Weekly forecast update, Nov. 12, 2021

Forecast updates

  • For this forecast, modified outlook for the following products:
    • Increased 2022 Cheddar block and barrel forecasts. Given current commercial disappearance and prospects for higher Q1, 2022 exports could keep markets supported.
    • Increased 2022 CME butter – modest increases given current stocks and drawdowns that could reduce carry-out stocks. Similar to cheese, more exports could keep stocks from building at the pace of the past two seasons.
    • Increased whey slightly through Q1 2022 – current exports and China’s demand for whey could keep prices elevated. That said, the Chinese government is recommending reducing unproductive sows – this looks to be an attempt to remove “speculators” from the market.

Fluid Milk Market

The biggest news this week, China’s milk price drifted lower – dropping 0.03 yuan in October to 4.31 yuan/kg. Historically, China’s milk price is a key indicator for milk powder demand – when it increases, it can cause world milk and dairy product prices to rise; the converse is also true. Primarily, China is the world’s largest dairy importer, and no other country can absorb all of the excess product when that nation slows imports. While China’s milk price has stopped increasing and reports indicate that consumer demand has slowed, China’s milk production gains are slowing so that less milk is headed to driers making the prospects for further imports likely.

Domestically, processors are reporting that milk and components have been slow to respond to cooler weather. Similarly, many are saying that bottling demand remains elevated. That is keeping milk balanced with discounts at bay. At the farm level, many are reporting that higher costs and production limitations are making adding milk, for now, less profitable. Further, some dairies are still adjusting rations to mitigate higher costs – all things that could negatively impact supply.

Next week will be a hefty shipping week ahead of Thanksgiving – that could keep bottling busy to meet retail demand. Most expect this to be the most expensive Thanksgiving in history, but analysts forecast the celebrations to be more elaborate.

Cheese Market

CME cheese markets reverted to former trends, with blocks carrying a substantial premium to barrels. Cheddar blocks averaged $1.7455/lb, up 11.1¢ compared to the previous week. Cheddar barrels averaged $1.531/lb, down 6.95¢. Barrel trading picked up 40 loads trading compared to 26 the last week. That widened the block-barrel spread to 11.45¢ with blocks premium to barrels. Similar to spot markets, futures are trending lower this week, with prices through April dropping below the $1.80 mark again. However, prices are still forecast above previous years – given exports and recent commercial disappearance seem reasonable.

Ceres estimates commercial disappearance at 1.07 million pounds for September – 1.83% less than the same period last year, but comparable to the five-year average of 1.03 million pounds for that month. While less than a year ago, year-to-date commercial disappearance is still running 3.6% higher than a year ago levels. This year cheese consumption eclipsed by 330 million pounds – more than the nearly 300 million added by the new Michigan cheese plant. That could support prices next year as the market, absent Uncle Sam, was able to consume all of the incremental production. With that production no longer incremental – it could lead to higher prices.

Butter Market

CME butter markets eased from recent highs but remained in the mid-190s this week. Trading picked up also. In the end, CME butter averaged $1.9625, 1.45¢ compared to the previous week. Like cheese, butter, and high butterfat products are headed to retail shelves next week in preparation for the Thanksgiving holiday. That could keep cream multiplier elevated and churning limited beyond what is necessary to meet commitments. Next week will likely mark the peak of demand, with orders subsiding from that point forward.

Blackbox Intelligence released restaurant same-store sales and foot traffic results for October – at +5.96% and -6.36%, respectively. That was consistent with September’s performance. The report suggests Halloween falling on Sunday could have had a modest impact on the sales. The key takeaways with the report – forecasts suggest restaurant sales slow further in November. Same-store sales are better than last year and even pre-pandemic levels. Foot traffic improved, but improvements seem to have stalled out with news of a new Covid-19 winter surge – that could cause further gaps this winter.


World NDM/SMP prices have converged with EU-27 prices still holding a modest premium to New Zealand and the United States. CME spot prices moderated somewhat this week but remain elevated. This week CME NDM averaged $1.562/lb – 0.23¢ less than the previous week on 16 trades. Futures ended the week modestly lower. Again, Global Dairy Trade will be on Tuesday, and most will look to that for nearby price indications. New Zealand milk futures are currently forecasting over NZ$9/kg milk solids – that would be a new contract high. WMP volume is unchanged from the forecast but less than volumes for the same week last year. SMP volume is 7.6% higher than last year.

Weather in New Zealand moved from wet to dry over a fortnight. Pasture dried out, and soil moisture dropped, and South Island dairies to turn on irrigation. That is typical in La Nina weather cycle years where the atmospheric river shifts rain/snowfall to the western United States – the moisture is redirected from the Indian Ocean to the West Coast of the United States – a New Zealand drought could cause prices to move up. When New Zealand has a drought, it tends to lift NDM/SMP prices higher, which could support prices until rain returns.

Whey & Lactose Products

CME spot whey prices moved back to the mid-60s this week, with prices averaging 66.2¢, up 1.4¢ from the previous week. Dairy Market News (DMN) whey prices move up 1¢ also this week for both western and central prices. WPC34, led by strong NDM prices, moved higher. With more robust demand from WPC/WPI markets and solid whey exports – prices could take time to retract substantially. For now, futures project whey prices will remain above the 60-cent/cwt level through mid-2022, influencing Class III milk prices and lifting them higher.