Weekly forecast update – Nov. 3, 2023

Forecast updates

It should be noted Ceres has not yet incorporated FMMO changes into the 2025-2026 forecast. Given the current pace of the hearing, it seems unlikely that there would be any impact in 2024.

After reviewing the latest data, it seems that 2024 is modestly better than 2023, but for many products, there may be little daylight between the figures. While supply continues to support prices, a general lack of enthusiasm and macroeconomic concerns seem to temper price increases throughout 2024 unless something changes. At the same time, some of the woes of 2023 seem less likely to reoccur – like the Class III rout in Q2 2023. But, for now, the forecast expects Class IV to outperform Class III through much of 2023 as butter prices remain elevated and NDM improves on this year while cheese and whey are better, they are expected to be modestly higher compared to this year.

Class III-Cheese-Whey:

It seems unlikely that Q2 2024 will perform as poorly as this year. A year ago, US cheesemakers were flying high with record-setting exports and an expectation of a repeat this year. However, higher US prices compared to significantly lower New Zealand and European prices caused US cheese to stay home, resulting in significant amounts of uncommitted cheese in Q2 that moved to Chicago.

  • This fall, US cheese remains competitive in Mexico and Japan, but New Zealand seems to have dislodged US cheese into Australia and South Korea with little expectation that will change this year as New Zealand pivots away from WMP into China.
  • New cheese plants are slow to bring on commercially viable Cheddar blocks – that could allow others to fill that demand, but it may mean more processed cheese solids on the market in early 2024. Cheese quality should improve, but it still could take time.
  • New capacity may meet expanding per capita demand, making more cheese easily absorbed into the market.
  • Cheese closer to the five-year average may bring back promotion – which could bolster demand.
  • Higher Class IV milk – at the forecast levels – could pull milk from cheese vats tightening up supply later in the year.
  • Increased the whey forecast for 2024 forward – but kept the increases modest. There are demand concerns from China as that nation’s pork industry continues to struggle with margins that could reduce whey demand. Additionally, US stocks remain elevated. Higher WPC80 demand and lower production could keep solids to whey less than this year.

Class IV-Butter-NDM:

  • Class IV prices are forecast 2-3% more than this year. Currently, Ceres’ butter forecast is less than this year, but news that India’s butterfat could be tight at the start of next year may cause prices to lift quickly should New Zealand or European butterfat head to fill those shortfalls.
  • Given higher global butter prices – that could support US prices at higher levels at the end of the year and beginning of next year.
  • With consumers accustomed to higher retail butter prices – there is little to suggest similar butter prices will negatively impact demand. Additionally, more butterfat is moving to cheese as the new plants increase output, as expected in 2024.
  • NDM prices could likely increase given modest supplies and less milk headed to driers in 2024. While China’s WMP demand could remain muted, the world carries fewer stocks than last year, and cheese demand is more balanced. Cheese vats in Europe and New Zealand will likely pull milk away from driers in 2024.
  • While prices are likely to be higher, given SEA and Chinese economies, there could be modest demand and price-sensitive consumers – that could cap serious runs higher.
  • As always, weather will be a wildcard that could impact prices.

Class I-II:

  • This forecast keeps Class II the highest milk price next year and a candidate for de-pooling in most FMMOs.
  • Class I appears to be similar to this year (assuming no FMMO impact). The skim prices in 1H 2024 are lower than this year – but 2H 2024 skim prices are forecasted higher than this year.

Milk Market

USDA announced the Class III and IV milk prices this week. Class III was $16.84/cwt – down $1.55 compared to September. The strong butterfat price, caused the lowest Class III protein price since December 2000. Class IV was $21.49/cwt – $2.40 more than September on stronger butter and NDM prices. That was a $4.65/cwt Class III-IV spread – something that could result in de-pooling in most FMMOs. Futures are forecasting that Class IV remains higher than Class III milk prices through the first half of 2024. Milk is seasonally on the rise. The same thing is happening in Europe according to various reports.

Cheese Market

For a few days, it appeared that CME spot Cheddar markets found some support ahead of the holidays and that prices could appreciate for a bit, but that fizzled by Friday as prices dropped again. Some anecdotal reports indicate western barrels are tight – but 22 spot trades indicate some were available to the markets. Spot Cheddar blocks averaged $1.69 – down 4.95¢ from last week; barrels were down 4.9¢ to $1.6580. The block-barrel spread remains tight at 3.2¢, near assumed levels. The market sentiment remains unchanged – orders are so-so, and there is plenty of cheese around.

US September cheese production was 1.15 billion pounds – 0.15% more than last year. That put YTD output up 0.22% compared to last year – marginal increases at best. American cheese production was 465.8 million pounds and 4.2% more than last year. That likely reflects a slowdown in exports compared to last year. Cheddar cheese production was 314.6 million pounds and 3.1% more compared to the prior year. More focus was on other American-style cheeses, suggesting demand in that category.

