Weekly forecast update – Feb. 24, 2023
Forecast updates
No significant changes to the forecast this week other than adjusting for spot market moves.
- Increases whey modestly – Dairy Market News price series remain elevated; however, recent 39-cent NDPSR prices could pull down on March prices if they persist.
- Adjusted NDM slightly higher through Q1-Q2 – specifically western prices.
- No major changes to butter or cheese.
Milk Market
USDA announced the Class I advanced price for March this week at $18.99/cwt – $1.79 less than February and $3.89 less than the previous year. That is the lowest Class I price since November 2021. Globally milk production continues to rise, with January looking up for the United States and New Zealand. Anecdotal reports suggest that European and Chinese milk production continue to expand also. So far, most expect dairy producers and processors to support prices to keep milk production flowing, given the difficulty getting it last year. Despite heavy rains in January, New Zealand’s milk production expanded by 1.2% compared to last year.
US January 2023 milk production continues to expand despite flooding in California’s Central Valley during the month. Output was at 19.3 billion pounds, up 1.3% compared to last year. California output was up 0.03% after significant rainfall that caused some disruptions. Milk throughout the center of the country was up. Florida and New Mexico continued to contract while South Dakota, Iowa, and Georgia led the gains. The US milking herd increased by 0.4% to 9.405 million head – results varied from state to state. Output-per-cow was 2052 pounds – up 0.91% – that was the driver of January’s output gains.
Cheese Market
CME Cheddar blocks were on the upswing until Friday, when prices moved lower again, ending the week where prices began. Cheddar barrels followed a similar pattern. That resulted in a CME block average of $1.9375/lb, up 5.7¢ from the previous week. Cheddar barrels averaged $1.5725/lb, up 2¢ from the prior week. That caused futures to decline also. Markets remain unsettled as they contend with mixed news that seems to be good one day and bad the next. In early 2023, there are some signs that cheese demand and promotion are returning to retail – something that could help stabilize domestic demand.
As of January 31, 2023, US cheese stocks totaled 1.44 billion pounds. That was 0.28% less than the same time last year. That indicates that as cheese production increases, domestic consumption and exports have been capable of keeping stocks from the building. American cheese stocks totaled 818.8 million pounds – 2.25% less than last year – indicating less Cheddar and related cheese, which may explain the above-average prices in early 2023. That may explain somewhat limited spot block cheese trading in early 2023 – barrels may suggest that export momentum is slowing.
Butter Market
CME spot markets started lower, with prices ratcheting higher on Friday. CME butter averaged $2.3925/lb, down 2.9¢ from the previous reports. There is still plenty of cream, and butter churns are busy. Some anecdotal reports indicate that cream demand may pick up ahead of the Easter holiday prep season. Despite those reports, cream remains discounted and plentiful. Western cream multipliers were steady at 1.03 this week, but central multipliers dropped to 1.16. All signs point toward plentiful butter available to the markets; however, spot and futures markets remain persistently high.
US January 2023 butter stocks were 262.7 million pounds – 19.8% higher than the previous year. That was a sizeable improvement over last year’s modest stockpiles. That leaves stocks below 2021 levels, but ahead of last year. Stocks increased 48 million pounds from December to January – above the five-year average pace of 45 million pounds. The data appears bearish, but the market continues to take news like that in stride.
NDM/SMP
In shortened holiday trading, CME NDM spot prices were modestly lower this week, while Dairy Market News were closer to unchanged. Spot CME NDM prices averaged $1.2163/lb. – down 1.58¢ from the previous week. The final February Global Dairy Trade (GDT) auction occurred on February 21. SMP and WMP moved lower, down 2.4% and 2%, respectively. Hopes of China returning to the market were quickly dashed. That said, New Zealand January exports cast a more optimistic outlook for Chinese demand this year. Like other markets, NDM and SMP continue to grapple with conflicting data – improving demand and rising output – resulting in erratic markets as participants attempt to determine market direction.
Most of the milk powder news came from overseas this week. New Zealand January 2023 SMP exports totaled nearly 115 million pounds – 69.5% more than last year. That was the most for that month on record. Exports to China recovered, with volumes up 147% compared to last year. Add to that exports to Indonesia and Vietnam, up 38% and 375%, respectively. Those improvements from China could bolster markets later this year and support additional milk production in early 2023. New Zealand WMP exports were nearly 282 million pounds – 7.1% more than last year, but well off the five-year average pace of 329 million pounds for the month. And exports to China were less than previous year – offset by increases to UAE and Southeast Asia. Again highlights the conflicting data markets continue to wrestle with in early 2023.
Whey & Lactose Products
CME whey prices pushed higher throughout the week with prices the 46 mark for the first time since early November 2022. Prices averaged 45.94¢, up 2.04¢ from the previous week. Dairy Market News (DMN) prices were higher. The central mostly price was increased 2.25¢ to 40.50¢; western mostly prices were up 1.6¢ to 41.85¢ this week. NDPSR whey prices moved down 0.02¢ this week to 39.85¢. European whey prices were stable at 32.6¢. Higher US prices appear out of step with European prices.
News was somewhat quiet this week. EU27 December 2022 whey powder exports totaled 113.8 million pounds, down 4.8% compared to the prior year. Exports to China were higher, but the EU lost ground in Asia.