Archive for Dairy Markets

Cheese and Butter Prices Skyrocket. Is it Realistic? Maybe not!

Wholesale prices for cheese and butter have been extremely volatile.  Both the Chicago Mercantile Exchange (CME) and the National Agricultural Statistical Service (NASS) numbers have been volatile although sometimes in opposite directions with wide differences. The NASS price is used for milk pricing.  The first section of this post will cover the volatility of cheese and butter prices as reported by NASS.  NASS conducts weekly surveys from 89 entities and publishes them on Wednesday of the next week.  These are used to set Federal Order milk prices.  The price of Cheddar is used to represent the cheese price in the Federal Order pricing.  This post will cover cheese and butter as they are key elements of Federal Order milk payments.

NASS cheese and butter pricing is shown below (Chart I and II).  They follow the same pattern.  In April, prices fell drastically.  Cheese prices dropped by ⅓ in a matter of a few weeks.  Butter prices had already started dropping but took another ⅓ drop as well.  Cold storage inventories of butter and cheese were growing rapidly in April as food service usage was drastically reduced due to mandated restaurant closures. High inventories bring lower prices.

On May 8, the Coronavirus Food Assistance Program (CFAP) was published.  By that time plans were in place to reopen the U.S. for business.  The impact was immediate.  Nothing had really changed at that time, but the speculation of recovery set-off significant price increases.  Cheese prices shot up by 90 percent to $2.13 per pound and butter shot up by 64 percent to $1.83 per pound.

Typically cheese and butter inventories levels in cold storage have the greatest influence on wholesale prices.  In this case, the increases appear to be fueled by an expectation of economic recovery and government stimulus.

Chart I – NASS Weekly Cheese Prices for 2020
Chart II – NASS Weekly Butter Prices for 2020

There have been press articles stating that cheese production is being ramped up to make cheese available for Coronavirus Food Assistance Program (CFAP).  If this were the case, it would defeat one of the intents of the program which is to lower the bloated inventories and bring them back to normal levels and restore normal prices.

It has also been reported in the press that some cheese inventories are in tight supply.  If that is true, it must be for just specific categories of cheese in specific locations.  Expanded pizza sales during the quarantine period have undoubtedly put pressure on Mozzarella cheese inventories and may have caused tight inventories is some locations.

Chart III is for orientation purposes.  The two cheeses, Cheddar and Mozzarella, make up 63 percent of total cheese production.  Cheddar is especially important because it is used as the “cheese” price for Federal Order milk payment and Cheddar is also the quoted price for cheese on the CME.  As seen in Chart I below, Cheddar makes up just 29 percent of total cheese production, but it is used as a barometer for all cheese prices.

Chart III – Cheese Production by Cheese Type
In the prior post, the end of April inventory levels for cheese and butter in cold storage were reviewed.  Additional data impacting the April inventories was recently released which sheds more light on the moving target of the COVID-19 impact.  The data for April now includes production, imports, exports, and disappearance. The term “disappearance” represents withdrawals from cold storage.

Production of the two largest categories of cheese, Cheddar and Mozzarella, are publicly available and will be covered specifically.  Inventory and disappearance levels for Cheddar and Mozzarella are not public but they do make-up the majority of cheese classified as American or “Other”.  Cheddar makes up 72 percent of American cheese production, and Mozzarella makes up 57 percent of the “Other” cheese production.  In the following analysis, the inventory and disappearance of American cheese and “Other” cheese are used to represent inventory and disappearance of the two top cheeses, Cheddar and Mozzarella.

This post was delayed for one day as new cold storage data for the end of May became available.  Charts VI, IX, and XII have been updated to show the impact of May end cold storage inventories.  No May data is yet available for production, imports, exports, or disappearance.  The new cold storage data does not show significant inventory reductions that justify the NASS high cheese and butter prices.  Butter inventories increased further in May from April and cheese inventories decreased only slightly.

The analysis will be presented in three parts.   Cheddar will be first because it is the most important, then Mozzarella, and then butter.

Production of Cheddar has not slowed down (Chart IV).  If anything, it is up.  Cheddar is not a growth product.  However, in April 2020, Cheddar production reached a high just slightly below the record high that occurred in December 2019.

Chart IV – Production of American Cheese

Disappearance of Cheddar is represented in Chart V by the disappearance of American cheese from cold storage.  Disappearance for the month of April 2020 was extremely low, down 9 percent from the average for the last three years for the month of April.  With the significant reduction in food service, this is not surprising.

Chart V – Disappearance of American Cheese

Chart VI shows the impact of “high normal” production and low disappearance.  April inventories of American cheese were up six percent to a record high 836 million pounds.  This led to the huge fall in NASS pricing covered in Chart I.  May cold storage inventories decreased by only two percent.

Chart VI – Inventory of American Cheese


April production of Mozzarella (Chart VII) was slightly down compared to the prior three years of April production.  Mozzarella is a growth product with heavy use in pizza and Italian food.  Mozzarella is held in cold storage for a much shorter time than Cheddar. The reduction in overall food service may have made this lower production necessary.

Chart VII – Production of Mozzarella Cheese

Disappearance of “Other” cheeses, primarily Mozzarella, was down nine percent from the prior three years of April (Chart VIII).  Considering that Mozzarella is a growth product and the drop in disappearance is an unusual occurrence but it does follow the drop in production.

Chart VIII – Disappearance of “Other” Cheese
The inventory of “Other” cheese was at an April record high level of 647 million pounds.  Disappearance was down much further than production decreases resulting in a significant increase of 16 percent in inventory (Chart IX).  May cold storage inventories decreased by only two percent.

Chart IX – Cold Storage Inventors of “Other” Cheese

Production of butter took a huge jump in April to a record high of 216 million pounds churned (Chart X).

Chart X – Production of Butter

Butter disappearance (Chart XI) was down from the prior month, but up significantly for the month of April 2020 compared to April in the prior three years.  April butter disappearance increased 10 percent from April in the prior three years.

Chart XI – Disappearance of Butter

The record churning of butter exceeded disappearance leaving a record high April butter inventory as shown in Chart XII.  The butter disappearance was better than the prior three years of April, but the rise in churning was exceptionally high and very significant.  May cold storage inventories showed a further increase of three percent in butter inventory.

Chart XII – Inventory of Cold Storage Butter


The price swings in cheese and butter are record setting and counter to the April data on production, disappearance, and inventories.

Source: MilkPrice

Global Dairy Commodity Update July 2020

Wholesale dairy markets rebounded strongly from the impacts of COVID-19 with worldwide closure of foodservice outlets – most importantly in the US and Europe – and the cessation of cross-border travel.

Trade was slower than the 2019 comparative for the first 4 months of 2020, impacted by some logistical difficulties due to COVID-19, but also against strong 2019 numbers for milk powders when prices were much lower. There are some timing factors that affected that – the peak of WMP trade was pushed earlier with the Chinese New Year timing this year, while the early 2019 run-out sale of SMP in the EU continued into March – meaning comparatives were strong.

The sustained strong retail sales, refilling foodservice outlets, government aid spending in the US and slower milk supply effects have hauled cheese and butter prices off the floor.

This feels like a false dawn. A deep recession is unfolding due to the huge losses in income due to business closures which will erode household spending in western markets and weaken developing world economies.

As the reality of recession takes hold, food spending in western economies will be impacted, reducing discretionary outlays, reducing the propensity to dine out and causing frugal spending in the grocery store.

The effect on ongoing cheese demand will be the most important driver of the impact on dairy markets, as the processor response to weaker demand will push more milk to powder driers in coming months. In the outlook, cheese EU and US demand remains flat in H2-2020 before improving in 2021.

The impact on cream demand without food service consumption will push up butter production and stocks. Demand from export markets, also with weak food service sectors for the rest of the year, will not help, despite prices being more attractive.

The milk supply response will be all important in this outlook with likely different trends across major producers.

Skim Milk Powder

SMP and NFDM prices continued steady, recovering after the worst of the COVID-19 shocks, as cheese and butterfat markets also stabilised.

Whole Milk Powder

Spot values remained mixed through June; NZ values improved, while EU product was steady. However, EU product continues to trade at a premium. WMP trade shrank (with exports to China 16% lower) further in May, with export declines posted by NZ and Uruguay.


Global cheese markets are likely to be impacted through 2020 by the disruption to food service sales, but not all of the impact will be negative. Attention is focused on the impacts on demand in major EU and US markets, affecting export prices, but also SMP/butter output.


