Weekly forecast update – February 19, 2021
Forecast updates
Additional adjustments this week
Increased dry products, including whey, WPC, and NDM. Given the demand from China, prices could remain higher through the spring months.
Increased butter for the remainder of February – but left lower prices post-Easter and pre-ice cream season.
Adjusted Q3 NDM prices higher – demand could remain strong through the duration of the year.
The adjustments, in turn, adjusted milk prices up.
Fluid Milk Market
Winter weather continued to be a problem throughout the week, with some Texas plants experiencing prolonged shutdowns. That caused significant dumping and displacement throughout the week. In some cases, transportation issues caused by impassable roadways further exacerbated the problems. Some farms in the region had difficulties throughout the week with feeding and other equipment issues due to the extreme cold that has lasted for days. Additionally, the cold weather caused issues with pipe bursting and electrical shortages. While there is some concern for prolonged negative impact milk output later this spring, most weather-related issues caused problems for the supply-chain – something that can be corrected. Bottling orders remain sizeable, which could relax as this weather system passes and it becomes warmer.
Cheese Market
CME weekly cheese prices declined this week as trading activity, especially for barrels, increased. Blocks averaged $1.5338/lb., down 6.87¢/lb. Barrels slipped 5.61¢ to average $1.4419 after 26 loads traded. Most processors are reporting slower sales this week – typical of this time of year. Global Dairy Trade (GDT) prices continued to move up. Futures markets are still forecasting a sizeable increase headed into the spring. Traders are still expecting USDA to add another round or rounds of food-box orders, which could support markets, but given current production, prospects may fall short. This week some Texas cheese plants were provided warnings of potential power outages, but it doesn’t appear any statewide disruptions impacted production.
Most of the news this week came from Europe. EU-27 & UK milk production was up just 0.3% in December 2020 vs. 2019. That put 2020 milk output up 0.8% compared to 2019 after adjusting for leap day. Once again, German and France dipped below the previous year levels, declining 1.1% and 1.4%, respectively. Italy offset most of those declines with output jumping up 5.3%. EU-27 cheese production in December totaled 1.64 billion pounds – that was 2.7% more than 2019 but 0.9% less than November on a daily average basis. Germany, Italy, and Poland pushed output higher. French cheese production was up compared to 2019, but with a smaller YoY gap than the other countries. All the data suggests cheese is not building in warehouses, which could support 2H 2021 prices.
Butter Market
CME butter markets pushed up again this week with an enormous surge on Friday. Also, prices move higher after another strong GDT performance on Tuesday. GDT butter prices averaged $2.2698/lb., up 6.2% vs. the prior auction. Butter prices ended the week in the mid-150s. CME butter averaged $1.4988/lb., up 8.53¢ from the previous week on nine trades. Cream availability increased this week as bottling picked up in response to the winter storms. That worked to ease cream multipliers again. Still, futures markets are forecasting a sizeable demand increase nearby.
EU-27 butter production in December 2020 totaled 391.1 million pounds, 1.1% more than 2019 and 2.4% higher than November. Increased Polish butter production offset declines from France. Danish and German output pushed YoY output above the previous year.
In November 2020, EU-27 and UK butterfat exports totaled 30.4 million pounds, 39.1% less than the prior year. Sizeable declines to Turkey and Egypt drove the deficiencies last year. Exports to the United States and Saudi Arabia were modestly higher. Butterfat markets remain volatile. Traders express more interest in US butterfat exports –markets are price-sensitive, and the US price discounts are attractive.
NDM/SMP
CME prices eased further this week, with prices averaging $1.1031, down 1.69¢ from the prior week. While GDT SMP prices continue to gain strength, US prices are sliding lower. Prospects for US milk production, slowing Mexican imports, and persistent shipping issues resulting from limited containers continue to frustrate US prices. That said, US exports and prices remain well below other regions through Q2. To the degree, exporters can get product exported; it could help keep markets balanced. More forecasts suggest that milk powder markets could remain balanced with some expectation that New Zealand prices could move lower. That would not preclude US prices from increasing. Should Asian milk powder demand remain strong – that could lift US Class IV and, in turn, Class II prices.
EU-27& UK November 2020 SMP exports totaled 130.8 million pounds, consistent with the same period in 2019. Exports to Algeria were higher. Exports to Ghana and Saudi Arabia were less than 2019 levels. EU-27& UK November 2020 WMP exports totaled 46.2 million pounds, consistent with the same period in 2019. More volume to Oman and Nigeria more than offset declines to Algeria and Kuwait.
Whey & Lactose Products
CME whey prices pushed to the mid-50s this week as managed stocks and elevated Chinese demand support markets. While many in China have been on holiday – celebrating the lunar new year – expectations for business to resume normal levels at the start of March and its orders. Additionally, China lowered its most favored nation (MFN) tariffs for whey protein concentrate, isolates, permeate, and lactose at the start of the year – that could allow prices to remain elevated. CME whey prices averaged 54.75¢, up 0.75¢ from the previous week. NDPSR and DMN prices lifted also.