Weekly Forecast Update September 25, 2020

Fluid Milk Market

USDA issued the October Class I advanced on Wednesday at $15.20/cwt. $3.24/cwt. less than the previous month. Given the decline in the CME cheese markets in August and stable butter and NDM prices, it was reasonable to expect the October Class I base to decline. That said, with the recent increase in Class III milk futures again, it appears October could be subject to more depooling as the current futures market is indicating $18.95/cwt. Despite the wild swings in this year’s Class III price, the Ceres is till forecasting the Class I price to be less than year-ago price levels due to a lower Class IV price.

Cheese Market

The CME block market peaked early in the week, with prices settling back into the $2.50s. Cheddar barrels were mostly stable throughout the week, but prices jumped up on Friday. For both markets, very few loads traded this week. In the end, CME blocks averaged $2.5765/lb., up 21.95¢ compared to the previous week. Cheddar barrels averaged $1.6385/lb. up 2.25¢. Several participants report that there is cheese but that contacts are comfortable with current commitments. The availability of Cheddar seems to ebb and flow each week.

USDA released the August Cold Storage report this week with mostly expected information. On August 31, the United States holdings of cheese were 1.378 billion pounds, 1% less than July but 1% more than last year. That was the smallest year-over-year gap since March. American cheese stocks totaled 790 million pounds, 0.6% more than July, and 3% higher than year-ago levels. That was the biggest year-over-year gap since April. Given expanding American cheese stocks and declining total stocks, it would suggest that products like hard-Italian cheese fell. Higher summer cheese would have been plenty of incentive for processors to reduce cheese headed to aging programs.

Butter Market

CME spot butter started the week strong but faded following the USDA Cold Storage report. After an unexpected move higher, sellers returned to Chicago as buyers stepped back. That caused prices to falter mid-week. Despite the turn lower, this week’s CME prices still averaged $1.5515/lb. up 2.5¢ vs. the previous week. While there was good buying interest as spot and futures markets lifted – sentiment quickly changed when reports indicated more than sufficient butter for the holiday season. While reports continue to indicate that retail sales are far exceeding last year’s volumes, lackluster foodservice orders have offset that demand.

For the first time since the 1990s, US butter stocks increased between July and August. In most years, butter stocks peak between May and July – but this year, supplies are hanging in there, and that was enough to scuttle the run markets attempted to make this week. In total, the United States butter holdings were 371.7 million pounds, 0.1% more than July, and 22.1% higher than a year ago. While there are still hopes of a strong holiday season, it would take a lot to consume the butter on-hand at the end of last month. That fact has not been lost on buyers. Still, the new cheese plant that starts next month could redirect some butterfat away from butter and to American cheese next year – something that is keeping butter futures lifted for now.


CME spot NDM prices reached $1.10/lb. on Friday, the highest spot price since early March. Overseas demand continues to be robust, and that is lifting prices for now after hovering for weeks near $1/lb. CME prices lurched higher with prices averaging $1.0835/lb., up 2.4¢ compared to the previous week. Fifteen loads changed hand this week. Most market participants are reporting better order flow and more interest – but whether more product trades at the current spot prices remains to be seen. Many are still saying that prices are discount to spot CME to move larger quantities of products. Regardless, product is moving, and that could support prices through the end of the year.

New Zealand released its exports for August this week with large quantities of whole milk powder (WMP) headed to China. In total, New Zealand exported nearly 111 million pounds of WMP in August, 48.3% more than the same period last year. New Zealand also shipped 19.3 million pounds of SMP, 21% less than last year. Earlier in the year, New Zealand’s Fonterra signaled it would redouble its efforts on WMP to China and slow SMP. That provides market opportunities for US milk powder and suggests that exports could remain positive through the end of the year.

Whey & Lactose Products

Just as US whey prices are lifting, European whey prices, especially those from Germany, are fickle. This week CME spot prices reached 38.5¢/lb. before easing into the end of the week. Still, CME spot whey prices averaged 37.6¢/lb. this week, up 2.5¢ vs. the previous week. Domestic markets remain balanced, with some sellers reporting more overseas interest. For whey and lactose producers, most are comfortable and do not feel a sense of urgency to fill orders – quite a shift from earlier in the summer.

At the same, time German whey prices are showing signs of weakness. That may be related to the African swine fever (ASF) spreading among its hog herd, and gaining strength over the past few months. Feed is a significant consumer of whey and lactose globally. As Germany is Europe’s largest hog producing nation, the spread of ASF could be problematic and weigh on prices.


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