Global butterfat prices have converged with improving EU wholesale prices, while Oceania markets have weakened with demand reflecting the slow reopening of food service channels in major markets and the damage to consumer spending as recession bites.
While grocery and other food retail demand remains buoyant, there is no prospect that this can make up for the loss of butterfat sales into food service outlets.


Whey product prices have inevitably been caught in the complex impacts of COVID-19 due to changes in cheese production, relative protein values and the demand for certain applications.

Source Maxum Foods

Holiday optimism drives markets higher in Chicago Thursday

On the Chicago Mercantile Exchange milk futures closed higher Thursday on holiday optimism and strong cheese demand. Class III milk futures ended the week on a higher note.  July milk added 12 cents to $22.97/cwt.  August milk rocketed 54 cents higher to $20.95.  September increased 45 cents to $18.81/cwt.  Second half 2020 average is $18.99/cwt.  Class IV futures were relatively unchanged.

In the CME Cash Dairy Product Trade,  dry whey unchanged at $0.33.    Blocks up $0.0350 at $2.6750.  Six trades were made ranging from $2.66 to $2.68.  Barrels up $0.0150 at $2.4150.  Four trades were made at $2.41 and $2.4150. Butter down $0.0125 at $1.7375.  Nonfat dry milk up $0.0050 at $1.01.  Markets will be closed on July 3rd for the holiday.

The grain complex receded today.  December corn tumbled 7.50 cents to $3.53/bushel.  November soybeans fell 1.75 cents to $8.9725/bushel.  September Chicago W=wheat decreased 6.75 cents to $4.92/bushel.  August live cattle rallied $2.75 to $100.05/cwt.  August feeders climbed $2.82 to $135.90/cwt.  August crude oil launched a 51-cent gain to $40.33.  

Milk Futures See Major Gains in Chicago Wednesday

On the Chicago Mercantile Exchange milk futures saw major gains Wednesday ahead of the monthly dairy products report while most cash trade was dimmed by the holiday-shortened week.  Class III moved higher – June announced price is 21.04, July gained 66 to 20.41 and Aug gained 45 to 18.36. Class IV announced June price is $12.90, July gained 1 to 14.74, and Aug gained 11 to 15.09.

The CME spot trade saw Dry whey up $0.0125 at $0.33.   Seven trades were made ranging from $0.31 to $0.3175. Blocks unchanged at $2.64.  Barrels unchanged at $2.40. Butter down $0.0150 at $1.75.  Four trades were made at $1.7475 and $1.75. Nonfat dry milk unchanged at $1.0050. 

The grain complex continued moving higher. Corn begins July trading 9 ¾ higher to 3.48 ¼, Soybeans followed suit, gaining 9 ½ to 8.93 ¾, and November soybeans finished the day at 8.99 even but traded over $9 for the first time since March. Soybean meal moved $6.40 higher to 292.70.

Futures Up Cash Dairy Steady in Chicago Tuesday

On the Chicago Mercantile Exchange Tuesday milk futures were up, and cash dairy prices were steady to up.   Class III milk prices rose double digits in 2nd half 2020. August milk led the charge jumping 60 cents to $19.80 per cwt.  June Class III milk was up $.03 at $20.97.  July was up $.15 at $22.35. August was up $.55 at $19.75.  September was up $.41 at $17.91.  The milk futures from October through next May ranged from two to thirty-two cents higher.   First, half 2021 added double digits as well. Class IV markets were mixed following butter’s unchanged session and nonfat’s slight fall. 

Tuesday’s commodity markets were highlighted by a stronger dairy and grain complex.  Dry whey was unchanged at $.3175 cents per pound.  Five sales were recorded from $.3175 to $.32. Forty-pound blocks were up $.02 at $2.64 per pound. There were five sales recorded from $2.62 to $2.67. Barrels were unchanged at $2.40 per pound.  No sales were recorded. Grade AA Butter was unchanged at $1.7650 per pound.  No sales were recorded. Nonfat dry milk was down $.0075 at $1.0050 per pound.  Six sales were recorded from $1.0050 to $1.01.

Over in the grain complex the USDA released its Planted Acreage and Quarterly Stocks reports. The surprise came in the corn acres data. While the trade was looking for an average of 95 million acres, USDA printed 92 million acres spurring the corn market 12-15 cents higher. December corn traded through $3.50 per bu. for the first time since April 14. Soybean acreage was more in line with expectations as 83 million acres were released. Soybeans rallied 17-20 cents per bu. Tuesday. 

Milk Futures Start Week Strong in Chicago

In the CME cash dairy product trade, Dry whey was up $.0050 at $.3175 cents per pound.  Six sales were recorded from $.31 to $.3175. Forty-pound blocks were up $.0450 at $2.62 per pound. There were nine sales recorded from $2.5725 to $2.62. Barrels were unchanged at $2.40 per pound.  Two sales were recorded at that price. Grade AA Butter was unchanged at $1.7650 per pound.  No sales were recorded. Nonfat dry milk was down $.0075 at $1.0125 per pound.  One sale was recorded at that price.
The grain complex ran higher ahead of tomorrow’s USDA Acreage and Quarterly Grain Stocks report. December corn added 9.50 cents to $3.3475 per bushel.  November soybeans inched a quarter-cent higher to $8.6125per bushel. July soybean meal dropped $1.60 to $280.50 per ton. September Chicago wheat improved 10.75 cents to $4.8650 per bushel.  

Volatile Milk Future Markets in Chicago

As the Spot Chicago Mercantile Exchange stabilized Thursday, Class III pushes into extended limits during trading. Milk futures continued to slide Thursday as block cheese continues its descent and traders correct overbought positions. Class III milk finished the day June fell 9 cents to $20.92, July fell 62 to $20.94, and August fell 57 to $18.98/cwt. Balance of 2020 moved 7-40 cents lower. Class IV milk had June falling 17 to $13.08, July fell 30 to $14.45 and August fell 30 to $14.95/cwt. 

Dry whey up $0.01 at $0.3125.   Eight trades were made ranging from $0.3025 to $0.3125. Blocks down $0.050 at $2.5750.  Three trades were made at that price. Barrels unchanged at $2.40. Butter down $0.0225 at $1.7650.  Three trades were made ranging from $1.765 to $1.7750. Nonfat dry milk up $0.0075 at $1.0350.  Twelve trades were made ranging from $1.0250 to $1.350.

The grain complex fell sharply. July corn down 7 cents to $3.17 ¼, soybeans down 1 ½ to $8.69 ¼, and soybean meal fell $1.20 to $285.50/ton

Class III Sell Off in Chicago Drives Futures Down

In the CME cash dairy product trade, Dry whey down $0.0050 at $0.3025.   Six trades were made at $0.3025 and $0.3050. Blocks down $0.23 at $2.58.  Five trades were made at $2.58 and $2.81. Barrels up $0.03 at $2.40.  One trade was made at that price. Butter down $0.0250 at $1.7875.  Five trades were made ranging from $1.7875 to $1.7925. Nonfat dry milk down $0.0025 at $1.0275.  One trade was made at that price.

December corn finished 3 cents lower to $3.3375/bushel.  November soybeans fell 4 cents to $8.70/bushel.  July soybean meal gained 40 cents to $286.70/ton.  September Chicago wheat tumbled 5.25 cents to $4.8575.  June live cattle dropped 22 cents to $93.30/cwt.  August feeders gave up 32 cents to $132.87/cwt.  August crude oil finished $2.24 lower to $38.13.          

Blocks Push Higher as Futures are Mixed in Chicago Tuesday

On the Chicago Mercantile Exchange, milk futures were mixed Tuesday while traders test the limits of prices and cash cheese prices remain strong. Class III milk markets fell 19 cents to close around $22 perc wt. August and September fell 50 plus cents while 4th quarter prices weakened 12-30. 2021 prices were mainly unchanged on the day. Class IV markets dropped 5-10 cents in 2020 as well. 

Dry whey down $0.0075 at $0.3075.   Five trades were made at $0.3075 and $0.31. Blocks up $0.1075 at $2.81.  One trade was made at that price. Barrels up $0.0475 at $2.37.  Three trades were made from $2.36 to $2.37. Butter down $0.02 at $1.8125.  One trade was made at that price. Nonfat dry milk down $0.0025 at $1.03.  Two trades were made at that price. 

Grain markets struggled on Tuesday following uncertainty from China and U.S. trade talks held last week in Hawaii. Conflicting media reports out of the White House broke corn price 5 cents and soybeans were also down 4 cents. Cattle prices, on the other hand, rose $1-2 per cwt and feeders were also up to $1.50. 

