Weekly forecast update – April 23, 2021

Forecast updates
Adjust prices for spot markets.
Adjusted the CME spot cheese prices – increased MAY slightly and reduced the block-barrel spread for the remainder of the year.
Modified spot prices for current markets.
Increased whey prices through Q3 based on current markets.
Left butter unchanged.
Updated the May 2021 announced Class I price and the Class II skim values.
The Class I price forecast continues to increase on stronger Class III and IV prices.
All changes adjusted milk prices.
Fluid Milk Market
USDA announced the May 2021 advanced prices this week. The Class I base is $17.10/cwt. – $1.59/cwt. more than April – on a higher advance Class III and IV milk prices. Class II skim value increased 55¢/cwt. to $9.58/cwt. – that is the highest Class II skim price in over a year.

USDA released March 2021 milk production also. US milk production totaled 19.75 billion pounds in March, which was 1% more than February and 1.8% higher than a year ago. The increases were smaller than expected. Output from Florida, Georgia, and Arizona slowed. Wisconsin led the output gains, followed by Minnesota and California. The milking herd continues to expand without cow numbers reaching 9.468 million head – 10,000 more cows than February and 77,000 higher than a year ago. Approximately 45% of the milk came from new cows in March and 55% from higher output-per-cow.

Cheese Market
Spot CME cheese markets ended the week near where it started, with some peaks and valleys along the way. Trading volumes remain elevated, with 22 blocks and 26 barrels changing has through the week. In the end, blocks averaged $1.7925/lb., up 0.35¢/lb. compared to the prior week. Barrels rocketed to $1.7905/lb, up 9.8¢ compared to the preceding week. The block barrel spread closed to just 0.2¢. Barrels ended the week, holding a premium to blocks. Orders have reportedly slowed compared to previous weeks, but buyers in Chicago remain interested in owning more cheese.

US cheese stocks totaled 1.47 million pounds as of March 31, which was 6.7% more cheese than a year ago. A large portion of that cheese is American-style cheese totaling 831.8 million pounds and 7.1% higher than a year ago levels. The new cheese plant is helping to lift cheese holdings relative to last year. Other style cheese and total natural cheeses set a record this month. Most of the increases came from Michigan and Wisconsin – little surprise there and Minnesota, Iowa and South Dakota. That suggests refilling of aged cheese holdings or that there may be some cheese backing up.

Butter Market
Spot butter prices relaxed this week, but prices recovered a bit of the lost ground on Friday. With 44 loads of butter trading this week, prices averaged $1.794/lb., down 8.7¢/lb compared to the previous week. A sizeable seller arrived at the CME this week, which resulted in downward pressure throughout the week – that also caused a related futures sell-off. This has been a pattern leading up to the monthly Cold Storage report; prices trend lower for a time and then mount a new recovery. While butter production is expected to reach seasonal peaks within weeks, it appears output may be slowing as cream demand remains elevated.

US butter stockpiles totaled 354.6 million pounds on March 31, which was 14.5% more than year ago levels and largely stable. Despite rumors of large drawdowns, butter stocks held, and that likely precipitated the mid-week sell-off. All of that said, it was the smallest month-to-month build over the last five years – the five-year average build is 10.5 million pounds between February and March. A slowdown in a build could curb the stockpiles for the rest of the season.

With the release of strong Chinese imports through March, US NDM prices continue to lift. Prices reached the mid-120s this week a the CME resulting in a $1.242/lb. weekly average, 3.15¢ more than a week ago with just eight loads trading. GDT SMP prices were unchanged at the April 19 event at $3,365/MT. With European prices in the mid-$1.30s US spot prices could get toppy. Reports suggest that processing is active in western states – and that should continue for the next four to five weeks. With European milk flat and less headed to SMP, that could keep prices supported.

China imported 69.6 million pounds of SMP – a record for March and 27% more than year-ago levels. This March finally surpassed the lofty levels set in 2014. 39% of that volume came from New Zealand, which was 8% more than a year ago. Imports from the United States soared – 2010% higher than a year ago levels. Some exporters are reporting a lot of interest from China now that the trade war has subsided. Imports from Australia and Europe were higher also.

China’s WMP imports were impressive in March 182.6 million pounds and 77% higher than year-ago levels, but they fell short of the 2014 highs. A year ago, China was struggling under the weight of the pandemic, and shipping was disrupted entirely. 92% of the import came from New Zealand, and that was 82% more than year-ago levels and explained recent highs and reported tightness. Imports were also higher from Uruguay and Australia.

Whey & Lactose Products
CME whey prices reached as high as 70.25¢ this week and then eased back to 62¢ by Friday, and that lifted the weekly average to 66.8¢, up 0.7¢ from the previous week on four trades. Dairy Market News central and western prices increased again this week, averaging 62,75¢ and 64.88¢, respectively. Lactose was unchanged at 45¢.

China’s whey imports rocketed higher in March, setting an all-time high for any month. At this rate, China’s imports are highly supportive of price. In total, China imported nearly 167 million pounds – that was 77% more than year-ago levels. Imports from the United States accounted for 43% of imports, and they were 64% more than year-ago levels.