Weekly Forecast Update – Oct. 6, 2023

Forecast updates


  • While the data remains largely positive for cheese demand, sellers continue to place sell-side pressure on the market.
    • As a result, Ceres reduced the Q4 2023 and Q1 2024 forecast and widened the block-barrel spread.
    • There are some concerns about foodservice demand that could slow needs at the end of the year. But the jury is still out on consumer spending as reports indicate despite inflation, higher interest rates, more debt, and falling savings rates, consumers continue to spend at a breakneck pace. That could bode well for the holiday demand season this year. Additionally, President Biden forgave another round of student loans this week.
    • Although there is reason to be optimistic about demand, and given it is the USDA bid season for the 23/24 fiscal year, sellers continue to offer more cheese at the CME.
    • Even more compelling August US cheese production slowed, falling 0.2% behind last year’s pace.
    • Despite all of that news – the spot market will impact fall prices and for now that seems to be keeping prices near current levels.


  • Butter prices continue to set records in early October. Production in August slowed, down 2.1% compared to last year, and stocks were up nearly 4% – the lowest YoY gap this year.
  • Bulk butter remains tight, and brokers are aware of that fact. As a result, there is little fear that bidding the markets higher will result in ownership – at least for a few more weeks.
  • This year, +$3/lb butter could last a few weeks, but it will take a toll on demand and could cause the cream to start moving back to churns in late October – early November as it did last year.
  • Ceres increased the Q4 2023/Q1 2023 forecast – but the expectation is that 2024 prices could be higher than this year through most of the year as more butterfat has been converted to American-style cheese.


  • No significant change in expectations this month and as a result very few changes to the forecast.
    • US NDM production fell 15.2% behind last year’s pace in August, which has been supported by anecdotal reports suggesting new product is hard to come by.
    • SMP production was also lower, indicating less milk headed to driers.
    • NDM stocks were nearly 15% less than last year in August – but the days of production on hand was 73 days – suggesting that some of this product has been on hand for a bit.


  • No significant changes to expectations. For now, prices are rangebound. Presently, the Ceres EU-27 whey price is significantly lower than EEX futures – that may be something to monitor as that could support 2024 prices.

The forecast result was a disparity between Class III and IV milk, with Class IV milk holding a premium. Class III milk’s impact on farm incomes could be problematic. Further, history suggests that the gap between those prices doesn’t last as long as forecasts tend to project. That would suggest that cheese prices could be prone to upward movement in 2024.

Milk Market

USDA announced the September Class III milk price at $18.39/cwt – up $1.20/cwt from August, but $1.43/cwt less than a year ago. Class IV was $19.01/cwt – up 18¢ from August, but $5.54/cwt less than a year ago. Not much has changed this week – except moderating weather has some expecting milk production to pick up. Milk is still tight in parts of the country, but given the heat and humidity is subsiding, that could help lift production. At the same time, base plans are ramping back up – that could have an opposite impact. Overseas, China’s August milk production fell further behind last year, with a 1% gap opening up. The nation’s milk price slipped again to 3.74 yuan – the lowest since August 2020. Lower milk prices could cause milk to continue to contract – which may recalibrate imports in 2024.

Cheese Market

There is some scuttlebutt that barrel cheese shipments from western states have become sporadic with some disruptions to shipping schedules. That has some market participants speculating that it may bring more barrel buyers to the spot market compared to recent weeks and may help explain some of this week’s market dynamics. This week, CME blocks prices eased through mid-week before finding some price support. Blocks averaged $1.7015/lb, down 4.5¢ from last week. Barrels averaged $1.5530, up 3.45¢ from the prior week. Blocks and barres moving in opposite directions caused the spread to contract to 14.85¢ this week. There are concerns that consumers are continuing to trade down, seeking more cost-effective retailers. At the same time, private label promotion has been somewhat limited so far this year.

US cheese production totaled 1.15 billion pounds in August – 0.22% less than a year ago. That caused YTD cheese production to total 0.2% more than a year ago. Interestingly, cheese production from central states like MN, SD, IA, and NM slowed vs. last year. Output in California was back on the plus side. Most gains came from ID, WI, OH, PA, and NY. Cheddar cheese production was 314.4 million pounds – down 1.2% vs. last year. Other American-style cheese increased by 3.5% to 144.4 million pounds. Mozzarella output total 380.4 million pounds – down 0.91% – the second time in the last eight years that YoY output was lower in August. California’s Mozzarella production was lower by 0.4%.

US August cheese imports totaled 41.8 million pounds – 6.3% more than a year ago. That took YTD imports up 0.7%. While imports were higher, volumes from Italy fell 24.3% less than last year. Imports increased from Lithuania, France, the Netherlands, Spain, etc. US August cheese exports totaled 82.3 million pounds, 3% less than a year ago. That kept the YoY gap at 5.9% less than a year ago. Fresh cheese exports totaled 18.5 million pounds and 16.3% less than a year ago, and Cheddar cheese exports were 11.7% lower. Grated cheese exports made up the gap with volumes 91.7% more than a year ago. Higher exports to Mexico, Australia, and Japan were nearly above to offset losses to South Korea, Chile, and Saudi Arabia.

