Weekly forecast update – May 30, 2022

Milk Market

USDA released April milk production at 1% less than the previous year. That was quickly followed by New Zealand and Australia reporting April milk production down 5.6% and 6.6%, respectively. Global milk production continued to lag last year, supporting prices at above-average levels. Germany has still not reported March milk production figures yet. Weather, fewer cows, and retirements keep milk output in check. Still, there are some expectations of improvements over the summer should milk prices remain elevated.

Cheese Market

After a run higher last week, Cheddar blocks and barrels reset – wiping out earlier gains. Cheddar barrels averaged $2.3115/lb, down 10.15¢ and the lowest weekly average in May. Cheddar blocks averaged $2.316/lb, down 5.8¢. The block-barrel spread was a minimal 0.35¢ this week. In turn, 2022 futures pulled back also. There have been some reports that sales slowed ahead of the Memorial Day holiday.

US cheese stocks totaled 1.481 billion pounds on April 30 – 2.2% more than the previous year. American cheese stocks totaled 836.3 million pounds and 1.2% more than last year, expanding by 8 million pounds between March and April – comparable to the proceeding five-year average excluding 2020. US cheese stocks grew by 14.9 million pounds over the same period – 14.6 million pounds.

In overseas’ news, China’s cheese imports were 24.2 million pounds in April and 28.5% less than the previous year. That total was still higher than the five-year average for the month but off last year’s pace. For a while, there have been suggestions that the widespread lockdowns have taken a toll on foodservice demand and, with it, cheese. Grated cheese was much lower – a category containing pizza-type cheese. Losses were across the board; however, Denmark reported the most significant declines.

Butter Market

CME spot butter and futures prices increased throughout the week. Reports have been that some processors require more butter, and some have been sourcing the product from the CME. Some expect more cream to head to churns ahead of the Memorial Day holiday – that could last into the following week. CME spot butter averaged $2.8825/lb, +8.65¢ compared to the previous week. While more milk may head to processing over the next few weeks, the cream should start to move to ice cream processing in more significant quantities once Memorial Day passes.

US butter stocks totaled 299.6 million pounds on April 30 – 23.2% less than last year and below analysts’ expectations. April stocks have been closer to 332 million pounds in the past five years. Stocks are still building seasonally. The March to April build was 17 million pounds – compared to 34.2 million pounds over the last five years. Excluding 2020 – that build is more like 25.2 million pounds. Consider that pre-pandemic April 2019 stocks totaled 290.8 million pounds, which is somewhat comparable to current levels.

Also, this week, China reported April’s butterfat imports at 27.3 million pounds and 19% less than last year.  Fewer imports from New Zealand accounted for half of the declines. Imports from the EU-27 dropped by 927/MT, accounting for a third of the decline.

NDM/SMP

CME spot NDM prices increased throughout the week – prices reached the mid-180s for the first time since early April. Spot CME prices averaged $1.8365/lb – 7.35¢ more than the previous week. Futures also increased, with prices averaging above the $1.80 mark through the end of the year. As Northern Hemisphere milk production eases, that could provide price support as it will take until October for Southern Hemisphere products to be available to the market.

New Zealand SMP exports totaled 58.2 million pounds in April, which was 20.7% higher than last year’s. Anecdotal reports suggest that New Zealand processors are comfortable with protein commitments through the end of the year. Exports to China fell by 24% compared to the previous year. But those declines were more than offset by higher exports to Indonesia, Malaysia, and Taiwan. New Zealand April WMP exports totaled 251 million pounds and 13.8% less than last year on fewer exports to China.

Whey & Lactose Products

CME whey averaged 50.25¢, up 0.4¢ from the previous week. DMN western mostly price was 59¢, down 2¢; Central prices fell 1.25¢ to an average of 57.75¢. The lactose price was 43.75¢ this week, unchanged. European prices are declining this week but slower than the previous week. In part, lower whey prices may explain why the Class III milk is again under the Class IV milk price.

China’s April whey imports totaled 102.3 million pounds – 30.2% less than last year. Imports from the United States increased 11.9% compared to the previous year, offset by declines from France, Belarus, Poland, and Turkey.