Milk Futures Continue to Push Higher in Chicago to Start the Week

On the Chicago Mercantile Exchange, milk futures continue to push higher, closing more than $1 higher in nearby contracts, supported by global optimism, strong cash cheese prices, and expectations for a bullish cold storage report. Class III milk futures took advantage of the newly expanded CME limits of $1.50/cwt. June added 1 penny to $21.00/cwt. July launched a 96-cent gain to $22.14/cwt. August milk skyrocketed 93 cents to $20.20/cwt. Q3 2020 is averaging $20.41/cwt. Q4 2020 resides at $17.28/cwt. Class IV milk futures were relatively unchanged.  

The corn and bean market trended lower today.  December corn declined 4.25 cents to $3.4175/bushel.  November soybeans inched 1.50 cents lower to $8.7925.  July soybean meal descended 50 cents to $286.50/ton.  September Chicago Wheat climbed 4.25 cents to $4.8950/bushel.  Fats and feeders ended the day in red ink.  June live cattle fell 30 cents to $94.40/cwt.  August feeders lost 80 cents to $131.75/cwt.  Crude oil added 85 cents to $40.60.

Milk Futures Close Higher in Chicago thanks to USDA Milk Production Report

On the Chicago Mercantile Exchange milk futures again closed higher Thursday ahead of USDA’s milk production report, cash trade was mixed. The USDA Milk production report was released on Thursday.   USDA says production in the U.S. was down nearly one percent compared last year at more than 18.8 billion pounds with production per cow down 31 pounds from last year. As expected, milk production fell 1.1% over 2019 levels as milk processors enacted many mandatory production cuts during May. Most of the adjustment came in production per cow, falling 31 lb. to 2,010 lb., a 1.5% decline from the previous year. Cow numbers were 11,000 lower than April, but still 4/10 of a percent above 2019 levels.

 Class III milk finished trading with June up 17 to $20.91, July gained 64 to $20.43, and August gained 45 to $18.54/cwt. September – December were 7-28 higher. Class IV saw June fall 1 to $13.34, July fell 37 to $14.82, and August fell 10 to $15.35.


New Zealand milk price forecasting ‘tricky’

Rising milk production in the Americas and Europe, the COVID-19 pandemic and a strong NZ dollar are making it difficult for economists to forecast the 2020-21 milk price.

This reflects a wide ranging farm gate forecast price for the new season.

ANZ is forecasting a milk price of $5.75/kgMS for the new season, Westpac $6.30/kgMS, Rabobank $5.95/kgMS and ASB $6.50/kgMS.

Fonterra, for the first time, has announced a $1.50 range – $5.40 to $6.90/kgMS.

ANZ agriculture economist Susan Kilsby says the new dairy season brings heightened uncertainty, which is impacting milk price forecasts.i

“New Zealand sourced product is commanding a premium in the global markets, but this premium is likely to be eroded as we start forward selling higher volumes of new-season dairy product. 

“Prices typically weaken during July/August each year as buyers start to refocus on Oceania-sourced product. 

“Global supply at this time of the season tends to be relatively high, as stocks tend to build in the Northern Hemisphere following their peak supply period, which occurs about May. At present we are selling the tail end of the dairy products manufactured from milk collected in the 2019- 20 supply season.”

Other NZ processors are also cautious in their forecast.

Synlait’s opening announcement is for a $6 milk price for next season. Open Country continues to pay its suppliers on a shorter time frame with its season divided into four sections. It has forecast a milk price range of $6.20 – $6.50/kgMS through to November. 

Smaller processors like Oceania Dairy and Westland Milk will continue to pay a milk price linked to the Fonterra price plus a small premium.

ASB senior economist Chris Tennent-Brown says while the lift in whole milk prices in the last Global Dairy Trade was encouraging, over recent weeks the stronger NZD is an offsetting negative.

 “We have been noting for a while the possibility that the milk price dips below $6.00/kg and have regularly suggested farmers prepare for this contingency.”

Milk production in the US and Europe continues to rise.

According to Fonterra’s latest global dairy update, US milk production increased 1.5% in April compared to the same period last year. 

It says despite lower foodservice demand, US milk production continued to grow year on year. Milk production for the 12 months to April was 1.3% higher compared to the same period last year.

EU milk production lifted 0.9% in March compared to the same period last year as the EU season gets underway. 

The largest production growth was seen in Spain (up 7.1%), followed by the Netherlands (3.0%) and Poland (1.9%) but decreases were experienced by Italy (2.8%) and the UK (2.4%). 

With a demand slowdown in response to the pandemic, milk is being redirected towards powders and the European Milk Board is pushing for excess supply to be reduced through a voluntary supply reduction.

Dry bites milk production

Dry weather in the North Island caused a 10% drop in milk production in April, says Fonterra.

North Island milk collection in April was 51 million kgMS, down 9.9% on last April. Season-to-date collection was 844.6 million kgMS, down 2% on last season.

The co-op says effects of the drought are still being felt across much of the North Island.

“Soil moisture levels remain low, and pasture growth rates have slowed, both of which have impacted milk production.”

The drop in North Island collection was partly offset by South Island collection in April of 55.3 million kgMS, up 5.4% on last April. 

Season-to-date collection was 602.6 million kgMS, up 1.8% on last season. Fonterra says the South Island has had a strong start to autumn, with milk production up strongly on the same time last year. 

However, in the Central South, some farms are reported to have restarted water irrigation to alleviate dry soils.

The co-op’s total April milk collection was 106.3 million kgMS, 2.6% less than the same month last season. Season-to-date collection was 1,447.2 million kgMS, down 0.5% on last season. 

Fonterra processes around 80% of NZ’s total milk.

Total NZ milk production in April was relatively flat, down 0.6% on a litres basis (down 0.8% on milk solids basis) compared to last April 2019.


Global Outlook pushes Class III Higher in Chicago Wednesday

Spot cheese has continued to maintain its strength this week.  Blocks unchanged at $2.50.  Two trades were made at that price. Barrels up $0.0050 at $2.33.  Two trades were made at that price. Butter down $0.0225 at $1.80.  Ten trades were made ranging from $1.7875 to $1.80.  Nonfat dry milk up $0.0175 at $1.03.  Seventeen trades were made ranging from $1.02 to $1.0350. Dry whey down $0.01 at $0.3050.   Seven trades were made ranging from $0.3050 to $0.3125.

The grain complex was a mixed bag today. July corn added 1.25 cents to $3.3025/bushel. December corn remained unchanged at $3.4275. Spot soybeans climbed 4.25 cents to $8.7125/bushel. November soybeans ascended 3.50 cents to $8.7650. July soybean meal fell 10 cents to $287.80/ton. September Chicago Wheat descended 7.25 cents to $4.94/bushel. June live cattle finished 17 cents higher to $96.50/cwt. August feeders gained 70 cents to $133.57/cwt. July crude oil declined 70 cents to $37.70.   


The Bulls Charge Out of the Gate Once Again This Week

The T.C. Jacoby Weekly Market Report Week ending June 12, 2020


The bulls came charging out of the gate once again this week. But after a few days romping around LaSalle Street, they left abruptly, presumably in search of greener pastures. Bulls must be fed daily, and by Thursday the market had run out of positive fundamental news with which to fill their troughs.

The cheese market has likely climbed high enough, for now. Both blocks and barrels rallied to alltime highs early in the week, but they finished lower. CME spot Cheddar blocks closed today at $2.52 per pound, down 3.25ȼ from last Friday. Barrels reached $2.425 on Tuesday, but they settled at $2.3325, down 2.75ȼ. The invisible hand of the markets and the passage of time are starting to ease the physical shortage that propelled the cheese markets to such unprecedented heights. USDA’s Dairy Market News reports that some end users who were rushing to restock after Covid-19 closures have filled their refrigerators, and buyers are more hesitant at these values. Cheesemakers are still running hard. A high price is the best fertilizer. The markets may have to contend with a bumper crop of cheese later this year.

With more cheese comes more whey. While whey output climbs, demand appears steady at best. CME spot dry whey dropped 2.75ȼ this week to 31.75ȼ.

Butter backed off as well. CME spot butter slipped 5.5ȼ this week to $1.87. Although slow demand from foodservice remains a drag, butter is still moving rapidly through retail. Output has slowed as ice cream – and to a lesser extent cream cheese – manufacturers are willing to pay more for cream than most butter makers can afford.

