Weekly forecast update – Dec. 15, 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:

  • Reduced CME cheese forecast through Q1 2024. While it appears there is good interest in US cheese, it seems likely that given seasonal declines, it could take until trade data begins to be reported before markets lift.
  • No significant changes to whey forecasts, raised WPC through 1H 2024.
  • These adjustments reduced the Q1 Class III forecast to mid $15/cwt range.

Class IV-Butter-NDM:

  • Reduced the butter forecast through February 2024 to reflect current spot markets.
  • Adjusted Q1 2024 NDM forecasts – flatlined and reduced somewhat.

Class I-II:

  • No significant changes to Class I or II milk prices this week.

Milk Market

Bottling demand was surprisingly resilient this week. That will be followed by the next two weeks with schools out of session for the winter holidays. That will push more milk to manufacturing, but given milk output slowdowns and a bit more capacity, that could make milk easier to handle over the next few weeks While there will be some discounts, it seems the larger discounts earlier this year may be a thing of the past.

Off the farm, more reports show that fresh cows and heifers are challenging to come by, and the costs are rising with each report. That could have implications next year as new cheese capacity comes online about a year from now. Few cows could mean that cows move longer distances. That could also indicate if prices were to lift, similar to 2022, it could take time to see a production response.

Cheese Market

CME cheese markets were mostly lower this week, albeit with a few days of higher prices before markets turned abruptly lower on Friday. Despite reports of better demand and evidence of returning interest in US cheese for exports, markets are struggling to hold onto somewhat meager prices for this time of year. At the same time, the 2024 futures are forecasting prices at or below the five-year average – a figure that should attract some risk management activity. This week blocks averaged $1.5740/lb, down 2.35¢ this week. Barrels averaged $1.5010, down 7.7¢ this week. Reports of tight barrels seem to run afoul of current markets and may be a thing of the past. The weekly average block-barrel spread widened to 7.3¢. Overall cheese markets remain balanced – but the per capita consumption and commercial disappearance may hold the key to the slight imbalance that lead to lower prices this year.

ERS released the October cheese domestic commercial disappearance at 1.17 billion pounds, 1.09% more than a year ago. YTD commercial disappearance is running 0.4% more than a year ago. This year’s modest gain could add to last year’s modest increase. In 2022, per capita consumption of cheese was 39.8 pounds (excluding cottage cheese) – unchanged for American-style cheese and up 2.4% for other than American-style cheese. But, Cheddar cheese consumption dropped 1.3%, which was offset by a jump of 3.3% more for other American-style cheese varieties. That may provide some explanation of why Cheddar prices are struggling to find a footing should that trend continue into this year – demand that slowed more than output and fewer exports. Mozzarella cheese per capita consumption increased by 2%. For the first time in four years, Swiss cheese consumption increased, up 3.3% vs. 2021. Cream cheese and Hispanic cheese were the big winners with consumption up 8.6% and 8.2%, respectively.


Butter Market

With the end of the butter season upon markets prices dropped this week to their lowest level in months. Mid-week prices declined to $2.46/lb before recovering to $2.49 on Friday. Given the holidays and seasonal demand lull it is possible traders will attempt to push prices lower. But, next week’s Cold Storage report may provide some support for markets. CME butter averaged $2.4790/lb, down 17.55¢ compared to the previous week. US prices continue to decline faster than those from Europe and New Zealand prices are showing some signs of support. This week Fonterra announced it reduced the butter on offer for the remaining 2024 auction by 9.9% – that tends to reflect better commercial demand. While US prices are headed seasonally lower, there is little to suggest that 2024 prices don’t follow a similar pattern to this year. Throughout 2024 there will be more milk headed to American-style cheese production and more demand for other high butterfat products – that could limit butterfat headed to butter. Most expect that butterfat, as a component of milk, will increase, but with flat to lower milk production that may provide little relief.

ERS announced the October domestic commercial disappearance at 195.5 million pounds, 5.5% more than a year ago. YTD commercial disappearance is running 8.4% more than a year ago. That is an improvement from last year when per capita consumption of butter dropped to 6 pounds per person according to ERS’s latest data. That was a 6.8% decline and the first YoY drop since 2009 to 2010. Butter may have declined last year due to the high costs and constant reporting in the popular press, along with eggs, as to the inflationary impact on the product. This year will likely reflect a recovery as price was less impactful on purchase decisions this year and while prices set a new record, the amount of time above the $3/lb mark was less compared to last year.


Spot CME NDM prices seemed content to range between $1.16 and $1.17/lb this week while NDPSR prices rose to $1.2129/lb. That may reflect some reporting gaps in NDPSR as more fixed price product moves through the system. Additionally, CME may indicate a seasonal slowdown as buyers hope for some price relief as more milk heads to manufacturing over the next two weeks. CME NDM averaged $1.165/lb, down 0.55¢ compared to the previous week. Markets will likely await the final GDT of 2023 before assessing price direction for next year. EEX, NZX, and CME futures expect prices to lift next year as Southeast Asian demand lifts and bit and China looks to stabilize. With global milk production flat and more milk headed to cheese, that could keep NDM/SMP/WMP production in check, allowing NDM/SMP prices to trade more consistently above the $1.20 mark this year.

ERS announced October NDM domestic commercial disappearance at 43.5 million pounds, 26.4% less than a year ago. YTD commercial disappearance is running 7.6% less than a year ago. 2022 was the lowest commercial disappearance for NDM since 2010, making this year dismal. At issue, there are cost-effective liquid alternatives like UF milk, condensed skim, etc. Similarly, US 2022 per capita consumption of NDM was 2.3 pounds, down 5.4% compared to 2021. That has pushed this year’s exports to 73% of total production indicating that more US NDM/SMP will head overseas. While production was lower, falling exports may become problematic as the domestic market is incapable of absorbing those lost volumes.

Whey & Lactose Products

Much like other powder markets – there is little new information for whey markets, and that is causing prices to vacillate in a tight range. Given weaker Chinese whey demand that has spread into Q4 and stunning demand from WPC80 – it seems that staying put may be the best case for whey markets through the end of the year. CME whey averaged 39.4¢, down 0.45¢ compared to last week. European prices were unchanged this week on a lower euro. News remains the same: China’s whey demand is lower due to poor pork/hog market margins, and WPC80 demand continues to climb on higher domestic use and exports to Japan and Brazil. With new capacity months away – that could continue to support WPC/WPI prices and draw whey solids.

ERS announced October domestic whey commercial disappearance at 50.6 million pounds, 32.9% more than a year ago. YTD commercial disappearance is running 122% more than a year ago. That is helping to offset lower exports. October domestic WPC commercial disappearance at 26 million pounds, 76% more than a year ago. YTD commercial disappearance is running 161% more than a year ago. That supports the story that domestic demand for nutrition uses expanded this year.