Weekly forecast update – Dec. 1, 2023

Forecast updates

It should be noted 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.

This week did little to significantly change the 2024 price outlook outside of some recalibration for spot markets.

Class III-Cheese-Whey:

  • Cheese demand is performing well and keeping up with last year’s pace, albeit with fewer exports. That modest decline in YoY exports shifted more volume to the domestic market and may by the culprit behind the meager fall cheese prices. Additionally, private-label cheese promotion has been limited as many retailers and processors look to recoup lost ground from last year.
    • The market is mainly balanced, but it may be that processors are holding more inventory than typical at this time of year – that is sending a bit more product to Chicago. If that is the case, there could be some reordering on tap ahead of Super Bowl.
      • Headed into the end of the year, US cheese is in a superior position to one year ago holding the lowest global price – that should allow US cheese to move beyond North America.
      • European markets are somewhat repaired, and prices are rising – that could keep more EU cheese at home, opening up some space for US and NZ exports.
      • But, New Zealand will continue to supply Australia and South Korea as they continue to market more cheese to replace lost volumes to China.
    • As a result, Ceres raised the Q2 2024 cheese price expectations modestly.
      • Reduced the Q1 2024 forecast and lifted 2H compared to the November forecast.
      • That pushed blocks up slightly – expecting a bit higher barrel price.
      • That would result in a tighter block barrel spread this year.
    • No significant changes to the whey and lactose forecast this month. The news from China is bleak and could mean less whey, permeate, and lactose demand. At the same time WPC80 demand is improved. That may mean that prices improve modestly, but not significantly compared to last year.
      • Flatlines prices near current levels. Higher stocks and faltering Chinese demand could keep those product prices under pressure.
      • Recent reports suggest a new, albeit modest, wave of African Swine Fever (ASF) is running through market – that is raising culling for smaller processors.
      • Larger processors are culling animals due to poor margins.
      • While the annual averages are similar – the 2024 forecast is higher and flatter compared to this year vs. the extremes from this year.

Class IV-Butter-NDM:

  • Raised the NDM forecast compared to last month – flattened the 1H forecast, but lifted the 2H forecast.
    • EU milk is declining faster than expected. US milk will likely remain behind this year in early 2024 – which could cause additional buying.
    • The impact of lost volumes in China should be muted as milk is lower and New Zealand found homes for more milk in 1) other products and 2) other countries.
  • Increased the 2024 butter forecast by raising the 2H prices. European prices are rising – which could provide the United States with opportunities to export.
    • That could mean a repeat of higher fall prices again – high prices this year did little to slow demand.

Class I-II:

  • This forecast keeps Class II the highest milk price next year and a candidate for de-pooling in most FMMOs.
  • Class I appears to be similar to this year (assuming no FMMO impact).
  • There were no major class price forecast changes compared to November.

Milk Market

Spot milk discounts picked up this week, with some reporting as much as $5/cwt under – most $1-$2/cwt less than class. Bottling resumed relieving plants that backed up over the long holiday weekend. Milk is seasonally rising, and USDA noted that better Midwest feed is supporting milk production growth. There are still issues in western states with milk that continue to lag last year. For dairy producers, margins remain somewhat limited, and Q1 2024 prospects could be concerning. Compared to the previous year, dairy producer margins have been much lower, and the DRP program is offering little relief with prices in the $15/$16/cwt level. While futures lifted on Friday, there is a chance if cheese prices drop back, Q1 2024 prices may have $15 – that could cause culling to pick up.

October 2023 DMC was $9.44/cwt – the best so far this year on modestly higher milk prices and lower corn and alfalfa prices. October reflected the lowest feed costs so far this year.

Cheese Market

CME cheese markets were tumultuous this week – blocks moved up and then dipped to the lowest price in November. By Friday, blocks and barrels were equal. In the end, blocks averaged $1.574/lb, down 1.93¢ this week. Barrels averaged $1.4825, up 0.08¢ this week. That caused the weekly average block-barrel spread to close to 7.15¢. Despite data to the contrary, western cheese manufacturers reported that US cheese prices are uncompetitive in world markets – that seems hard to believe when EU27 reported over $2/lb this week. Cheese demand remains steady, but cheese production is on the uptick seasonally. Overall, there have been no bad reports on cheese demand, but the indifference about market prospects for the rest of this year is abundant. It seems markets are setting up better for US exports in early 2024 given the sizeable gap between US and world prices. Additionally, with lower prices domestic demand could continue to gain vs. this year. That may be sufficient to offset new American cheese capacity. For now, markets seem to be in a pattern with limited upside through year-end.

