By Sarina Sharp, Daily Dairy Report
Milk, Dairy & Grain Markets
Soaring temperatures, summer shortages, and sky-high prices are out of season as the cheese and butter markets hunker down for the winter. So far, pre-holiday demand has not impressed. Butter makers tell USDA’s Dairy Market News that orders are “steady to lighter.” For cheese, foodservice sales are “slow,” while purchases from retailers are “steady to stronger.” Demand is simply not keeping pace with current production.
Milk tankers are queuing up outside the new cheese facility in Kansas, which is sure to boost U.S. cheese output well above year-ago levels after nine months with very little growth. There are two other major expansions to U.S. cheese production capacity gearing up to fill their shiny new vats in the first half of 2025. The cheese and Class III markets have braced for impact, and they’ve taken several big steps downward. This week, spot Cheddar blocks and barrels both notched their lowest prices since April. After a modest rebound today, blocks closed at $1.6925 per pound, down 2.75ȼ since last Friday. Barrels plummeted 8.25ȼ to $1.685.
Cream is cheap and plentiful, particularly in the Midwest. Central region multiples, which determine the price that manufacturers pay for cream relative to butter values, ranged from 1.2 to 1.26, well below the five-year average of 1.294. Cheap cream should entice butter makers to churn more product, but processors tell Dairy Market News that they continue to turn away offers of surplus cream because they are “sated with current intakes.” In the face of ample stocks and robust production, CME spot butter fell 2ȼ to $2.63, its lowest price since January.
While consumers have all the cheese and butter they can stomach, they can’t get enough dairy protein. Most adults are actively trying to consume more of it. Protein is especially vital for the roughly 15 million Americans taking glucagon-like peptide-1 (GLP-1) medications like Ozempic or Wegovy. As they eat significantly fewer calories, many GLP-1 users prioritize foods that pack a bigger nutritional punch. Highly concentrated whey powders, like whey protein isolates (WPIs), are becoming increasingly popular, in part because they’re supplying a larger piece of GLP-1 users’ smaller pie. Makers of WPIs and whey protein concentrates (WPCs) with at least 50% protein are using up as much whey as they can, leaving less for WPC-35 and whey powder. While demand for less concentrated whey products is steady, lower production of those products has boosted prices significantly. This week CME spot whey powder jumped 2.5ȼ to 65.5ȼ, its highest price since March 2022.
Nonfat dry milk (NDM) powder prices also climbed. This week they rallied 1.25ȼ to $1.40, their highest price in nearly two years. Prices in Chicago got a boost from Oceania after skim milk powder (SMP) jumped 3.1% to its highest-ever price in its 13-month tenure at the Global Dairy Trade’s (GDT) Pulse auction. Rising prices at the GDT signal that demand from Asian markets has been good enough to offset the impact of higher milk output in Australia and New Zealand. Closer to home, milk powder production will be limited as new cheese production capacity pulls more milk away from dryers.
A casual glance at dairy fundamentals suggests that whey and milk powder prices are likely to remain high while the butter and cheese markets are doomed to the doldrums. But the invisible hand is already turning the pressure release valve. Steep declines in U.S. butter and cheese markets have made American products extremely competitive to foreign buyers despite a strengthening dollar. Meanwhile, whey and NDM/SMP exporters are likely to lose some marketshare at today’s prices.
Strength in the milk powder market helped to hold nearby Class IV prices steady around $21 per cwt. But the drop in butter prices weighed heavily on deferred contracts. April through June Class IV futures lost roughly 40ȼ and dipped below the $21 mark. On the other side of the dairy complex, Class III futures finished in the red for the eighth straight week. Most contracts lost around 20ȼ. That puts Class III in the high-$18s and low $19s. Milk revenues should more than cover costs for most producers. But the November and December milk checks will be much lower than those that thrilled dairy producers for the past three months.
Grain Markets
The feed markets retreated from recent highs. A month of big rains in the Southern Plains revived the winter wheat crop, allowing for excellent growth ahead of winter dormancy. Wheat futures lost a lot of ground over the past two months. This week’s wheat selloff was steep enough to drag corn down with it. December corn closed at $4.24 per bushel, down 7ȼ since last Friday. January soybeans plummeted 33ȼ to $9.98. December soybean meal dropped another $7 to $289.60 per ton. Grain and oilseeds are abundant, and U.S. prices must remain low enough to compete for exports. Dairy producers can expect to enjoy a relatively cheap ration.
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