Weekly Forecast Update – May 28, 2021

Forecast Updates
• USDA announced the May Class III & IV prices next week – not updates to May this week.
• Closed May CME and DMN prices.
• Modest changes June and July prices based on markets.
• Given current markets no significant changes this week to the forecast.

Fluid Milk Market
Memorial Day resembles normal this year compared to last year – that is good and bad for dairy markets. Bottling slowed considerably ahead of the three-day weekend, sending more milk to manufacturing this weekend. That could result in some imbalance and modest discounts. At the same time, many report that the spring flush was less than expected, but milk, while plateaued, remains elevated into processing plants. Still, many report bottling plant intake remains muted compared to last year – to the point some are concerned fluid milk consumption declines could accelerate as people get out of their homes this spring and summer. A shift toward bottling can slow milk to manufacturers, especially milk powder plants – but the converse is also true. Some of the reported slowdowns may be a reshuffling of milk supply contracts resulting in similar intake but different suppliers.
Seasonally more milk pushing to processing facilities has dampened enthusiasm and prices. But, given the strength of demand from other categories and international markets – Class III and IV forecasts are still looking higher. Because Class III and IV price forecasts are close –the 74-cents on top of the average more noticeable.

Cheese Market
CME spot cheese prices declined this week, with blocks and barrels losing ground compared to last week. May spot trading volume surpassed April, resulting in the most blocks and barrels traded since December 2020 and January 2021, respectively. Sellers pushed prices back throughout the week but seemed to redouble their efforts on Friday when prices retreated for both products. In the end, CME blocks averaged $1.543/lb., down 7.05¢/lb. compared to the previous week with 36 loads changing hands. Barrels averaged $1.6055/lb, down 3.2¢ on 33 trades. Barrels are still carrying a premium to blocks – 6.25¢. News for cheese remains mixed, with many reporting an uptick in orders since mid-May, but most indicating that cheese was headed to the warehouse and sourcing cheese of any variety, was straightforward. The recent decline in cash-settled futures contracts could make Q3 exports more feasible. Similarly, markets provide carry for spot cheese headed into the warehouse for use later in the year.
US cheese stocks totaled 1.45 billion pounds on April 30, which was 1.08% less than March and 1.73% less than last year. The YoY decline resulted from lapping the previous year’s inventory surge due to the near-nationwide lockdown that caused demand to vanish overnight and cheese to move to the warehouse. American cheese stocks were 831 million pounds, 0.42% less than 2020.

Butter Market
As they have for most months this year, it was Cold Storage week, and CME butter prices declined. CME butter averaged $1.809/lb – that was 4.45¢ less than last week with 20 loads trading. Some reports that cream was harder to market ahead of the holiday – while others reported some improvements vs. last week. For now, the markets are mixed. There are some rumors that ice cream processors slowed processing this week, which may have been why cream appeared to back up quickly. That said, cream multipliers remained ahead of last year – but multipliers did pull back from the previous week. Markets will closely watch the Global Dairy Trade auction on June 1 for price direction.
US butter stocks totaled 385.35 million pounds on April 30 –7.8% more than March and 3.4% higher than last year. The YoY gap closed as butter stocks lapped the previous year’s robust build. That said, stocks are still rising – a possible explanation for falling prices this week.
New Zealand exported nearly 64 million pounds, 22.4% less than year-ago levels. At the same time, exports to China were up 11.3%, exports to the Philippines and Saudi Arabia, and Thailand and Mexico. Declines elsewhere could be related to the higher cost of New Zealand butterfat compared to the United States.

The CME NDM price slipped again this week – still, prices recovered on Friday. Nearby reports of driers filled with milk and slowing orders may have caused buyers to take a step back this week while sellers picked up activity. The market averaged $1.2901/lb. down 1.3¢ compared with the previous week. A total of 23 loads changed hands during the week. Most of the market will wait for the GDT on June 1 before making further adjustments. As reported last week, next week’s GDT forecasted volumes remain unchanged; however, volumes are sizeable and more significant than last year. So far, analysts expect WMP prices to lift on Tuesday, and for SMP to setback – that would imply a result of unchanged or higher would be particularly supportive to nearby prices.
New Zealand SMP exports totaled 46.9 million pounds in April – that was 27.3% less than last year – not surprising based on prices, but something that took markets lower this week. Most of the volume, 32%, moved to China – with exports totaling 15.3 million pounds. Indonesia accounted for 15% of the exports – totaling 7.2 million pounds. The data suggests that China’s imports are still tracking higher than last year, but the YoY gaps have closed.

Whey & Lactose Products
CME whey prices averaged 63.95¢, 0.15¢ less than the previous week on three trades. Demand from China continues to provide good financial support, but upticks in whey production and seasonally higher output could put some downward pressure on markets. The same could be said of lactose – demand was sufficient to keep stocks in balance. As a result, prices were unchanged for the week.