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Cheese prices rise to highest since August 2023
Mielke Market Weekly
By Lee Mielke
 The fire in cheese prices intensified this week, shooting higher and pulling Class III futures with them. Block Cheddar closed Friday at $1.98 per pound, up 19 cents on the week, highest since Aug. 31, 2023, seventh consecutive week of gain, and 45 cents above a year ago. They’ve gained 58.75 cents in two months.
The Cheddar barrels finished the week at $1.9125, 3.25 cents higher, highest since March 28, 2023, 42.25 cents above a year ago, and 6.75 cents below the blocks. The week saw six loads of each trade hands at the CME.
Midwest cheesemakers have been reporting strengthened demand from both local and Eastern customers for several weeks, says Dairy Market News. Spot milk availability has shifted beyond peak milking season and spot prices mid-week were $1-under to 50 cents over-Class III, a “somewhat dramatic year-over-year shift” from a year ago when they ranged $12- to $4-under Class. Current cheese inventories are generally viewed as balanced, says DMN, but cheesemakers are limiting orders and so as not to oversell.
Cheese manufacturers are running busy production schedules in the West. Milk volumes are meeting current needs but some anticipate tightening volumes with heat levels starting to affect the milk supply. Domestic cheese demand is stronger while export demand is steady but the higher prices may temper that.
CME butter dropped 5.25 cents Tuesday and closed Friday at $2.99 per pound, down 8.50 cents on the week, but still 59 cents above a year ago. There were 14 sales reported for the week at the CME.
Central butter makers say cream availability is holding in line with April. Reported multiples at mid-week were not at or below 1.00, says DMN, but some have shifted closer to that direction. Milk is showing signs of tightness but milkfat availability has yet to fall in line. Butter makers attribute some of the extra cream to output-per-cow improvements on the farm. Foodservice and retail butter demand pushes are being reported. Prices nearing $3 per pound may be higher than typical this time of the year but expectations are they will only continue to push. “Clearly, butter markets are, and have been, the bullish stalwart of the industry and the general viewpoint is bullish,” says DMN.
Western butter manufacturers report production remains busy as cream volumes are comfortable and readily available. Some are taking additional cream before seasonally lighter milk production occurs to ensure adequate inventories for third and fourth quarter demand. Retail demand is steady overall as annual mid-May celebrations sparked stronger food service demand. Demand for unsalted bulk butter is strong though some sellers have tight availability. International demand continues to be moderate due to the high U.S. prices, according to DMN.
Grade A nonfat dry milk fell to $1.1150 per pound Tuesday but rallied to a Friday finish at $1.1525, up 2.25 cents on the week, highest since March 15, but 1.75 cents below a year ago, on nine sales.
StoneX says, “Nonfat prices have been the weakest of the complex lately which continues to be dominated by weak demand globally and more volume, especially skim milk powder out of New Zealand.”
Dry whey slipped 1.25 cents Monday, gained a quarter-cent back Thursday, and closed Friday at 38.50 cents per pound, down a penny on the week but 8.25 cents above a year ago. There were 10 sales on the week.
StoneX broker Dave Kurzawski said in the May 13 “Dairy Radio Now” broadcast “We’re in the midst of a chaotic move to the upside where rationale and supply-demand fundamentals go out the window and where greed and fear take over.” He said the seeds were sown in the market over a year ago, as the story believed was one of “weak demand for cheese.”
Cheese manufacturers, especially Cheddar makers, heard that, he explained, so they made less. “If they had kept the gas on Cheddar production, we could have potentially been at $1.20 per pound, not the $1.40-$1.50 we were the first quarter of the year. When demand turns around and you’re making less Cheddar and making less milk, things happen very quickly,” he said, “And exposes the fragility of the supply chain. That’s what we’re dealing with right now.”
Milk output was struggling before the avian flu, according to Kurzawski, so that only added to the concern. “You now have real demand and perceived problems going forward and the markets are reflecting that.”
When asked if dairy farmers will see milk prices that finally pay the bills, he answered “I absolutely think so. In just one month’s time we gained $4 on June Class III, trading at over $20,” though he cautioned, “No one knows how sustainable demand is and the issues of the economy still exist. We realize we have a supply problem,” he concluded. “It’s not going to be solved overnight.”
The Agriculture Department raised its 2023 milk production forecast in Friday’s World Agriculture Supply and Demand Estimates report and gave us a preview of what it expects in 2025.
2024 production and marketings were projected at 227.3 and 226.3 billion pounds respectively, up 1 billion pounds on both from last month’s estimate. If realized, both would be up 900,000 pounds or 0.4 percent from 2023.
2025 production and marketings were projected at 229.3 and 228.3 billion pounds respectively. Both would be up 2 billion pounds or 0.9 percent from 2024. The increase was attributed to expected higher milk per cow and an expanding milk cow herd, according to the WASDE.
The 2024 Class III milk price estimate was raised 55 cents from a month ago, to $16.75 per hundredweight, and the 2025 average was estimated at $16.30. The 2024 Class IV average was lowered 15 cents, to $20.25. The 2025 average was projected at $19.95. I’ll have more details next week.
Meanwhile, you’ll recall March milk production was down 1.0 percent from a year ago and the March Dairy Products report shows where that milk was directed.
Cheese production climbed to 1.226 billion pounds, up 7.6 percent from February but only 0.1 percent above March 2023. The February total saw only a minor revision and production for the first three months of 2024 totaled 3.6 billion pounds, up just 0.1 percent from 2023.
Butter production climbed to 208.5 million pounds, up 10.9 million pounds or 5.5 percent from February’s total which saw no revision, and was up 2.7 million pounds or 1.4 percent from a year ago. YTD is at 623.4 million pounds, up 4.5 percent from 2023.
The Daily Dairy Report stated “Elevated butterfat values in milk likely helped to keep churns full, even as March milk production fell 1 percent from prior year.”
Yogurt production totaled 426.9 million pounds, down 0.4 percent from a year ago, with YTD output at 1.2 billion pounds, up 2.0 percent. Hard ice cream, at 66.1 million pounds, was up 1.4 percent from 2023. YTD, 173.1 million pounds had been produced, down 0.7 percent from a year ago.
Dry whey production crept to 79.9 million pounds, up 7.8 million pounds or 10.8 percent from February, and up 2.6 million pounds or 3.4 percent from a year ago. YTD whey stands at 229.8 million pounds, up 4.1 percent.