The cheese market appeared to be turning a corner, but Class III futures’ weakness indicates otherwise. Class IV futures have performed better as butter prices remain supportive. The USDA’s annual Agricultural Outlook Forum, held on February 15th and 16th, provided an outlook for the US dairy industry, indicating that Class IV prices will remain significantly higher than Class III prices. The average Class IV price this year is expected to be $20.20, up $1.08 per cwt from 2023, while the Class III price is expected to be $17.10 this year, up $0.08 per cwt from 2023.
The butter price is expected to remain strong and trend higher, with recent increases in international butter prices improving the potential for US butter to become more competitive on the international market and increasing demand. Butter exports for 2023 were significantly lower than the previous year, and if export demand improves significantly, butter prices will rise above current levels, potentially returning to 2023 highs or higher.
Traders anticipate higher prices as more premium is added to butter futures contracts through the end of the year. The October butter futures contract anticipates an average price of $2.92 per pound. However, the USDA was less optimistic about cheese prices, forecasting an average price of $1.69, or nearly $0.07 per pound less than in 2023. Whey demand has increased, both globally and domestically, providing some support to the Class III milk price.
The USDA also released grain production and price forecasts for the 2024/25 crop year, indicating lower grain prices and higher ending stocks. Corn planted acres are expected to be 91.0 million, with a yield of 181.0 bushels per acre, and ending stocks are estimated to be 2.532 billion bushels, with an average price of $4.40 per bushel, $0.40 per bushel less than last year. Soybean planted acres are expected to reach 87.5 million, with a yield of 52.0 bushels per acre, up from 83.6 million this year and 50.6 bushels per acre.
