- The dairy industry experienced a rough week due to mediocre demand and a short-lived rebound for Class III dairy markets.
- Cheese inventories grew seasonably in January, reaching 1.45 billion pounds, up 0.5% from January 2023.
- Cheese prices must remain low enough to keep product moving abroad, suggesting continued volatility in the range between $1.45 and $1.70 per pound.
- CME spot Cheddar blocks finished at $1.55, while Barrels climbed 3.5ȼ to $1.65.
- Whey prices tumbled, with CME spot whey powder falling 9.75ȼ to 42.5ȼ, erasing six weeks of hard-won gains and slashing nearly 60ȼ from nearby Class III values.
- The butter market retreated, with spot butter falling 9.25ȼ to $2.7575.
- The milk powder market took a small step back, with CME spot nonfat dry milk (NDM) slipping a quarter-cent to $1.1975.
- USDA announced the February Class III price at $16.08 per cwt, up 91ȼ from January’s painful lows, but still inadequate for producers who continue to suffer steep discounts despite a tighter milk market.
- The steep setback in whey prices took a big bite out of Class III values this week, with the March contract losing 53ȼ and the April Class III falling $1.10 to $16.75.
- Class IV prices are much better, with the February contract going off the board at $19.85, up 46ȼ from January.
- The dairy herd is in decline, and milk-cow head counts are likely to keep dropping.
- Feed prices bounced back from last week’s steep selloff, with May corn settled at $4.2475 per bushel, and May soybean futures closed at $11.5125, up 10.75ȼ.
The dairy business had a hard week on LaSalle Street, with decreased milk production and a smaller herd driving markets higher. However, lackluster demand continues to plague the dairy industry, rapidly suffocating any major rallies. Class III’s rebound has been short-lived, since unrelenting rise in cheese output calls into question the idea that decreased milk production is sufficient to reduce supply. Cheese inventories increased seasonally in January, reaching 1.45 billion pounds at the end of the month, up 0.5% from January 2023. Cheap cheese helped boost export sales, but the industry dried up after prices rose. Cheese prices must remain low enough to maintain goods going overseas, implying continuous volatility in the well-trodden band of $1.45 to $1.70 per pound.
Whey prices plummeted, with CME spot whey powder sliding 9.75̼ to 42.5̼, wiping six weeks of hard-won gains and chopping roughly 60ɼ off neighboring Class III values. Domestic demand for high protein whey concentrates continues to lower the proportion of the whey stream intended for the dryer, but increased cheese manufacturing means more whey output. The rising currency has significantly harmed US whey export prospects. Currency linkages have resulted in dairy goods priced in euros being 2% less costly than the identical product sold in dollars since the turn of the year, before accounting for any decreases in European whey prices.
This week, spot butter fell 9.25˼ to $2.7575. On January 31, there were 249 million pounds of butter in refrigerated warehouses, a 5.8% decrease from the previous year but much higher than in January 2022. Butter purchasers expect that less costly cream would increase production and allow them to avoid the exorbitant pricing of recent holiday seasons. Despite this week’s setback, butter prices are historically high and are expected to stay so.
The milk powder market took a modest step back, with CME spot nonfat dry milk (NDM) down a quarter cent to $1.1975. The February Class III price of $16.08 per cwt is up 91% from January’s lows, but it is still insufficient for farmers who continue to face substantial discounts despite a tighter milk market. The February Class IV contract sold for $19.85, a 46 percent increase over January.
Feed prices have rebounded following last week’s severe selloff, with Central Brazil trending drier, which may lower production predictions for the safrinah or second-corn crop. The trade is also afraid that farmers would plant fewer acres than usual since prices are just too low to cover input expenses.
Original Report At: https://www.jacoby.com/market-report/a-rough-week-on-lasalle-street-as-markets-propel-upward-and-downward/