The milk powder market bucked the trend once again and bounced back from last week’s losses. CME spot nonfat dry milk (NDM) advanced 2.75ȼ to $1.005, and most NDM futures finished higher than last Friday, thanks to a strong showing in the middle of the week. Milk production is slowing in some regions, and cheese plants are taking on all the milk they can, leaving less for dryers. Still, there is plenty of milk powder to go around, as manufacturers hold ample stocks.

Milk futures put in a mixed performance this week. June Class III jumped another 54ȼ to $20.42 per cwt. But the other Class III contracts finished lower. Most lost around 30ȼ this week. Most Class IV futures settled a little higher than they did last Friday, but the June contract plummeted 56ȼ to a paltry $13.35.

Higher Class III prices are calling for dairy producers to make more milk, a dramatically different message than the one the markets delivered in April and early May. The industry is listening. Milk yields are declining seasonally, but dairy producers are likely undoing all the measures they took to slow output in the spring. They are keeping their barns full, slowing cull rates, and adding high-energy feeds back into the ration. In the week ending May 30, which included Memorial Day, dairy cow slaughter was just 48,120 head. That was down 9.8% from the holiday week in 2019. After exceptionally high volumes in April, dairy slaughter fell short of the prior year four out of five weeks in May.

More cows will mean more milk, but do we need it? Once restaurants have restocked and food bank donations fade, the industry may find itself awash in dairy products.

The corn market bounced back and forth this week and ultimately settled a little lower. July corn futures closed at $3.30 per bushel, down 1.25ȼ. After resurveying farms in North Dakota, USDA cut its estimate of last year’s corn harvest by 46 million bushels. Still, there is plenty of corn in the world, and U.S. corn stocks are expected to balloon after this year’s harvest. Barring a weather issue, corn is likely to remain cheap. It’s getting uncomfortably dry in the Southern Plains, but in the Corn Belt, the crops are in great shape.

USDA’s monthly supply and demand update showed a surprisingly strong increase in soybean meal demand. The market has also been cheered to see Chinese buyers return to U.S. ports, despite reports that state-owned buyers were told to pause purchases. July soybean futures rallied to 3.5ȼ this week to $8.7125. July soybean meal held steady at $289 per ton.


Class III continues higher in Chicago to Strat the Week

The Class III milk market on Tuesday continued its upward on the Chicago Mercantile trade after Monday’s limit higher move.  Milk futures closed higher Tuesday following a mostly positive Global Dairy Trade report and mixed cash trade. June Class III milk up four cents at $20.64.  July up 15 cents at $19.42.  August up 11 cents at $17.89.  September six cents higher at $17.36.  October through December contracts eight cents lower to 11 cents higher.

CME spot dairy auction closed as a mixed bag. Dry whey up $0.01 at $0.3150.   One trade was made at that price. Blocks unchanged at $2.50.  Two trades were made at that price. Barrels up $0.0050 at $2.3250.  Two trades were made at $2.3225 and $2.3250. Butter down $0.0225 at $1.8225.  Nine trades were made ranging from $1.8125 to $1.8250.  Nonfat dry milk unchanged at $1.0125.  One trade was made at $1.01.

Key Cold Storage Cheese Inventories Swell – When Will Inventory Levels Normalize?

The prior post was titled “EXCELLENT NEWS” as cheese inventories were still in line at the end of March and the USDA’s had issued a plan to buy huge amounts of dairy products in the coming months.  The post ended with the phrase “As with everything about COVID-19, the future has uncertainties.”  Inventories of cheese and butter for the end of April were released on May 21 and cheese and butter inventories had swelled to record highs and are no longer “in line.”

High cheese inventories cause lower cheese prices and lower cheese prices reduce producer milk prices.

The huge dairy buying program included in the CFAP program is in place and requests for bids are open.  This will hopefully bring inventories back “in line”, but there is still uncertainty as programs of this size have no history to relate to.  In the prior post, the CFAP was described as a “very rich” program.  It must be rich to bring relief to the devastating damage caused by the pandemic. 

The impact of the CFAP was modeled and indicates normal cheese inventories will not be reached until the end of 2020 or the beginning of 2021.

The charts below compare 2020 data to the prior four years.  In every chart, the year 2020 was a normal year until April numbers were published.  The CFAP program referenced in the prior post must now supply enough demand to reduce existing inventories in the upcoming months.

The increase in total cheese inventories are shown in Chart I.  Cheese inventories increased from 1373 to 1483 million pounds in April. This was the biggest monthly increase in history.  Butter inventories also grew to record highs and are covered in Chart IV below.

Some data like cheese production and disappearance for April is not yet available.  On the demand side, the most obvious culprit is the lack of demand by food service.  The restaurants that food service supplies were largely closed in April.  Therefore, the food service companies which provide about half of the demand for dairy products were cutting back on purchases.

Chart I – Total Cheese Inventories in Cold Storage

Cheese in cold storage is reported by the USDA as “American Cheese” and “Other Cheese.”  Charts II and III report these inventories separately.  These charts allow a “drill down” to see more precisely where the major issues are.

“Other Cheese” inventories grew significantly in April but are still below the levels of the last two years.  “Other Cheeses” are mostly Italian cheeses lead by Mozzarella which accounts for 57 percent of the production of “Other Cheeses”.  In March, the “Other Cheeses” inventory was below the prior four years in spite of growing demand, so those inventories could absorb increases without reaching record levels.  The demand for Mozzarella delivered by food service may have remained strong as pizza is a major user of Mozzarella and pizza sales are reported up during the “Stay-at-Home” order period.

Chart II – Other Cheese Inventories in Cold Storage

“American Cheese” reached record highs in April as shown in Chart III.  Milk pricing is based on the price of cheddar cheese.  While cheddar cheese inventories are not reported separately, they do make up nearly three quarters of “American Cheese” production.  Therefore, if American Cheese inventories are high, cheddar cheese inventories are no doubt high as well.  Cheddar prices on the CME fell to a 20-year low in April.  NASS cheddar cheese prices that are used to set milk prices were not as low as the CME auction prices but were also near twenty-year lows.  This is the reason for the April Class III milk price of $13.07/cwt. which was a 10-year low.

Chart III – American Cheese Inventories in Cold Storage

Butter inventories in cold storage also hit a record high.  Butter inventories have been higher for all of 2020, but the April inventory level skyrocketed to a twenty-year high.  This decreased the butter price to a 10-year low.  This also contributed to the low Class III price for April 2020.

Restaurants use butter almost exclusively in food preparation and serving.  Households use a mix of plant-based spreads and butter.  This may have reduced the butter disappearance in April and might therefore continue to limit disappearance in May and June as restaurants begin to reopen.  As data is available, it will be reviewed here.

Chart IV – Butter Inventories in Cold Storage

When will cheese inventory levels return to normal?

Based on the CFAP program of Food Assistance which will begin buying cheese starting May 15, the excessive dairy inventories will likely start shrinking in June.  But the inventories will not normalize until near the end of 2020 or early 2021.  Data used in this model suggests that producer milk prices will likely drop in May and then slowly return to the levels of March 2020 through the remainder of the year and will extend into the early 2021.

Models are just as good as the assumptions made.  The extraordinary circumstances of the COVID-19 pandemic create uncertainty. The CFAP program and assumptions for this model are as follows:

  • The CFAP as issued on May 8 will provide $1120 million for dairy purchases.  They are programed to spend $100 million a month starting May 15, 2020.  A supplemental program aimed at the third quarter of 2020 will provide an additional $120 million of dairy purchases.
  • Because the CFAP provides dollars of purchases, a price per pound for cheese is needed to convert this into pounds of cheese purchases.  The prices used in two versions of the model are the average of the last 12 months of cheese prices, $1.82/lb. and the April low of $1.40/lb.
  • The model assumes that 50 percent of the CFAP dairy purchases will go to cheese.  That is roughly the ratio of milk usage for cheese vs. other dairy products.
  • Because the government cheese purchases will be given away, estimates of cannibalization of retail purchases are used in the model to reduce the impact of the purchases. The estimates used in the model assume a range of no cannibalization to 25 percent cannibalization of retail purchases.
  • Normal cheese inventories are assumed to be the March 2020 ending inventory levels.  At that time the Class III price was $16.25/cwt.

