Weekly forecast update, Oct. 8, 2021

Forecast updates

  • Modest changes to the forecast.
    • Due to spot price changes, adjusted October and November prices;
    • Made additional changes to whey and NDM through the end of the year.

Fluid Milk Market

Throughout the country, milk output from the farm is varied. Some regions report improvements as the heat and humidity abate, while others indicate that milk and components remain unchanged. Some are concerned that poor feed quality could cause milk production and components to stay behind last year’s levels. At the very least, in areas that remain dry, reports indicate that alfalfa prices are increasing. That could again put additional pressure on farm margins. Class I sales leveled off for now, and there are some indications that processors are doing some routine maintenance – sending some milk to balancing plants. Still, others are reporting that milk demand is more substantial and keeping balancing plants relatively quiet.

This week, Class III and IV milk futures prices increased to levels not experienced in some time. $17 and $18/cwt milk are likely catching the eye of dairy producers as current price levels should provide a return over increased costs. Globally, milk is slowing relative to last year – which has many concerned that prices could continue to increase.

Cheese Market

Cheddar block and barrel prices reached their highest levels since spring during the first full week of October spot market trading. Higher spot markets lifted futures as well, returning Class III futures above $18/cwt through the end of the year. Cheddar blocks averaged $1.8065/lb, up 0.95¢ from the previous week with seven loads changing hands. Barrels averaged $1.7855/lb, up 9.45¢ with similar trade volumes. Again, reports suggest that CME eligible product is limited and that is keeping markets elevated; however, similar reports suggest that cheese is widely available commercially. All indications are that demand remains elevated.

This week USDA released August cheese production totaling 1.14 billion pounds, which was 0.3% less than July, but 4.4% more than last year. Cheddar cheese output was 318.5 million pounds, 1.8% less than July and 1.5% lower than last year. Western cheese processors shifted to Mozzarella – which suggests higher exports. Mozzarella production totaled 379.4 million pounds, 0.8% more than July and 6.7% higher than last year. That was the largest YoY increase for August over the past five years.

Additionally, USDA Foreign Agricultural Service’s issued US cheese exports that totaled 81.1 million pounds in August – 7% more than July and 25.7% higher than last year. Given the current value of markets vs. 2020, it is little surprise that the US is far more competitive in export markets. Cheddar cheese exports totaled 13.9 million pounds and surged 75% above last year’s volumes to Mexico, and Australia was modestly lower – expanding elsewhere. Fresh cheese exports increased 21.9% above the previous year, accounting for some of the new Mozzarella production. US cheese imports totaled 36.7 million pounds in August – 2.1% less than July, but 8.9% more than the previous year. Imports from the Netherlands (likely a broker), Germany, and Ireland increased. Volumes from Italy declined modestly.

Butter Market

CME spot butter prices erased September increases during the first full week of October spot trading. Butter averaged $1.699/lb, down 5.45¢ from the previous week on 31 trades. While butter demand remains elevated and production has slowed, the market perceives sufficient products to meet holiday demand over the next 45-60 days. The current decline appears consistent with last year’s decline. Markets are somewhat flat – but futures still forecast further declines headed into the end of the year. Anecdotal reports suggest that Class II butterfat demand remains high –keeping cream away from butter churns and lifting cream multipliers above the last two years for the current market.

US August butter output totaled 148.4 million pounds, 1.5% lower than July and 1.7% less than last year. California butter production increased, while other western states, namely Washington, fell (likely due to lower milk output and heat that negatively impacted components in the state). New York and Pennsylvania output fell compared to last year – reports suggest churning dropped due to increased interest in cream from other Class II uses. Central states remain the only region with positive YoY output – up 1.8% vs. last year.

US butter exports totaled 10.9 million pounds in August – 2.7% more than July and 150% higher than last year. US August exports have not been this high since 2013. Given slowing exports from Europe and more robust demand from China consuming more Oceania butterfat – US exports could continue given the significant price gaps to other exporters. The biggest increases were in Canada, China, and South Korea. US butter imports totaled 12.2 million pounds in August – 7.6% less than July but 0.9% more than last year. Imports from Ireland increased 33%; imports from New Zealand surged to 2.9MM pounds, up 2.4MM pounds vs. last year.


CME NDM again pushed higher this week, with spot price reaching their highest levels since fall 2014. In the end, CME NDM averaged $1.43/lb – 5¢ higher than the previous week on 28 trades. Stronger international demand coupled with lackluster NDM/SMP output is lifting spot prices. As a result, the gap between US and world prices is closing. While prices have not been at this level since 2014, they can remain elevated for a time. Demand remains positive, but some of the recent upticks could be related to slowing milk supply and concerns that if demand remains this high, there could be issues as stocks are modest and unlikely to provide a sufficient buffer next year.

US August NDM production totaled 122.1 million pounds – 17% less than last year;

SMP production totaled 60.5 million pounds – 12.7% less than last year. Significant declines from western processors caused the sizable YoY declines – reports suggest that Washington is still struggling to recover from a severe heatwave this summer that negatively impacts milk production. California output dropped 20.9% – some of that could have been shifting to SMP – but some were due to lower milk production. The YoY decline in August for NDM and SMP was the largest over the last five years for that month.

US Manufacturers’ stocks of NDM totaled 284.6 million pounds as of August 31 – that was 9% less than July but 2.8% more than last year’s levels. Stock build and depletion are following seasonal patterns. USDEC reported that despite shipping delays – it is having little impact on the stock build.

In August, US NDM/SMP exports totaled nearly 174 million pounds – 8.1% more than July and 13.8% higher than last year. Despite months-long shipping delays, US exporters have increased exports by 12.5% vs. last year. Exports to Mexico drove the August results. Exports elsewhere were mixed. Given reports that Mexico has been a big buyer of NDM/SMP in recent weeks – that could help mitigate some of the shipping woes.

Whey & Lactose Products

This week, CME spot whey prices pushed up again, averaging 59.15¢, up 1.2¢ compared to the previous week on a single trade. That drove CME dry whey futures into the 50s through the end of next year for the first time during the contract period. It was also the primary driver behind the higher Class III trade this week. Most news remains largely positive for whey; however, some anecdotal reports suggest prices could moderate.

US August whey production totaled 74.9 million pounds, 2.6% less than 2020. While a decrease to last year – it was modest compared to the last five years. WPC (50-89..9%) output increased 1.4% to 25.7MM pounds vs. 2020 – a similar decline to the previous year. WPI production totaled 10.6 million pounds, +14.7% vs. 2020 – the most significant YoY increase for August over the past five years. Whey stocks were 68.1 million pounds on August 31 – down 22.6% vs. last year.

US whey exports totaled 41.6 million pounds in August, up 81.6% compared to last year on higher exports to China.