Butter Market

CME butter prices settled above $3.50/lb for the first time. Throughout the week, traders bid markets higher on a single trade. On Friday, two offers were left on the board for the first time since Sept. 11. Futures are skeptical of recent cash price appreciation and have been slow to follow. CME butter averaged $3.4355/lb – up 20.45¢ from the previous week. The higher spot prices move, the more concern that the swift descent could be as impressive as the ascent. While OCT23 futures moved higher at the end of the week, NOV23 forward declined. That has opened a gap between the two months of 28.5¢ discount – with another 30.5¢ from NOV23 to DEC23. Those discounts could discourage cream demand for any production without a firm commitment before the end of the year – in other words, cream may head back to churns in a few weeks – at that is what markets forecast.

US butter production totaled nearly 140 million pounds in August 2023 – 2.1% less than a year ago. That was the first YoY output decline this year and a complete reversal from Q2. That caused the YTD gap fall to 3.6% more than a year ago. California’s butter production was nearly 4% less; Pennsylvania was down 24%. August’s butter production has fallen behind the previous year for the past three years. With butter production approaching its annual low, it appears possible that output could slow further. While there were other indicators that butter prices could lift, the August production data shows that bulk butter was and remains tight-headed into the demand season.

Less impact this year is US butterfat trade. US butter exports totaled 5.5 million pounds, 68.7% less than a year ago on lower volumes to North America. US butterfat imports totaled 13.1 million pounds, 10.5% more than a year ago on higher imports from New Zealand – not much change in US trade balance from earlier in the year.


NDM spot prices pulled back through mid-week, but prices picked up again on Friday. CME NDM prices averaged $1.170/lb. up 1.15¢ from the previous week. On Tuesday, the Global Dairy Trade (GDT) auction milk powder prices increased – erasing Q3 2023 losses. SMP ended up 6.6% $2,558/lb ($1.16/lb). European prices also firmed throughout the week. Prices appear to be forming a bottom as plots of weekly global SMP prices show that prices could head higher from here. Most of the news this week was supportive to prices. Interestingly, firming spot prices appeared to cause 2024 vs. 2023 futures prices to lift.

US August 2023 NDM production was 113.4 million pounds, down a whopping 15.2% compared to last year. YTD production is 0.3% more than a year ago. That compares to volumes up 5-8% in Q2. At the current rate, NDM/SMP production could fall behind last year’s pace by the end of Q3 2023. California’s production was down 27% vs. last year; Wisconsin was down nearly 20%; Pennsylvania was up 8.7%. Again, output is headed to its seasonal low, which could cause output to fall even further before the end of the year. SMP production was 57.2 million pounds, down 12.7% compared to last year. MPC production was 13.7 million pounds, down 4.96%. The lower YoY across the board suggests less milk is headed to driers as of August, causing the declines.

US Manufacturers’ stocks total 266.6 million pounds as of August 31, 2023, down 14.8% compared to last year. The MoM stock decline from July to August was less than normal, suggesting that the declines resulted from less product moving into storage, but also, stocks on hand are slow to leave. That is supported by the NDM days of production on hand jumping to 73 days. That means less product is headed to warehouses, but at the same time, there may be some age on the product on hand. Given fewer products moving in – it seems a matter of time until those stocks clear out to supply current needs. Fewer stocks could cause prices to lift.

In August, US NDM/SMP exports totaled 150.6 million pounds, 4% more than a year ago. That brought YTD exports up 0.3% more than a year ago. Volumes to Mexico were 6% more than a year ago. Exports to Indonesia, Vietnam, and Honduras increased. That offset declines in Malaysia, China, Panama, and the Dominican Republic.

Whey & Lactose Products

Whey prices remain range-bound. Prices pulled back earlier but have picked up through Friday. EEX whey futures project 2024 whey price between 35 and 43 cents seems to feed into CME whey futures, providing modest support as the whey price has increased from the upper 30s to 40 for next year.. CME whey averaged 29¢, down 0.7¢ from the previous week. DMN Central mostly whey averaged 31.5¢, up 1¢ from the previous week. Western mostly whey averaged 34¢, up 0.5¢ from the previous week. Lactose prices eased this week for the first time in weeks, up 0.75¢ to 23.25¢. EU whey prices are reportedly steady, indicating mid-30s by Q1 2024.

US August whey production totaled 83.4 million pounds, 10.7% more than last year – Wisconsin whey output dropped; New York production increased vs. last year. This was the first YoY increase for August since 2019. US WPC (25-49.9%) production totaled 13.6 million pounds, 21% more than last year. WPC (50-99.9%)production totaled 26.7 million pounds, 11.9% more than last year. WPI production totaled 9.4 million pounds, 10.8% less than last year.

US whey stocks totaled 88.7 million pounds on Aug. 30, 2023, down 32% vs. last year. US WPC (25-49.9%) stocks totaled 34.7 million pounds on Aug. 30, 2023, up 55.% vs last year. US WPC (50-89.9%) stocks totaled 47.3 million pounds on Aug. 30, 2023, down 4.9% vs. last year. US WPI stocks totaled 21.4 million pounds on Aug. 30, 2023, up 3.6% vs. last year.