.%.

US butterfat imports were 17.2 million pounds – up 84.7% compared to last year – again making the United States a net butterfat importer. Imports from Ireland doubled. Imports from New Zealand were nearly 6X larger.

NDM/SMP

NDM prices started the week lower, but recovered into the end of the week. CME NDM averaged $1.1715/lb, 1.15¢ lower than the previous week. Dairy Market News (DMN) prices decline also. Western mostly prices averaged $1.225, down 2¢ from the previous week. Central prices were down 1¢ to $1.21/lb. The lower GDT SMP results on March 7, down 1.1% on lower volumes, caused CME futures markets to sell off as the market noted the results as bearish. Futures stabilized by the end of the week as interest returned. While exports were more robust in January, more milk is headed to dryers, and demand, especially from Mexico, is reportedly spotty. As prices return to the teens there are reports that interest from Southeast Asia is returning.

US January 2023 NDM/SMP exports totaled 150.4 million pounds – 14.8% more than last year. Those increases were entirely the result of exports to Mexico – up 75% compared to last year. Exports to Columbia and Thailand also increased, up 99% and 638%, respectively. Declines in the Philippines, Vietnam, and Yemen offset gains. That was a strong start of US exporters and one that could help mitigate stock build. That said, more milk could head to dryers through the spring.

Whey & Lactose Products

CME whey prices remain stable and range-bound for now but still at a premium to world prices. Higher protein product prices remain under pressure, which should provide a ceiling for whey prices.  CME spot prices averaged 44.1¢, down 0.94¢ from the previous week. Dairy Market News (DMN) prices were higher. The central mostly price was increased 0.5¢ to 42¢; western mostly prices were unchanged at 0¢ to 43¢ this week. NDPSR whey prices moved up 0.58¢ this week to 40.86¢. European whey prices were up at 33.6¢.

US January whey exports totaled 29.1 million pounds, 8.7% more than the prior year. Exports to China increased by 75% compared to last year. That offset declines in Canada, Vietnam, and Malaysia. US WPC (<80% protein) totaled 24.6 million pounds, up 14.8% compared to last year. US WPI exports totaled 10.2 million pounds, up 12.9% on higher exports to Japan and Canada. US WPC (<80% protein) imports rose to 5.2 million pounds, up 24.8% compared to last year.