Source: MilkPrice

Class III Shoots Higher in Chicago to Start Week

Class III shot higher on Monday at the Chicago Mercantile Exchange after sliding lower to finish the week, ahead of Tuesday’s Global Dairy Trade report despite mostly lower cash trade.  Class III had June move 18 higher to $20.60, July gained 73 to $19.27 and August moved limit higher to $17.78/cwt. Balance of 2020 moved 32-68 higher.  Class IV was much quieter, unchanged across the board outside of July fall 4 cents.  June at $13.35, July sits at $15.23, and August at $15.45/cwt.

The CME spot trade, however, was mostly weaker. Dry whey down $0.0075 at $0.3050.   Five trades were made at $0.3050 and $0.31. Blocks down $0.02 at $2.50.  Three trades were made at that price. Barrels down $0.00125 at $2.32.  Butter down $0.0225 at $1.8475.  Five trades were made ranging from $1.84 to $1.8475.  Nonfat dry milk up $0.0075 at $1.0125.  Two trades were made at that price.

Grain markets continue to be rangebound, corn fell ¾ cents to $3.29 ¼, soybeans fell 2 ¼ to $8.69 even, with soybean meal falling 60 cents to $288.40/ton.

Class III Sell Off in Chicago Thursday

Class III milk sells off as we see a lackluster cheese trade on the Chicago Mercantile Exchange.  Milk futures were pressured by mostly lower cash markets despite a positive supply and demand report.  Class III milk had June gaining 10 cents to $20.45, but the bulk of the futures curve fell. July fell 45 to $18.91, August fell 42 to $17.40, and September fell 44 cents to $16.94/cwt.  Class IV milk saw June give up 44 cents to $13.50, July gained a penny to $15.55, and August fell 7 to $15.78/cwt. 

The CME spot trade saw Dry whey down $0.0025 at $0.32.   Fifteen trades were made ranging from $0.3175 to $0.32. Blocks unchanged at $2.54. Barrels down $0.01 at $2.3575.  Butter down $0.0525 at $1.90.  Nine sales were made ranging from $1.90 to $1.9525. Nonfat dry milk up $0.02 at $1.00.  Seven trades were made ranging from $0.9825 to $1.00.

Feed and Grain markets were quiet after a quiet USDA Supply and Demand report. Corn gained 3 ½ to $3.29 ¾, soybeans gained half a cent to $8.66 even, and soybean meal gained 90 cents to $289.70/ton.

Class III Dips While Class IV Climbs

Dairy markets reacted negatively to offers showing up in the Chicago Mercantile Exchange spot dairy auction on Wednesday, pressured by oversold positions and lower cheese markets. Class III milk prices declined double digits throughout 2020. July led the charge lower, losing 35 cents per cwt. Despite the softer trade July is offering north of $19 per cwt while the full second half sits at $17.50. Class IV markets performed well adding double digits. Second half 2020 Class IV is sitting between $15.50 and $16.00 in that period.

Spot trade saw Dry whey down $0.0050 at $0.3225.   Twelve trades were made ranging from $0.3225 to $0.33. Blocks unchanged at $2.54.  Four sales were made ranging from $2.53 to $2.5425. Barrels down $0.0575 at $2.3675.  Five sales were made at $2.3675 and $2.4125. Butter up $0.03 at $1.9525.  Eleven sales were made at $1.95 and $1.95.25. Nonfat dry milk up $0.0275 at $0.9525.  Two trades were made at $0.97 and $0.98.

Saputo and Fonterra milk prices announced

FOR the first time, milk processors last week released their opening prices for the next year on the same day.

Saputo’s 2020-21 opening weighted average milk price in the southern milk region will be $6.40 per kilogram milk solids.

In accordance with the Dairy Industry Code of Conduct, Saputo has published its opening minimum milk prices in its standard non-exclusive milk supply agreement. The minimum prices are the price Saputo will pay monthly to suppliers for premium quality milk.

In addition to the minimum prices, Saputo will continue additional payments to suppliers, including the monthly milk quality bonus, productivity payment and off-peak payment. The minimum prices and additional payments result in the weighted average farm gate milk price.

“Determining the outlook for milk prices for the 2020-21 milk year has been particularly challenging,” a Saputo spokesperson said.

“Heightened uncertainty and rapidly-changing conditions arising from COVID-19 will continue to impact world economies and the dairy market for the coming milk year.

“Despite this, Saputo’s objectives remain the same. We are well placed, with our diverse product mix and markets, to adjust to evolving market conditions and continue maximising the value of every litre of milk.”

After announcing a weighted average opening price from $6.06 per kilogram of MS on Monday last week, Fonterra revised that figure on Wednesday to $6.40, with forecast closing range of $6.40 to $6.70 per kilogram MS.

Fonterra Australia managing director René Dedoncker said Fonterra had kept in line with industry convention to open at a price lower than the full-year forecast, with the understanding that step-ups would be paid throughout the season where the market supports it.

“Clearly though, our opening price needs to be competitive. We said we would review our pricing in June, and we have brought this forward due to the competitive environment we are in, which is what is driving this price,” he said.

“Our revised opening price fits at the lower end of our original full-year forecast and is aligned with our business plans for the year ahead.

“On Monday we said that the impact of COVID-19 on economies and the market is still largely unknown and will be uncertain for some time. Consumers’ purchasing power is reduced and the foodservice industry remains impacted. This holds true today.”

Dairy Australia has published a guide to assist dairy farmers with the introduction of new industry wide milk supply agreements with processing companies.

‘A Farmer’s Guide to Milk Supply Agreements and the Dairy Industry Code of Conduct’ has been designed to make milk supply contract negotiations easier and more transparent. It is available via Dairy Australia’s website.

Dairy Australia trade and industry strategy group manager Charles McElhone said rules around standard form milk supply agreements were part of the Dairy Industry Code of Conduct launched on January 1.

“As farmers gear up for their new season contract negotiations, for the first time they will be looking at milk supply agreements that come under the Dairy Industry Code of Conduct,” he said.

“Contracts might look different, some of the terminology will be different, there are new terms that have to be incorporated into agreements.

“It’s a priority for us that farmers have access to information that makes it easier to get their head around some of these changes. We’ve developed these resources as a practical guide for farmers to consider how a milk supply agreement aligns with their business.

“All milk supply agreements created, varied or renewed this year are subject to the code and, by January 2021, all milk supply agreements no matter when they were entered into, must be code-compliant.”

Australian Dairy Farmers and Australian Dairy Products Federation contributed to the guide, which can be used in conjunction with contract templates developed by these organisations. The federal government provided funding as part of an election commitment to support farmers with the introduction of the Dairy Industry Code of Conduct.


Class III Milk Shows Strength in Chicago

Class III milk futures saw considerable strength today on the Chicago Mercantile. Milk futures shot higher Tuesday supported by strong barrel prices.  June milk launched a 41-cent gain to $20.55/cwt. July skyrocketed 62 cents to $19.56. August improved 42 cents to $17.89/cwt.  Second half 2020 gained 19-62, and is residing at $17.59/cwt.   Class IV milk futures were thinly traded today. June milk remains at $14.08/cwt. July milk is trading at $15.10. Second half 2020 is averaging $15.48/cwt.  

In the CME cash dairy product trade,  Dry whey down $0.0075 at $0.3275.   Three trades were at that price. Blocks down $0.0450 at $2.54.  One sale was made at $2.5850.  Barrels up $0.0650 at $2.4250.  One sale was made at $2.41. Butter down $0.0025 at $1.9225.  One sale was made at that price. Nonfat dry milk down $0.0075 at $0.9525.  Ten trades were made ranging from $0.9525 to $0.9575.

The grain complex showed weakness across the entire spectrum. July corn fell 6.25 cents to $3.2725/bushel. Spot soybeans lost 1.50 cents to $8.6325/bushel. July soybean meal descended $1.30 to $287.10/ton. September Chicago wheat declined 6.50 cents to $5.1075/bushel. June live cattle ascended $2.20 to $96.32/cwt. August feeders added $1.17 to $134.25/cwt. Crude oil improved 45 cents to $38.64.      

Class III Moves Higher in Chicago to Start the Week

On the Chicago Mercantile milk futures were higher Monday as traders bought back oversold positions.  June gained 26 to $20.14, July gained 27 to $18.94, and August gained 9 to $17.47. Fall milk was quieter gaining 1-13 in September – December. Class IV milk was mixed. June gained 17 to $14.08, Jul fell 10 to $15.10, and August fell 21 cents to $15.17/cwt. 

Grain and feed markets were mixed with corn gaining 2 ½ cents to $3.33 ¾, soybeans fell 3 cents to $8.64 ¾, with soybean meal down 70 cents to $288.40/ton.

