Weekly forecast – May 5, 2023
Forecast updates
- No significant updates to the forecast this week.
- Raised butter due to reports that more bulk products priced from NDPSR vs. CME this year.
Milk Market
Milk is seasonally rising, creating issues as plants have planned and unplanned downtime. That can be somewhat problematic for production as the cows need more time to transition from one season to the next. Additionally, schools are starting to wind down, and bottling plants will move toward their seasonal lows, pushing milk to processing. The same is happening in Europe. Until milk reaches its seasonal peak, plenty of it will be available to processing plants – something that could result in modestly more butter, cheese, and NDM/SMP through the end of the month. Headed into the end of New Zealand’s season, more dried-off and empty cows could result in cows headed to slaughter. That will be a boon for China, a large importer of New Zealand beef. Slaughter rates on the North Island are rising – the numbers nationally do not look worse due to expansion on the South Island. There is a much higher rate of cows that are not pregnant headed into the end of the season – that means less milk next season. LIC forecasts that the animals headed to slaughter this year will result in 2.7MM KGMS less milk next year. There are 17.2% “empty” cows this season, up from 15-16%, which is typical for this time of year.
Cheese Market
CME spot markets were up and down this week. Blocks and barrels lifted through mid-week, and prices started to turn lower again, with prices pulling back by the end of the week. CME barrels averaged $1.557/lb., up 2.2¢ from the prior week. Blocks slipped 0.8¢ below the previous week, with prices averaging $1.6625/lb. Reports remain mixed, with sales reports varied by channel and region. Production remains strong, but several reports of plant downtime in the Upper Midwest this week slowed milk intake. Data was price neutral as modestly lower output and was offset by slightly lower exports. But prices will likely chop around through the spring as more milk heads to manufacturing and new plants begin start-up procedures.
There was considerable US data this week. US March 2023 cheese production totaled 1.223 billion pounds – 0.2% less than last year. Production across the country was mixed. Western states like Idaho and California increased output compared to last year, but Wisconsin, South Dakota, and New York slowed – along with a few others. Cheddar cheese production was 345.6 million pounds and 3.6% higher than last year. Mozzarella production was 402.5 million pounds and 1.4% less than the prior year. Declines in Mozzarella output could indicate slower exports during the month.
US trade data was also released this week. US cheese imports totaled 33.9 million pounds in March – 5.3% less than a year ago. France, Mexico, Finland, and Morocco had the most significant declines.
US cheese exports totaled 91.9 million pounds – down 0.6% compared to last year. Given the sharp uptick last year, consistency was a good performance. Fresh cheese exports dropped 17%, and Cheddar was 4.5% lower vs. last year. That was offset by significantly higher grated cheese exports (think pizza cheese) up 49.1% – all of that cheese moved to Mexico. In total, exports to Mexico increased 15.6%; Australia was up 39.4% – but volumes to Japan were down 23% and South Korea -60%.
Butter Market
CME spot butter markets had a sizeable gap to futures on Monday before spot increased to close the span. Futures are holding in the low 240s. There are mounting concerns about 2H 2023 butter availability as YoY stock gaps dwindle and production continues to slow. With cream demand picking up as ice cream production gets underway, there is less cream moving to churns, suggesting the build’s end is weeks away. CME spot butter averaged $2.421/lb this week, up 2.8¢ from the previous week.
US butter production totaled 204.98 million pounds in March – 1.3% more than last year. YTD butter production is running 2% more than last year, but the YoY gaps are diminishing. California produced a staggering 6% less butter than last year; PA was down 5%. Other western states increased output by 2.8%, partially offsetting California’s decline. Central states increased production by 6.4%, driving the YoY gains in March.
US butterfat imports surged in March, up nearly 50% compared to last year. Imports totaled 17 million pounds. Most of the butter came from Ireland, with volumes up 71%. New Zealand continues to increase butterfat exports to the United States, offsetting China’s decline. US imports from New Zealand expanded 137% vs. last year. Given the gap between New Zealand AMF and US butterfat, imports will likely continue. US imports from Mexico increased by 477% – a small volume but a complete reversal. US butterfat exports declined in March – which was expected given the premium to world prices. Exports totaled 10.8 million pounds – down 32.6% vs. last year. Q1 exports are down 32% vs. that year. Volumes throughout North America were down – Canada 6.2% less, Mexico down 67.5% – those countries are getting more product from New Zealand and Europe. There were more imports from China and Vietnam.
NDM/SMP
Reports of plant disruptions this week could impact NDM/SMP production for several days. That may explain why CME prices continued to lift. Add to that a better-than-expected Global Dairy Trade (GDT) SMP performance. CME NDM prices averaged $1.1855, up 1.95¢. For the second subsequent month, the final week of NDPSR NDM pricing, volumes doubled, and prices dropped. If the pattern holds, weekly NDPSR prices should increase next week. Those volumes indicate substantial spot volumes – but the timing is most interesting as it has minimal impact on weekly and previous month’s pricing. While prices could experience additional weakness this spring, improving global price outlooks and concerns about 2H 2023 milk supply seem to support nearby prices. NDM is still competing with widely available milk and condensed skim.
US March NDM production totaled 200.2 million pounds, 4.4% more than the previous year. SMP production totaled 35.6 million pounds and is 16% lower than last year. California’s NDM production was modestly higher than last year. With lower SMP, production could have dipped. Again, other western states offset the production from California by lifting output. Higher output from Central states, like butter, pushed US output higher. Stocks jumped higher, up 10.8% vs. last year and 319.1 million pounds.
US March trade data corroborated earlier reports that Mexico was sopping up inexpensive US milk powder. In March US exports were down 2.9% compared to last year, totaling 172.1 million pounds. While exports were down, volumes to Mexico were up 45.4% compared to last year – the most since May last year. Exports to Colombia increased 125% vs. last year. That was not enough to completely offset losses to the Philippines, down 70%. Volumes slipped to China and throughout SEA.
Whey & Lactose Products
CME whey prices were consistent throughout the week. CME spot whey prices averaged 33.05¢, down 1.1¢. The unusually high NDSPR price from a week ago was revised lower. This week’s NDPSR price was 42.63¢, down 1.88¢ vs. the previous week. NDPSR prices are retreating but slowly. Dairy Market News whey prices declined this week. Central prices averaged 39.75¢, down 0.75¢ from the previous week. Western prices averaged 40¢, down 1.25¢ from the previous week. Lactose prices dropped 1¢ to 27¢.
Although US cheese production is moderating, whey and derivatives are rising. US March 23 whey production was nearly 78 million pounds and 0.3% more than the previous year. US WPC (25-49.95%) production was 13.2 million pounds and 15.9% more than the prior year. US WPC (50-89.9%) production was 28.2 million pounds and 11.3% more than the prior year. US WPI production was 28.2 million pounds and 11.3% more than the prior year. Higher output is one reason US whey prices are substantially lower than last year. Whey stocks moderated, declining 2.1% compared to last year. WPC (25-49.9%) remains high, 59% more than last year. WPC (50-89.9%) stocks are elevated, +20% vs. last year, but consistent with recent months. WPI stocks were 61% higher than last year. Widely available high-protein whey products are creating a ceiling for prices.