Weekly forecast update – Jun. 10, 2022
Forecast Update
- No significant changes – updated for spot markets.
Milk Market
Milk is seasonally rising as spring conditions spread across the country. At the same time, bottling is slowing and manufacturing plants are experiencing unplanned downtime, causing milk to back up quickly in parts of the country and discounts to take hold. Labor remains a weekly note – the lack of drivers and plant personnel is causing milk and fluid products to get discounted and having a hard time moving between locations. After April’s lower output there are some reports suggesting that milk may have recovered in May and could be expanding in parts of the country suggesting prolonged higher milk prices may finally start to impact YoY output.
China’s milk production in April was reported 5.8% higher than last year. That along with slowing fluid milk sales caused prices to retreat again in May – down 5% from the high. Presently, China’s milk prices are following the price trajectory in 2014 – an early signal to a significant global price reset lower. That has markets paying attention.
Cheese Market
CME cheese prices traded erratically this week. Blocks recovered while barrels lost ground. Barrels traded as high as $2.305/lb for a day before dropping back again. In the end, CME barrels averaged $2.2585/lb – down 2.09¢ from the prior week. Blocks averaged $2.273/lb – up 1.99¢/lb. Both prices were under some pressure by the end of the week. Anecdotal reports suggest there is more spot cheese available to the market than in previous weeks – that may be the culmination of weeks of slower retail trade. Foodservice and exports remain strong and are expected to do so through the end of Q2.
US cheese exports continue to increase compared to last year. In April, US exporters shipped 91.7 million pounds overseas – that was 2.4% more than the previous year. Cheddar cheese led the increases with exports double last year’s export volumes – that offset decreases in other categories including grated and fresh cheese. Higher Cheddar exports and lower output help explain the recent tightness and higher prices. Exports to Chile, South Korea, and Australia dropped. Much higher exports to Mexico, Japan, Central America, and SEA more than offset those declines.
US cheese imports totaled 34.8 million pounds – 9.4% higher than the same period last year. That was the highest imports for April over the last decade. Imports from Italy, France, and the Netherlands drove the higher results.
Butter Market
For the first time since September 2015, CME spot butter prices reached the $3/lb mark. In that year, prices stayed above $3/lb for four trading sessions – prices peaked at $3.135/lb. In 2014 prices were above $3 for 11 sessions. This week prices sustained two trading sessions at $3 before declining on Friday. CME butter averaged $2.979/lb – up 7.4¢ higher than the previous week. Anecdotal reports indicate that cream moved away from churns this week as Midwest cream multipliers jumped up week over week.
US butterfat exports totaled 15 million pounds in April – 37.7% more than the previous year. Exports to Canada, Mexico, and South Korea continued to push higher with Mexico and South Korea at 6.6 and 5.7 times the same period last year. Exports to the Middle East faltered with volumes dropping compared to last year. Stronger exports continue to support the domestic price as there is more competition for US butterfat.
US butterfat imports totaled 15.8 million pounds – 44.5% more than the same period last year. Imports from Ireland fell by 15%. Imports from India were 7.4X the comparable period last year – an indication that processors are looking at overseas AMF. A switch to overseas butterfat could cause butter stocks to rebuild by the end of the year.
NDM/SMP
CME NDM prices pulled back on Friday after rising to $1.885/lb on Wednesday. CME NDM averaged $1.872/lb up 0.58¢ from the previous week. Prices started to ease as soon as information about the declining Chinese milk price began to spread through the industry. For now, China’s reduced participation in the June 7 GDT also shook market confidence. GDT price results were within expectations with SMP rising 3% and WMP prices eased 0.3%. For now, SMP/NDM prices could remain in a tight range with slowing global milk supporting prices and moderating demand from China creating a nearby ceiling for prices. In the next few weeks, markets will look to the Algerian tender to see if prices hold or decline as the next step price direction input.
US NDM/SMP exports totaled 164 million pounds in April – that was 5.9% less than the same period last year. Exports to Mexico were 6.3% less than last year. Exports were mostly higher throughout Southeast Asia except for Vietnam where volumes dropped 42% below the previous year. The largest single decline was Egypt – 95% less than last year; followed by Algeria fell 100%. Exports remain consistent with US production – suggesting some of the declines could be related to lower output and less product on offer.
Whey & Lactose Products
CME whey averaged 53.7¢, down 0.93¢ from the previous week. DMN western mostly price was 59.2¢ up 0.2¢ from the previous week. Central prices were stable at 57.5¢. The lactose price was 44¢ this week, up 0.25¢ from the previous week. European prices were mixed again this week. Despite the lower spot markets futures increased compared to the prior week.
US whey exports totaled 37.5 million pounds – down 19% compared to last year. The YoY gap remains consistent and a likely ceiling on nearby prices. US WPC (<80% protein) exports were 28.9 million pounds and 24% more than last year. US WPC/WPI (>80% protein) exports were 12.3 million pounds and 4.8% higher than last year.