Mid-August CME dairy product prices were mostly higher led by cheese topping $2 per pound, all of which drove Class III futures higher.

After jumping almost 11 cents the previous week, the Cheddar blocks closed Friday at $2.10 per pound, up 14.25 cents on the week, a price not seen since March 27, 2023, and 7.25 cents above a year ago.

The barrels finished at $2.2550, 25 cents higher, highest since June 9, 2022, 44.75 cents above a year ago, and 15.50 cents above the blocks. Sales for the week totaled 21 loads of block and eight of barrel.

The Aug. 13 Daily Dairy Report warned, “New cheese capacity will be coming online later this year in the Southern Plains. Theoretically, cheese production will increase once the new plants are up and running, flipping the market balance back to heavy supplies and pushing prices lower. However, with low heifer and cow inventories, concerns about these plants having enough milk to run have been growing.”

Dairy Market News reports that Midwest cheesemakers continue to say milk is tight to tighter week over week. Mid-week reported spot prices were hovering in the same area as the previous week, but cheesemakers say milk availability is scarce for the most part. Some are still getting enough but at increasing prices. And, as more schools reopen, a growing percentage of milk will go to Class I and expectations are that prices will be above Class III until Labor Day, at the earliest. Cheese demand is somewhat steady. Barrel producers have shifted their focus onto other varieties which could have been a factor in the recent CME price surge. Block markets are also bullish, but not to the same extent, says DMN. Cheese inventories in the region range from balanced to tight.

Western cheese production remains active. While most cheese makers are finding plenty of milk, supplies remain tight in parts of the West due to high temperatures. A few processors have adjusted their milk production caps to incentivize farms to ship more milk and keep cheese production full. Some contacts say there is plenty of cheese available, others suggest supplies are a little snug, but demand is steady to strong. With the start of school terms at hand, a few contacts report an uptick in retail and institutional food service purchases.

Butter jumped 4.25 cents Monday, gave back 2 cents Tuesday, and closed Friday at $3.18 per pound, up 8.25 cents on the week, highest since Oct. 31, 2023, and 48 cents above a year ago.

There were 103 sales on the week, 51 on Thursday alone, highest single day total since Nov. 3, 2004, when butter only traded three days a week. Interestingly, there was 49 loads traded on Aug. 16, 2023. This volume represents hundreds of thousands of pounds worth of butter moving through Chicago this week.

Butter demand in the Central region is “starting to find its seasonal groove,” says DMN. In recent weeks, demand has been somewhat hit and miss. This week, however, butter producers say customers are more actively seeking product and are working on deals for the latter months of the year. Production is beginning to slide, says DMN. There were weeks in July when churning in the region was busier than expected, seasonally, but as cream availability has shifted noticeably downward in recent weeks, so has churning. Butter markets are in a “steadfast position,” says DMN, but few see anything below $3 per pound.

Grade A nonfat dry milk saw its Friday finish at $1.2550 per pound, up 5.50 cents on the week, highest CME price since Feb. 13, 2023, and 15 cents above a year ago, with 19 sales put on the board for the week.

The powder got some support from an Algerian tender announced Tuesday and higher GDT Pulse prices, according to StoneX. “A large volume was cleared. Ramadan demand will start right about now as the holiday will start earlier next year (Feb 27th - Mar 29th) so those buyers were looking to stock up.”

Dry whey closed Friday at 55 cents per pound, down 1.15 cents on the week but 28 cents above a year ago, with 3 sales for the week.

It’s the age old question – is supply driving the market or demand? We got a look at the latest Dairy Product Supply and Utilization data and HighGround Dairy’s Betty Berning reported highlights in the Aug. 19 Dairy Radio Now broadcast.

Total cheese usage was up 0.9 percent from June 2023, she said, fourth month in a row to top a year ago, and driven primarily by the “other” category, particularly on exports. Export numbers have been strong for cheese throughout 2024, according to Berning, and a lot of Mozzarella and Gouda was exported.

The other side of the story is supply and “The smaller milk supply resulted in smaller cheese output in June and right now its summertime.” Milk is very tight and with schools reopening, more milk will go to the bottle instead of the vat.

Berning reported that spot milk prices are running over Class, are the highest in a number of years, and have topped three year averages. The downside however is the higher cheese prices will hurt exports as the U.S. will not be as competitive.

Butter utilization was down 1.1 percent, with domestic use down 2.0 percent, while exports were up 33.3 percent.

Nonfat/skim milk powder was down 15.1 percent, lowest total for the month since 2014, according to HGD, which stated, “Year-to-date usage finally passed the one-billion-pound mark in June, a month later than in the past five years when this threshold was crossed in May.”

Dry whey usage was down 6.5 percent, however HGD points out, “Despite waning domestic demand, limited inventories and rising exports helped propel the CME spot dry whey price to 62.50 cents per pound on Aug. 1, the highest price since April 2022.”

The USDA lowered its 2024 and 2025 milk production forecasts in its latest World Agriculture Supply and Demand Estimates report, and blamed lower cow inventories for both years based on the most recent data in the Milk Production report. Output per-cow was also reduced for both years.

2024 production and marketings were projected at 226.3 and 225.3 billion pounds respectively, down 600 million on both from last month’s estimate. If realized, both would be down 100 million pounds or 0.04 percent from 2023.

2025 production and marketings were projected at 228.2 and 227.2 billion pounds respectively, down 900 million pounds on both. If realized, both would be up 1.9 billion pounds or 0.8 percent from 2024.

Price forecasts for 2024 cheese, NDM, and whey were raised from last month based on recent price strength. The butter price forecast was lowered.

Cheese is expected to average $1.8250 per pound for 2024, up a half-cent from last month’s estimate, and compares to $1.7593 in 2023 and $2.1122 in 2022. The 2025 average was also raised a half cent to $1.86 per pound.