Blackbox Intelligence reported an improvement in October restaurant sales and traffic numbers. In October, same-store sales were up 1.4% compared to last year, and foot traffic was down 2.1%. While foot traffic is down, that closed the gap from September and it was the best performance since March (that month received a YoY Omicron bump). The best-performing restaurants were in New England, QSR, and Italian-style restaurants – all good news for dairy as those are large consumers of cheese. Industry analysts called September an anomaly in its weaker performance rather than indicating things to come. Fast casual and fine dining had negative same-store sales – the only categories with declines from 2022.

Butter Market

After sizeable pre-holiday declines, spot butter recovered lost ground with with prices lifting back to the $2.60s. That caused DEC23 and JAN24 futures to erase sizeable discounts and 1H 2024 futures lift. CME butter averaged $2.60/lb, up 8.42¢ compared to the previous week. While European prices are higher, US butter at $2.60 or higher headed into the warehouse is expensive. That suggests that nearby prices could pull back as the butter season winds down and more cream heads to churns or that 2024 fall prices could be very high. It seems the former is more likely at this point. Spot cream availability picked up this week and multipliers dropped. While there are still a few weeks left in this holiday season, as bulk packers resume activity and more butter heads to warehouses, butter prices could pull back a bit – but not as much as last month.

Costco butter became a viral topic in a bad way on Reddit last week, with bakers blaming the butter on ruined holiday pies. Bakers believed the salted butter had higher moisture, causing pies to crumble so they would not roll out or fall apart in the oven. At the same time, some consumers blamed Costco’s sugar, stating the cane sugar released excess water. Several news lines picked up the story, and it appears to be a good-sized thread indicating it could make its way around the internet and may impact where consumers buy butter as cookie season gets underway.


Spot NDM prices increased into the midweek and then prices dropped back on Friday. CME NDM averaged $1.186/lb, up 0.27¢ compared to the previous week. It was noteworthy NDPSR volumes fell below 10 million pounds this week – that was likely caused by a higher proportion of prices fixed more than 30 days ago moving through the system. European SMP prices are approaching $1.30/lb – that is attracting little international interest, but reflects lower supplies compared to a year ago. The GDT Pulse auction this week indicates that next week’s auction could move a bit lower. While buyers are still concerned about 2024 product availability some are hopeful that more milk headed to driers after the holiday season could moderate futures price expectations.

The FAO Food Price Index for October continued to decline, but slower compared to earlier in the year. The FAO Food Price Index (FFPI) averaged 120.6 points, down 0.7 points – 0.5% from September and 14.8 points (10.9% less than a year ago. While most food categories moved lower – sugar, cereals, vegetables, oils, and meat – dairy lifted. It appears the FFPI bottomed in September, and prices started to recover in October – that is consistent with the US experience. The dairy FFPI averaged 111.3 points in October, up 2.2% from September breaking with nine consecutive months of declines. While higher than September, the FFPI was still 20.1% less than a year ago – a significant improvement and a reflection that dairy is more affordable compared to a year ago. Higher milk powder prices caused the index to lift – again consistent with the September to October market turnaround. International cheese prices continued to decline over the same period. The higher prices were attributed to lower milk production in Europe and the United States and concerns about what the El Nino could bring for the Southern Hemisphere during the second half of the season.

Whey & Lactose Products

CME spot whey prices eased a bit this week on little new news. CME whey averaged 39.8¢, down 0.12¢ compared to last week on six trades. European prices were unchanged this week on a modestly higher euro. News is similar expectations of slowing demand from China is keeping some pressure on spot markets while reports of WPC80 demand that remain elevated is providing an alternative and some support. Dairy Market News (DMN) western mostly was up 1¢ to 41¢ this week. Central mostly was 39.5, up 0.5¢ from the prior week. Lactose was 26.5¢, up 1.5¢ from the previous week. WPC was up, +2¢ to 92¢ this week. Overall, whey trading and prices seem somewhat range-bound, meaning there is little reason for prices to move lower and little for them to increase.