Weekly forecast update July 23, 2021

Fluid Milk Market

USDA announced the August Class I price this week at $16.90/cwt, which was 52¢ less than July on lower Class III values. Class II advanced skim is $10.37 for August. In July, weaker spot markets caused August’s advanced price to fall. Anecdotal reports from across the country indicate the demand for bottling plants is low. Many are curious how the 2021/22 school year begins, given the spread of the delta-variant of Covid-19 and the inability to vaccinate children under the age of 12. That said, the Center for Disease Control (CDC) so far maintains that children fare better than adults and that use of masks and social distancing again this year could mitigate the spread of the disease this fall. All of that said, many believe the beginning of the school year is less than clear, and that could have implications for dairy products this fall.

USDA released US June milk production at 18.96 billion pounds and 2.9% more than year-ago and seasonally 1.4% less than May. The YoY gap, while expansive, closed compared to May as last year milk production was starting to recover. The US milking herd stands at 9.51 million head in June – 153,000 more animals than last year. Output-per-cow was 1,994 pounds in June and 1.3% more than last year. That suggests that 56% of June’s milk came from new animals and 44% from the higher output. While on-farm margins are deteriorating as costs are rising while milk prices are easing, it could take months to slow milk down, given the current size of the herd.


CME spot cheese markets were a grudge match this week, with buyers and sellers pushing the market to and fro throughout the week. Barrels spent most of the week in the $130s but seemed to find some support by the end of the week as buyers returned to Chicago a bit more forcefully on Friday. Blocks retreated but managed to fend off further mid-week declines. While prices picked up on Friday, they fell short of returning to Monday’s price level. The USDA Cold Storage report may be responsible for the end-of-week turnaround that caused prices to recapture lost ground and move higher. CME blocks averaged $1.57/lb, 12.7¢ less than the previous week on a single trade. Barrels averaged $1.3965 and 16.8¢ lower than the prior week, with 35 loads changing hands.

The Cold Storage reported a modest cheese stocks build for June that surprised many. Given fewer government orders, higher output, and questions about exports, the accumulation was less than expected. US cheese stocks totaled 1.434 billion pounds on June 30, which was 1.3% more than last year, but 2.1% less than May. American cheese stocks totaled 809.4 million pounds, 2.6% less than May but 2% more than last year. That suggests most of the build was American-style cheese suggesting that Italian – including frozen Mozzarella and Parmesan likely declined given the data.


It was Cold Storage report week, and CME butter markets were unable to shake the pattern so far this week; prices tend to dip. Prices dropped on Thursday, but the weekly average edged out the previous week. CME spot butter prices averaged $1.7085/lb – up 1.25¢ with 20 loads changing hands. While butter prices declined, some reported that components are dropping in milk and that cream markets have stabilized this week.

The Cold Storage report provided some bright spots; however, it proved again the United States has been unable to chip away at the 55 million pounds of butter added in April 2020. Butter stocks totaled  414.5 million pounds as of June 30, 14.4% more than year-ago levels and 3.2% higher than May. So far, stocks have not yet peaked – that is likely in July if seasonal patterns hold. While the overall stocks caused prices to slip, the data suggests that current supply and demand are balanced, but it will take more to reduce the pandemic caused accumulation.


CME spot NDM prices retreated to $1.23/lb before recovering into the end of the week. The Global Dairy Trade (GDT) whole milk (WMP) and skim milk powders (SMP) dropped despite lower volumes on offer. The auction was swift, and few buyers were willing to pay up for the product. That sent a negative wave through markets. Prices turned higher at the end of the week as news of deadly flooding in China’s Henan province and reports that China’s June imports remain strong. Henan accounts for 7-8% of China’s annual milk production. The region received a years’ worth of rain in three days.

China again surpassed expectations with its June SMP and WMP rocketing past last year’s levels. China imported 34,268 MT (75.5 million pounds) of SMP in June – the most for that month on record. Imports from New Zealand, Australia, and the United States were all higher. The largest increase came from Belarus. Similarly, China’s WMP imports totaled 149.5 million pounds and 89% more than last year and by far the highest monthly volume for June on record. Again, most of those imports came from New Zealand. Most are concerned that China’s demand could decline during the second half of the year – through June, exports are much higher than year-ago levels and some of the highest on record.

Whey and Lactose

CME whey prices were relatively stable this week, with prices averaging 53.65¢, up 0.65¢ compared to the previous week. Western Dairy Market News prices were similar to last week, but Central prices dropped. Lactose was consistent also. Reports suggest that WPC34 prices are holding and that there is still good demand for WPC, which may keep the market in balance. While spot whey prices have been mostly unchanged, US prices are premium to European prices, suggesting that there could be a ceiling. Whey has been a significant contributor to the Class III value – should it start to decline, that would also impact the Class I forecast.

China’s whey imports may not bode well for US prices in the coming weeks. In June, China’s whey imports fell to 121.5 million pounds –22% less than May and 1.8% less than last year. US exports felt the brunt of the declines, with imports dropping 7.4% – imports from Poland fell by 34%. Higher imports from Belarus and Turkey replaced that product. Fewer exports to the largest US whey trade partner could put pressure on prices later this year.