Weekly Forecast Update November 13, 2020

Forecast Updates

  • It is adjusted for spot market changes.

Fluid Milk Market

Milk supplies remain better-than-year ago levels throughout much of the country. There are some reports that Class III milk in the Midwest is carrying hefty discounts to move milk. Some milk may be headed to driers vs. cheese vats as processors avoid building inventory as markets are falling – something that could result in sizeable write-downs headed into the end of the year.

Cheese Market

Cheese markets continued an accelerated decline this week, with November likely to set a record for price losses in a single period. CME blocks averaged $2.1505/lb. down 44.65¢ vs. the previous week. Since the beginning of November, blocks have lost 86.25¢. CME barrels averaged $2.003/lb., down 36.8¢. Like blocks, barrels have shed 92¢ since the start of the month. The block-barrel spread widened to 14.75¢ for the week – still, that is relatively small compared to some weeks this year. Barrels ended the week in the $1.61/lb. with a hint that prices could breach the $1.50s yet this week. So far, trade volumes have been low compared to recent months.

Ceres estimates US cheese commercial disappearance for September improved to 1.08 billion pounds, up 2.6% over the previous year. Still, year-to-date disappearance is 0.5% less than the same period a year ago. Once again, September reflected a few items – first and foremost, there was more government order fulfillment at that time. Year-to-date demand, at less than year-ago levels, given the level of government buying, suggests weak consumptions figures that could become a bit ominous at the beginning of 2021 as new cheese capacity heads to its potential and government spending, so far, looks to be ending as no new funds have been allocated and Section 32 awards have stopped.

That would be the first time in nearly two years that there is no government spending, and that could let cheese prices tumble. While that works for exporters, it could come as quite a shock to dairy producers who have benefitted from higher prices over the past few years.

Butter Market

CME butter markets remained in their tight trading range this week, with prices moving between $1.40 and $1.46. Butter experiences weakness and more sellers when prices surpass $1.45 and quickly find support when prices reach $1.40. Butter prices averaged $1.4342/lb., up 0.6¢ compared to the prior week with 25 loads changing hands –very similar performance to last week. Retail demand could be robust this holiday season, but as states begin to increases Covid-19 restrictions, restaurants and bars are the first establishments to see reduced hours, once again reducing foodservice demand. The limits are causing consumers to stockpile groceries again, causing demand to exceed already lofty expectations. Cream markets were a bit weaker this week with multipliers declining and more product headed to churns – that was a bit earlier than expected.

Ceres estimates US butter commercial disappearance at 161.1 million pounds in September, which is 2.3% less than a year ago. Still, year-to-date demand is 2.3% ahead of the same period last year. The stronger retail pull during Covid-19 created a large year-over-year gap, but demand slowed as people started moving around again. While demand remains positive, it is insufficient to consume the butter readily available in warehouses throughout the country.  That is a likely explanation for the lowest butter prices headed into the holidays since 2013. That could bolster demand this holiday season, but again, it may not be enough to offset the losses from foodservice. Presently, state governments are starting to limit Thanksgiving gatherings – that could have an impact on demand.


NDM prices increased through the end of the week, lifting the weekly average. Still, prices are off recent highs as news from overseas remains mixed. US NDM prices increased 1.5¢ to average $1.0855/lb. on 17 trades. Markets still expect less US NDM production as the St. John’s cheese plant comes online; however, prospects of more EU-27 SMP weigh heavily on markets. Add to that reports that China’s milk production is running 8-10% ahead of the same period last year, and markets are confused. The spot market seems to reflect unsettled markets.

There is bipartisan agreement on issuing more stimulus to deal with the economic blow dealt by Covid-19. However, the devil is in the details, and there is no agreement about how much money should be allocated, and some pundits are saying there could be no vote during the lame-duck session. That could be like the rug being ripped out from under dairy markets come January 1 when USDA support evaporates.

NDM commercial disappearance in September was nearly 86% more compared to last year. Still, year-to-date commercial disappearance appears nearly one-third less than a year ago. Although exports slowed in September, domestic demand picked up the slack –which makes some sense given the lower demand throughout the summer and a likely need to restock.

Whey & Lactose Products

CME spot whey prices lifted this week as markets remain balanced and overseas demand for various whey products remains positive. CME whey averaged 42.7¢/lb, up 0.8¢. Dairy Market News (DMN) whey prices increased this week vs. last week. At the same time, DMN reported lower lactose prices again. According to reports, lactose sales for infant formula and contracts remain consistent; however, spot demand is faltering, causing prices to decline.

US whey commercial disappearance fell back 26.5% in September compared to last year – despite much more substantial demand from China in recent months. Year-to-date whey commercial disappearance is still 18% less than last year. WPC disappearance picked up to 1.4% more than last year, while WPI was an enormous 57% less than year-ago levels in September.

Our mailing address is:

Ceres Dairy Risk Management LLC

PO Box 2440

Sun Valley, ID 83353-2440