Weekly Forecast Update November 27, 2020

Forecast Updates

  • Adjusted DEC-20 and Q1 2021 prices for spot market changes.
  • Increased CME spot NDM prices for December and January 21.
  • Adjusted December and Q1 2021 whey prices up.
  • No other significant changes this week.

Fluid Milk Market

Ahead of the holiday, milk off the farm was reportedly rising faster as moderate weather and better feed quality combined to lift output-per-cow. Class III milk is finding homes, but with sizeable discounts reported between $5 and $7/cwt. This week there were also discussions of dumped milk in the Midwest for those unable to find a willing buyer. In the East, milk headed to bottling picked up ahead of the holiday, but school closures could cause demand to retreat next week.

Despite forecasts of lower prices on the horizon, milk is rising and could increase faster at the beginning of next year. There are rumblings that cooperatives could reinstate sizeable discounts in regions where milk is excessive. Throughout the nation, discussions of depooling and the new Class I formula continue to ramp up. Given the cost to dairy producers this year, 2021 could bring a desire to address some of the shortfalls with the latest federal order change.

Cheese Market

CME Cheddar blocks and barrels lifted during the shortened holiday week trade. After retreating to the upper $150s last week, blocks recovered to the upper $1.60. That resulted in a weekly block average of $1.6733/lb, down 4.12¢ vs. the previous week’s average despite the price recovery early in the week. Barrels averaged $1.4075/lb., up 0.3¢ vs. last week after trading 22 times this week. Barrels appear readily available, with some finding their way to Chicago. The same could be said of 640# blocks – those also are reported easy for buyers to obtain. 40# blocks may still be less available at this point in the market. Orders are slowing compared to prior weeks across most channels – that could be the result of the anticipated price reset next week – or slowing demand given fewer government orders in the system.

There was limited domestic data this week – USDA will release data after the holiday. Cheese exports are becoming a larger portion of U.S. cheese annually. With the recent drop in markets, there are reports of more export bookings for Q1 2021. In October, China’s cheese imports totaled 18.5 million pounds, which was 0.8% less than year-ago levels, with most of the product coming from New Zealand. Imports from the United States doubled in October compared to year-ago levels. New Zealand’s cheese exports declined to 57.9 million pounds in October and 7% less than last year. The largest declines resulted from fewer exports to Australia, Indonesia, and Saudi Arabia.

Butter Market

CME butter markets declined again, making these the lowest pre-holiday prices in over a decade. Prices picked up on Wednesday when 44 loads changed hands. While a sizeable figure – still well off the record volume traded in a single day. In the end, prices averaged $1.3292/lb down 3.73¢/lb. Frozen butter moving through commercial channels still has considerable age suggesting surpluses exist and that prices could remain under pressure. This week more cream will head to churns as fluid bottlers shut down operations during the holidays. That, in turn, will likely send more butter to warehouses as the holiday season looks to fulfill its final demand over the coming weeks. There are several reports that unsalted butter carries a premium due to higher demand and limited quantities.

China imported the most butter for an October on record with volumes totaling 14.3 million pounds – that was 59% more than a year ago. That was well above the five-year average of 9.8 million pounds for that month. Most of the butter came from New Zealand. New Zealand exported 78.6 million pounds, 12% less than a year ago on lower exports to the Philippines and New Zealand.


NDM prices remained in a tight trading range throughout the week, with prices pushing back above $1.09/lb. by Wednesday. Trading volumes picked up on Tuesday and Wednesday, up 11 loads each day. There are some signs that orders could be slowing as more milk is expected to head to driers over the next few weeks. Seasonally, there are just a few more weeks before shipments headed to Mexico slow down in response to the final holiday weeks of the year. All of that could cause stocks to build for a time. Class II demand is also reportedly slowing, and that too could cause more milk to move to driers.

China continued to import more milk powder in October, with WMP imports totaling 80.3 million pounds and 23.9% more than year-ago levels. New Zealand accounted for most of the imports, but the largest increase came from Australia and Uruguay. China imported 56.1 million pounds of SMP in October, which was 29% more than a year ago.

At the same time, New Zealand exported 59.9 million SMP pounds – 7.4% less than a year ago. While total exports were lower, New Zealand exported more product to China and Taiwan, reducing volumes elsewhere. That could bode well for U.S. export prospects in early 2021. New Zealand exported 278.5 million pounds of WMP, 3.4% less, with shipments to all countries declining.

Whey & Lactose Products

CME whey prices remained consistent, with prices averaging 43.25¢/lb. this week, that was 0.65¢ more than a week ago with just a single load trading. Dairy Market News whey, lactose, and WPC prices were all stable and unchanged this week. Most data remains supportive of nearby markets – that could shift as 2021 approaches, but markets appear comfortable at current prices.

China’s whey imports did little to wave markets off of current or even higher levels. In October, China imported 121.8 million pounds of whey – that was 55% more than the same period last year. While China has successfully rebuilt its hog herd to pre-African swine fever levels, the sows’ quality remains in question. That could keep imports of whey, lactose, and permeate flowing into 2021, absorbing some of the new capacity that would be available to the market. Imports from the United States jumped 73% above prior-year levels.