Milk Futures Close over $20 in Chicago Thursday

On the Chicago Mercantile Exchange, June Class III milk futures were up 38 cents at $20.21.  July 31 higher at $18.99.  August through October futures unchanged to up 20 cents.

Dry whey up $0.0125 at $0.34.  Six trades were made, with a range of $0.3350 to $0.34.  Blocks $0.02 higher at $2.5250.  Barrels up $0.06 at $2.37. Butter up $0.29 to $2.0150.  Fifteen trades made, ranging $1.90 to $2.0150. Nonfat dry milk down $0.0175 at $1.00.  Thirteen trades were made, with a range of $0.9975 to $1.0025.

CWT Assists with 2.1 Million Pounds of Dairy Product Export Sales

Cooperatives Working Together (CWT) member cooperatives accepted 22 offers of export assistance from CWT that helped them capture sales contracts for 1.371 million pounds (622 metric tons) of Cheddar, Gouda, and Monterey Jack cheese; 252,980 pounds (115 metric tons) of butter; and 456,357 pounds (207 metric tons) of cream cheese. The product is going to customers in Europe and Asia and will be delivered from May through August 2020.

CWT-assisted member cooperative export sales contracts for 2020 total 19.581 million pounds of American-type cheeses, 6.056 million pounds of butter (82% milkfat), 1.960 million pounds of anhydrous milkfat, 2.933 million pounds of cream cheese and 16.797 million pounds of whole milk powder. The product is going to 28 countries in seven regions. These sales are the equivalent of 516 million pounds of milk on a milkfat basis.

Assisting CWT members in moving dairy products overseas through the Export Assistance program is critical during the challenging times U.S. dairy farmers and cooperatives are facing. The Export Assistance program helps in strengthening and maintaining the value of dairy products that directly impact producers’ milk price. The program is helping member cooperatives grow and maintain world market share for U.S dairy products and is a significant factor in maintaining the total demand for U.S. dairy products and the demand for U.S. farm milk.

Dairy product and related milk volume amounts reflect current contracts for delivery, not completed export volumes. CWT pays export assistance to bidders only when export and delivery of the product is verified by required documentation.

All dairy farmers and dairy cooperatives should invest in CWT. Membership information is available on the CWT website.

The Cooperatives Working Together (CWT) Export Assistance program is funded by voluntary contributions from dairy cooperatives and individual dairy farmers. The money raised by their investment is being used to strengthen and stabilize the dairy farmers’ milk prices and margins. For more information about CWT, visit

Milk futures closer to $20

Class III milk futures continued its tear higher on the Chicago Mercantile Exchange. June Class III milk futures were up 23 cents to $19.83.  July 42 higher at $18.68.  August through October contracts up 16 to 26 cents. Class IV milk futures also saw an impressive move higher today.  June milk skyrocketed 59 cents to $14.20/cwt.  July milk climbed 22 cents to $15.30.  August milk added 52 cents to $15.84/cwt.  Second half 2020 improved 11-52 cents to $15.90/cwt.  

In the CME Cash Dairy Product Trade dry whey up $0.0175 at $0.3275.  Five trades were made, ranging from $0.3250 to $0.33. Blocks unchanged at $2.5050.  Barrels up $0.0975 at $2.31.  Three trades, ranging $2.26 to $2.31. Butter up $0.0050 at $1.7250.  Nonfat dry milk $0.0025 higher at $1.0175.

Global Dairy Commodity Update June 2020

Dairy markets turned the corner in May with improving demand as COVID-19 lockdowns started to ease in most regions while milk output slowed in the US and EU.

The re-opening of foodservice outlets has lifted short-term demand for cheese and boosted confidence that the worst is behind us. The strength of that recovery is now the primary focus – once populations are free to leave their homes and eat out, the reality of consumption is likely to leave a large gap in expectations.

The relaxation of COVID-19 restrictions will vary as Governments juggle the political choices between managing health system overload and economic fallout. This will ensure varied rates of recovery in food service sales while business and tourism travel will remain minor until late in 2020 (at the earliest). The ongoing impacts of lower household incomes will drive “trading down” behaviour and weak discretionary spending.

Slowing milk supply in Q2 will offset some of the slump in demand. Weather will continue to heavily influence milk output, but US government payments to farmers will support margins and may encourage a return to milk growth in Q3. Commercial actions to reduce surplus milk and product will cut milk output.

Weaker cheese demand may drive some change in post-peak product mix in the US and Europe, where flexibility exists.

Commodity prices will be influenced by the risk of stock-build in SMP and butter, until there is meaningful rebuilding of cheese and butter demand in Europe and the US. Oceania prices will be impacted by the pressure on available product from the EU in Q3-2020.

The stimulation of stronger export demand in commodity ingredients at lower prices from developing Asian and MENA markets will be critical to the outlook. These regions are experiencing their own lockdowns, the flow-on from global recession and travel restrictions. 

Skim Milk Powder  
Spot and futures improved in May as US values gained, moving ahead of European prices. NZ values softened but continue to trade at a premium. GDT prices jumped significantly at the most recent event on heavy Chinese buying.

Whole Milk Powder

Spot values were mixed in May; European values were steady and premium to NZ product, which softened through the month.  Limited inventory available for prompt shipment out of NZ, however weather is looking favourable for a good start to the new season.

US prices jumped in May due to a short-term cheddar shortage with the combination of slowing milk supply, domestic retail demand and a rush to fill government purchases for food aid programs. This lift was the largest increase in 30 days ever on the exchange.

EU spot values recovered at a slower pace in May, while NZ spot values softened for the month.

Spot values were mixed in May. The EU market stabilised and began to improve as cream surpluses were avoided and retail demand for butter remained strong. Slowing milk supply due to dry weather in a number of major EU producers helped. NZ values softened but continues to trade at a premium.    

EU spot prices were mixed in May and continued to trade below US prices, which firmed through May with better demand from China and SE Asia.


Saputo reveals opening milk price

Saputo has announced an opening milk price of $6.40 per kgMS for the southern milking region.

Saputo has committed to to no price step-downs in any circumstances during the year.

“Determining the outlook for milk prices for the 2020/21 milk year has been particularly challenging,” a statement said.

“Heightened uncertainty and rapidly-changing conditions arising from COVID–19 will continue to impact world economies and the dairy market for the coming milk year.

“Despite this, SDA’s objectives remain the same. We are well placed, with our diverse product mix and markets, to adjust to evolving market conditions and continue maximising the value of every litre of milk.”

For more information visit

Class III Milk UP $9 in last 90 days at CME

Class III milk continued to drive higher gaining over $9 in a 30-day window as it follows the spot cheese trade, on the Chicago Mercantile Exchange.  June Class III milk futures were up 63 cents to $19.60.  July 34 higher at $18.26.  August through October contracts up 14 to 20 cents.  Class IV saw June gain 18 to $13.61, July gained 11 to $15.08, and August gained 14 cents to $15.32/cwt.

A record trade on Tuesday with Cheddar blocks trading two loads at $2.50 ½.  Dry whey up $0.0075 at $0.31.  Seven trades were made, with a range of $0.3050 to $0.31. Barrels up $0.1125 at $2.2125. Butter $0.0550 higher at $1.72.  Twelve trades made, ranging $1.6975 to $1.72. Nonfat dry milk down $0.01 at $1.0150.

Cheese rallies as milk futures are mixed in Chicago to start the week

On the Chicago Mercantile Exchange, June Class III milk futures were up 47 cents at $18.97.  July 24 higher at $17.92.  August through October nine lower to 16 higher. Class IV put together a modest gain as well. 

The cheese rally on the CME spot dairy auction raged on once again Monday.  Block cheddar up $0.17 at $2.40.  Barrels up $0.0775 at $2.10.  Butter up $0.0050 at $1.6650.  Nonfat dry milk down $0.0050 at $1.0250. Dry whey down $0.0025 at $0.3025.  Seven trades were made, with a range of $0.30 to $0.3025.


