Weekly Forecast Update Jan. 22, 2021

Forecast updates

  • Adjusted nearby prices – reducing expectations for CME cheese and butter through March due to changes in the USDA food-box program.
  • Reduced Q2 cheese and butter prices given expectations of higher milk production at that time against slow restaurant sales.
  • Adjusted JAN NDM prices up a few cents but reduced FEB and MAR.
  • In turn, these adjustments recalibrated milk prices.

​​​​​​​Fluid Milk Market

USDA’s AMS released the February Advanced Class I milk price at $15.54/cwt. up 40¢ compared to January, but $2.01 less than year-ago levels. Despite the elevated Class III milk price forecast just a few weeks ago, prices moderated this week on news that USDA modified its food-box awards. While USDA will still issue the $1.5 billion for food aid, it will be done in three tranches. That change in orders could allow the supply chain more time to react to demands. Additionally, anecdotal reports of widely available discounted milk likely did not help support the $18-$19/cwt. milk forecasts. Given the Class III price decline – depooling is still likely, but the disparity appears less than just a week ago.

Reports indicate that milk is plentiful due to more cows and feed that is lifting production. While the cold snap could cause the output to retreat for a time, overall, most regions of the country are reporting spring-like milk receipts – something that portends a tsunami of milk could be headed to dairy processing facilities this spring. Milk elsewhere is in the world is flat, and that has supported international demand and price.

Cheese Market

CME cheese markets turned lower last week after USDA announced the food-box program would be issued over the next three months. While it doesn’t change the estimated spend or volume, it slows the pace of orders, which relieved the perceived tightness that lifted markets over the past few weeks.  Additionally, there are reports of widely available cheese, and some of it went to Chicago this week with 13 loads of blocks and 28 barrels changing hands. Cheddar blocks average $1.6981/lb., 21.39¢ less than the prior week. Barrels averaged $1.4456/lb., down 16.04¢ compared to the previous week. That kept the block-barrel spread wide this week.

USDA surprised markets this week when it announced the food-box program awards in thirds. One-third of the February delivery period awards were issued with expectations that March and April will follow 30- and 60-days from now. The change permits USDA to evaluate the bidders’ performance – if a group is unsuccessful, there is a chance they could be replaced before the second and third round. Additionally, spreading the awards reduced the likelihood of a market squeeze – that seemed to deflate markets immediately. Overall, the changes appeared to signal that there could be more changes on the horizon to meet the program goals of feeding people and supporting dairy producers without spiking markets.

Butter Market

During the shortened holiday week, spot butter spiked on Tuesday, after a strong GDT performance, and then returned to previous levels. While prices are holding in the $1.40s – prices could fluctuate, reaching back into the $1.30s for a time. There are reports that the cream market tightened up a bit, and multipliers are slowly starting to increase – the new USDA orders could be responsible for the rise as those orders require products made from fresh cream. The CME butter market averaged $1.4163/lb. +11.63¢ compared to the previous week.

GDT butter and AMF prices soared at the Jan.19 event. AMF prices leaped 17.2% above the last event, with prices averaging $5,398/MT – the highest price since July 2019. The increases were across all delivery periods. Butter prices lifted 4.6% vs. the previous event to achieve the highest level since June 2019.

The Black-Box Intelligence restaurant index fell again in December, with same-store sales 13.3% less than 2019 and foot-traffic down 18.6% vs. 2019. That put the entire Q4 performance below the same period in 2019. The group attributes the decline to colder weather that limited in-store dining, tighter dining restrictions, and spikes in Covid-19. That suggests that the first half of the year foodservice, and in turn, butter demand, could languish.


GDT soared this week, lifting global and CME markets along with it on Tuesday. Prices faded into the end of the week as news that China’s December 2020 imports were less than 2019. As spot prices moved up, traders availed themselves of the opportunity to transact with volumes reaching 33 loads traded. While some are reporting that overseas’ demand is strong, there is still plenty of product available to the spot market. That said, GDT SMP reaching $1.471/lb. – will likely support markets in the upper teens low $1.20s for a time. However, ample milk supplies and higher output headed into the spring could cap a price run.

Oceania weather turned, which may be why those dependent on New Zealand powder are willing to bid up markets. While shipping container scarcity continues to hinder US exports. Both items helped lift market sentiment and prices. However, at the end of the week, markets learned that in December 2020, China’s SMP imports fell 3.3% below 2019 levels – that was the first YoY decline since August. In total, China imported nearly 57 million pounds – the third-highest December on record. Despite reports of a brewing trade dispute, China imported more SMP from Australia, making it the largest trade partner that month. Imports from New Zealand fell 32.9% behind 2019 volumes.

Whey & Lactose Products

Spot CME whey prices remained in the 50s this week, reaching the highest level since October 2018. Dairy Market News whey prices are lifting but have yet to breach the 50-cent level. Robust demand from China continues to provide support for whey, lactose, and permeate. Most expect that to continue as China sustains its commodity purchases – corn, soybeans, and whey to support its hog herd.

China’s December whey imports grew nearly 34% vs. 2019. In total, China imported 128.4 million pounds, as its hog her continues to recover. Imports from the United States accounted for 39.4% of the total and 5.4% more than the previous year. Reports are surfacing that a new variant of ASF is starting to spread in China related to illegal vaccines.