Mozzarella production totaled 380.6 million pounds and 1.3% less than last year – that puts YTD output down 0.3% vs. last year – a clear indication of fewer exports. There are still concerns that pizza demand gains will pale compared to the previous few years. Parmesan production fell 22.2% below last year – a sizeable figure and one that would explain higher Cheddar output. That put Parmesan output 1.4% behind last year. At the same time, Gouda output was 23% higher – typically a product that indicates exports.

Butter Market

Spot butter prices unexpectedly appreciated on Monday. That was followed by days of declines, where prices ended on Friday at $3.1075/lb – the lowest since Sept. 25. More cream headed to churns at lower multipliers is causing spot needs for frozen butter to subside as processors can use cream to meet needs. That means more frozen butter will be headed to Chicago. Markets moved lower, with only six loads changing hands this week – most of the declines were from uncovered offers. declines are picking up, and futures are tumbling also. Futures held up reasonably well and seemed to move with the spot markets. CME spot butter averaged $3.19/lb, down 10.65¢ from last week. It will be interesting to see if cream demand picks up a bit this week as prices continue to moderate and November Class II butterfat values are forecast lower. With three significant shipping weeks left in the season before Thanksgiving price declines could accelerate – especially if bulk butter production picks up. Global prices are rising and forecast higher into 2024 – that could support unually high year-end values.

US September butter production totaled 144.6 million pounds, 2.9% more than last year. That takes YTD output up 3.5% higher than last year. But, as a reminder, 2023 reflected a considerable amount of AMF production – while collected by the USDA, it is not reported and continues to impact the YoY comparison. That will change when the Q4 data is reported, as US AMF production slowed considerably last year after October. The YoY gain in September was higher than the last two years but consistent with previous years with fewer exports. That should reflect the annual low, with output rising from here. That production level reflected 57 days of production on hand – a sizeable drop from the previous four months and the lowest since April – equivalent to last year.


Spot NDM prices continued to pull back this week as Dairy Market News (DMN) and international prices increased modestly WoW. Trading volumes were limited, with only two trades this week. Anecdotal reports indicate that demand is present, but the pace has slowed compared to previous weeks. CME NDM averaged $1.1885/lb, down 2.45¢. This week there was a Global Dairy Trade (GDT) Pulse auction that reflected lower WMP and SMP prices – which seemed to temper enthusiasm quickly. Overall, stockpiles of NDM/SMP continue to whittle back and milk production remains lackluster that seems to provide some support. At the same time, so-so demand from SEA and China have markets wary of rising too quickly.

US September NDM production totaled 101.1 million pounds, 17.7% less than a year ago. YTD production is running 1.3% less compared to the same period last year. SMP production was 55.7 million pounds and 18.7% lower than last year. Combined – less milk is headed to driers, likely the impact of lower milk in powder-producing regions, and more milk headed to cheese vats as processors looked to take advantage of modestly higher demand at that point in the season. Some milk moved to MPC – output was 16.3 million pounds and 12.6% more than last year.

Lower production and rising demand caused stocks to deplete quickly in September. But given the estimated 72 days of current production on hand, it seems there is still quite a bit of older NDM floating around. USDA reported on Sept. 30 that manufacturers held stocks at 243.6 million pounds – 10.8% less than a year ago. That MoM decline was less than last year but consistent with the five-year average pace.

Whey & Lactose Products

Whey prices pulled back this week after rising throughout October. Markets may have it a headwind as reports from China suggest the nation’s pork industry hit a rough patch with prices falling on lackluster demand. Lower margins could reduce whey needs in early 2024. CME spot markets averaged 39¢/lb, 3¢ more than the previous week. European prices pulled back this week. Dairy Market News (DMN) western mostly was up 1¢ to 36¢ this week. Central mostly was 39¢, up 5¢ from the prior week. Lactose jumped up to 25.5¢, up 0.75¢ from the previous week. WPC is also rising, up 0.75¢ to 88¢ this week. Whey above 40¢ would cause the Class I and III prices to rise next year.

USDA data supported market reports that good demand in WPC80 and above is helping to reduce stocks. At the same time, slowing whey and WPC 34 production has done little to dent current stockpiles. Sept. 2023, whey production was 76.2 million pounds – .5% more than a year ago. At the same time, stocks were 83.4 million pounds – 24.75% more than a year ago – which suggests the product is slow to move from storage. WPC (25-49.9%) output was 13.8 million pounds – 1.2% less than last year. Stocks were 34.1 million pounds and 34.6% more than last year. WPC (50-89.9%) output was 27.2 million pounds – 10.1% more than last year. Stocks were nearly 46 million pounds and 2.6% less than last year. WPI production was 10.7 million pounds and- 1.5% less than last year. Stocks were nearly 21 million pounds and 1.5% less than last year.