Milk Futures Mixed in Chicago Thursday

Class III milk was mixed and losing some steam.  Milk futures were mostly down, and cash dairy prices were mostly up at the Chicago Mercantile Exchange Thursday.   May Class III milk was down $.04 at $12.19.  June was down $.03 at $17.90. July was up $.05 at $17.20.  August was down $.01 at 16.28.  The milk futures from September through next April ranged from four cents lower to one cent higher.   Class IV milk was unchanged in May at 10.71, June fell 7 to 13.13, and July gained 16 cents to 14.36/cwt. Balance of 2020 was unchanged to 3 higher, averaging at 14.88/cwt

The CME spot trade saw Dry whey was down $.01 at $.31 cents per pound.  Ten sales were recorded from $.31 to $.32 per pound. Forty-pound blocks were up $.0825 at $2.13 per pound. There were two bids and no sales recorded. Barrels were up $.0050 at $1.93 per pound.  Eight sales were recorded from $1.9225 to $1.93. Grade AA Butter was up $.0125 at $1.59 per pound.  No sales were recorded. Nonfat dry milk was up $.0050 at $1.03 per pound.  Six sales were recorded from $1.03 to $1.0350.


Blocks over $2 and Milk Futures Higher in Chicago Tuesday

On the Chicago Mercantile Exchange, Class III milk saw the front month lead the charge higher with June touching $17.98 during mid-day trading.  July up 29 at $17.15.  August through October contracts closed two higher to nine cents lower. Class IV was unchanged in May to $10.71, June also unchanged at $13.20 and July fell 2 to $14.20/cwt. The balance of 2020 was 3-9 lower. Class IV was unchanged in May to $10.71, June also unchanged at $13.20 and July fell 2 to $14.20/cwt. The balance of 2020 was 3-9 lower.

Dry whey down $0.02 at $0.32.  Fourteen trades were made, with a range of $0.32 to $0.3350. Blocks up $0.0850 at $2.0475.  Barrels up $0.0150 at $1.9250.  Twelve trades made, ranging $1.8875 to $1.92. Butter down $0.0025 at $1.5775.  Nonfat dry milk unchanged at $1.0250.

Grain markets continue to be quiet. Corn gained 1 ½ cents to $3.20 ½, Soybeans gained 1 ½ to $8.48 ½, and soybean meal fell $1.90 to $282.00/ton.

Spot Cheese Markets Continue Their Breathtaking Climb

The T.C. Jacoby Weekly Market Report Week Ending May 22, 2020

The spot cheese markets continued their breathtaking climb. They have scaled great heights at spectacular speed. This week spot Cheddar blocks jumped another 15.75ȼ to $1.9375 per pound. Barrels rallied 17ȼ to $1.89, a new 2020 high. Since the month began, blocks have gained a mind-boggling 73ȼ and barrels have added 70ȼ. Milk powder is perking up too. CME spot nonfat dry milk (NDM) climbed 7.75ȼ this week to $1.0125, its first foray above a dollar in nearly two months. The other spot markets retreated. Butter dropped 5.25ȼ to $1.5925. Still, spot butter is 39.5ȼ higher than it was when the month began. Whey powder slipped 2.75ȼ this week to 36.25ȼ.

Helped by improving sentiment surrounding milk powder, Class IV futures trudged higher. Most contracts gained about 20ȼ this week. Despite the sizeable rebound from the depressing values reported in April, Class IV remains well below the cost of milk production.

After making great gains in the two preceding weeks, Class III futures found it difficult to keep climbing. Most Class III futures retreated this week, and the August contract lost more than a dollar. The market clearly believes that spot cheese may have climbed too far, too fast. June was the exception. June Class III added another 18ȼ and reached $17.03 per cwt. That marks the highest print on the board, with later months trading between $15.88 and $16.44.

The inverted futures curve highlights that the fresh cheese shortage is likely temporary. At the moment, companies that promised to supply food banks are shopping for huge volumes of dairy products, and restaurants are restocking their larders.

Once those needs are satisfied, there will likely be more than enough cheese to go around. But immediate demand must be formidable if we have managed to tighten up fresh cheese inventories so quickly after piling up cheese in immense volumes last month. As of April 30, there were 1.48 billion pounds of cheese in cold storage warehouses, the highest total ever. Stocks increased 108 million pounds from March to April, the highest month-to-month increase in more than a century of USDA records.

Butter stocks were formidable too. They totaled 368.7 million pounds, up 26.8% from a year ago. Manufacturers struggled mightily to churn their way out of an ocean of butterfat in April. With cream selling for a fraction of the butter price, every churn in the nation was making product and stocks swelled. Now, ice cream output is heating up and restaurants are loading their coolers with fat-laden ingredients. Discretionary butter churning has slowed and the price has risen accordingly.

At the Global Dairy Trade (GDT) auction, skim milk powder (SMP) gained 6.7% and reached the equivalent of NDM at $1.23 per pound. Most other products moved lower at the GDT. In Europe, SMP and butter values are bouncing back, but Cheddar continues to fade. Manufacturers are taking advantage of the government’s Private Storage Aid program to put some product away for the summer at a subsidized cost. The market will have to contend with these inventories later this year, but so far the volumes are modest.

U.S. milk output – including dumped milk – totaled 18.7 billion pounds in April, up 1.4% from the prior year. USDA revised upward its estimate of March milk production by a significant 0.6%, putting March milk output up 2.8% from last year, the steepest year-over-year increase since December 2014. No wonder we were drowning in milk. April’s more modest increase highlights dairy producers’ efforts, both voluntarily and forced, to reduce milk supplies. With overproduction penalties still in place and May milk prices excruciatingly low, growth in May milk output is likely to be tepid.

U.S. dairy producers culled hard in April, slaughtering 279,400 head, the highest total for the month since 1986. These numbers clearly reflect immense pain on the farm. The dairy herd contracted by 4,000 head in April, to 9.381 million milk cows. Still, that is 49,000 more than in April 2019 and likely more than we need in such a sluggish economy

Dairy producers have been drowning in red ink, and USDA has rushed to offer a lifeline. Beginning May 26, the agency invites dairy producers to sign up for direct payments to offset losses for Covid-19. Producers will be compensated $6.20/cwt. for first-quarter milk production, with 80% of the money up front and the remaining 20%, or a portion of it, to come later if USDA’s funding can cover all the requests. Payments will be capped at $250,000 per individual, or $750,000 for a partnership with at least three active members. That’s enough to cover recent losses on smaller dairies, but for large dairy producers, it doesn’t come close. According to research from the Agricultural and Food Policy Center at Texas A&M, on a 1,000-cow dairy, $250,000 would be equal to roughly $4.12 per cwt., a far cry from the $6.20 for their peers with fewer cows. On

a 2,500-cow dairy, $250,000 is equivalent to just $1.65 per cwt. More than half of U.S. milk is made on farms with more than 1,000 cows, so the caps will disappoint much of the industry. Still the aid is generous and likely to arrive swiftly, which will likely improve dairy producers’ strained relationships with their lenders. There may be an unwelcome side effect, however. The combination of a cash windfall and surprisingly high Class III futures may slow contraction in the dairy herd, to the detriment of prices later this year and into 2021.

It was another quiet week in the feed markets. Corn slipped 1.25ȼ to $3.18 per bushel. Soybeans lost about a nickel, falling to $8.3325. Although there are a few trouble spots, most of the Corn Belt has been blessed with an open planting window, plenty of rain, and, finally, warmer temperatures. Corn for ethanol demand is rebounding along with gasoline consumption, but feed demand is likely slipping as livestock growers try to slow production.

Original Report at

Milk Futures Rise in Chicago Tuesday as Cash Dairy Sees Mixed Results

On the Chicago Mercantile Exchange, June Class III milk futures were up 49 cents to $17.52.  July 42 higher at $16.86.  August through October contracts 33 to 39 cents higher.

Dry whey down $0.0225 at $0.34.  Six trades were made, with a range of $0.34 to $0.3550. Blocks up $0.0250 at $1.9625.  Barrels $0.02 higher at $1.91.  Four trades made, ranging $1.89 to $1.91. Butter down $0.0125 at $1.58.  Three trades, with a range of $1.58 to $1.5875. Nonfat dry milk up $0.0125 at $1.0250.  Two trades were made at $1.0150 and $1.0250.

Milk Futures Down in Chicago Monday

On the Chicago Mercantile Exchange, June Class III milk futures were down 60 cents to $17.03.  July 62 lower at $16.44.  August through October contracts down 35 to 60 cents.

Dry whey unchanged at $0.3625. Blocks steady at $1.9375.  Four trades were made, with a range of $1.93 to $1.9375. Barrels steady at $1.89.  Twenty-five trades made, ranging $1.8875 to $1.89. Butter down $0.05 at $1.5925.  Three trades with a range of $1.5875 to $1.5950.vNonfat dry milk down $0.0025 at $1.0125.  Twelve trades were made, ranging from $1.0050 to $1.0150.

Milk Markets Marginal as Cash Dairy Drive Higher in Chicago Thursday

Class III futures were slightly weaker today on the Chicago Mercantile Exchange.  May milk fell 9 cents to $12.20/cwt.   June was down $.08 at $12.63 per hundredweight and July was $.08 lower at $17.06, while August was down $.16 at $16.53 and September was a dime lower at $16.44.

July corn fell 1.75 cents to $3.1775/bushel.  Spot soybeans tumbled 11.75 cents to $8.35.   July soybean meal lost $3 to $282.50/ton.  September Chicago Wheat gained 3.50 cents to $5.1875/bushel.  June Live cattle finished 40 cents higher to $98.80/cwt.  August Feeder Cattle fell 12 cents to $128.87/cwt.  June crude oil increased 52 cents to $34.01.    

Mixed Markets in Chicago Wednesday

Dairy prices on Wednesday were stronger throughout the day at the Chicago Mercantile Exchange.  June Class III milk futures were 43 cents higher at $17.71.  July up 32 at $17.14.  August through October contracts a dime to 22 cents higher.

CME spot products put together another strong showing. Blocks up $0.07 at $1.92.  Barrels $0.07 higher at $1.8525.  Eight trades were made, ranging from $1.85 to $1.8525. Butter up $0.03 at $1.6350.  Thirteen trades, with a range of $1.6325 to $1.64. Nonfat dry milk up $0.01 at $0.9950. Dry whey steady at $0.3525. 

Dairy Markets Move Higher by Leaps and Bounds

The bulls bellowed and bucked this week, and the bears fled. The dairy markets moved higher by leaps and bounds. Although the rally faded on Friday, the magnitude and velocity of this week’s recovery are astounding. Cheese led the charge. CME spot Cheddar blocks jumped 47.5ȼ this week to $1.78 per pound. Barrels soared 45ȼ to $1.72, a new high for 2020. Both blocks and barrels stand above yearago levels, a truly impressive feat given the state of the economy. Butter vaulted 35.5ȼ this week to $1.645. CME spot nonfat dry milk (NDM) rallied 11ȼ to 93.5ȼ. Whey slipped back 0.75ȼ to 39ȼ.

The futures gained considerable ground. June Class III settled at $16.85 per cwt., up $3.17 from last Friday. The June contract has climbed more than $5 in the past three weeks. June through December Class III futures sit comfortably above $16. 2020 Class IV futures added more than $1.50, on average, this week. But at less than $15 per cwt., they are still a long ways from covering dairy producers’ costs.

The dairy markets in general, and the cheese and butter markets in particular, have been buoyed by a perfect storm of purchases. U.S. cheese was a bargain a couple months ago. Now exporters are loading containers to fill orders that were booked earlier this year. Grocers are still moving dairy products in huge volumes. They are competing with restauranteurs who are restocking after spending most of March and April on the sidelines. Meanwhile, some companies that signed up to supply nonprofits with food boxes under USDA’s Farmers to Families program are scrambling to secure the yogurt, dips, cheese, butter, and fresh milk needed to fill them. In the near term, processors may need to ramp up output to meet these simultaneous requests. Meanwhile, ice cream season has arrived, tightening up the cream markets and reducing butter production.

While dairy processors are hurrying to squeeze large orders into a very short timeframe, dairy consumption may be less concentrated. Dairy products are moving rapidly from processors to cargo containers, food banks, commercial kitchens, grocery pallets, and in-home refrigerators. But consumers probably aren’t eating a lot more dairy than they were just a few weeks ago. USDA is donating dairy at such a scale that it’s likely to cannibalize retail sales. Restaurant goers will also need fewer groceries. Importers who stocked up on U.S. cheese when it was on sale won’t need to buy as much later. Orders are not expected to maintain their current heady pace.

Whatever the future brings, improved demand has ushered the milk market into balance at a time of year when that can be difficult to achieve. Lower output has helped too. Preliminary data shows European milk collections up just 0.8% from a year ago in March. USDA’s Dairy Market News reports that high cull rates and variable feed quality have tightened milk supplies in the Northeast. Co-op penalties and self-imposed production cuts are reportedly weighing on milk yields in the Central region. In the Southwest and California, the heat is also dragging production lower. For the week ending May 2, dairy cow slaughter was 58,467 head, up 2.5% from the same week a year ago, and once again the highest total ever for this time of year, excluding 1986. Although the futures promise better days ahead, there is still immense pain on the farm. This week’s vigorous rally suggests the dairy downturn may be over sooner than we had feared.

The corn market went nowhere at all this week. July corn futures finished right where they started, at $3.1925 per bushel. On Tuesday, USDA published its first official supply and demand estimates for the 2020- 21 crop year. With massive acreage and no sign of planting trouble, the agency projects end-of-season corn stocks at over 3.3 billion bushels, the highest total since the 1987-88 season. Soybean futures slipped 12ȼ this week to $8.385. Exports are perking up, but the low corn price suggests that farmers may switch some ground into soybeans, which is not helping prices. The currency is also an impediment. This week the Brazilian real fell to an all-time low against the dollar, making South American soybeans extremely attractive for foreign buyers.

Original Report at:

GDT index increases in latest auction

The latest Global Dairy Trade (GDT) event 260 event has concluded up 1% from two weeks prior. The big winner at today’s event was lactose (LAC) which shot up by 15.6% in index, easily the most dramatic move among product indices on the day.Skim milk powder (SMP) also performed strongly, rising by 6.7% in index; though, on the flip side, cheddar dropped by 6% at the event. Butter fell 1.9%, and Cheddar fell 6% over the previous auction. Whole milk powder fell slightly lower losing half of a percent, and Rennet Casein fell 1.9% from prior trade.  Lasting for two hours and 19 minutes, today’s event saw 172 bidders participate across 17 rounds, with 107 winning bidders emerging. A total of 16,787MT of product was sold on the day.

Key results:

  • AMF index up 2.7%, average price US$4,079/MT;
  • Butter index down 1.9%, average price US$3,803/MT;
  • BMP not offered;
  • Ched index down 6.0%, average price US$3,864/MT;
  • LAC index up 15.6%, average price US$1,341/MT;
  • RenCas index down 1.9%, average price US$8,719/MT;
  • SMP index up 6.7%, average price US$2,549/MT;
  • SWP index not available, average price not available;
  • WMP index down 0.5%, average price US$2,677/MT.

Today’s increase marks two small index rises, and four index drops across the six auctions that have been held since the start of March.

Milk Futures Rebound in Chicago Tuesday in Chicago

Whiplash continues in our milk markets, as cheese marched higher on the Chicago Mercantile Exchange. Class III milk rebounded nicely Tuesday after and out of character sell-off Monday. Class III milk saw May gain 3 to $12.27.  June Class III milk futures were up 62 cents at $17.28.  July 57 higher at $16.82.  August through October contracts 15 to 21 higher. Class IV was unchanged in May to $10.61, June gained 64 to $13.50 and July was limit higher, up 75 cents to $14.38 per cwt. Second half class IV now averages at $14.81 per cwt.

The CME spot trade saw Cheddar blocks and barrels show strength as blocks where up $0.0350 at $1.85.  Barrels $0.0450 higher at $1.7825.  Five trades made, ranging $1.7750 to $1.7825. Butter steady at $1.6050.  Nonfat dry milk up $0.0450 at $0.9850.  Five trades, with a range of $0.96 to $0.9850. Dry whey down $0.01 at $0.3625.  Five trades were made, with a range of $0.3625 to $0.37.



Class Three Continues to Show Weakness in Chicago to Start the Week

In the CME cash dairy product trade, blocks and barrels continued its impressive run higher.   Blocks up $0.0350 at $1.8150.  Barrels up $0.0175 at $1.7375.  Eleven trades made, ranging $1.7375 to $1.75. Dry whey down $0.0175 at $0.3725.  Eight trades were made, with a range of $0.3725 to $0.3850. Butter $0.04 lower at $1.6050. Nonfat dry milk up $0.0050 at $0.94.  Six trades were made, with a range of $0.9325 to $0.94.

July corn gained 1.50 cents to $3.2075/bushel. Nearby soybeans jumped 6.50 cents to $8.45/bushel. September Chicago Wheat declined 3 cents to $5.00/bushel. Fats and feeders showed strength today. June Live Cattle rallied $1.72 to $98.72/cwt. August feeders finished $1.47 higher to $132.55. June crude oil soared $2.90 to $32.33.

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