Seasonal Demand Drives Cheese and Butter Prices Higher
Source: DairyNews.today
The onset of seasonal buying, following a relatively calm summer, has caused significant shifts in the dairy market. Notably, block cheese prices have broken out of a three-month sideways trend, surging to $2.10 per pound—the highest level since March 27, 2023.
Barrel cheese has similarly reached new heights, not seen since June 9, 2022. This upward momentum is largely driven by increased buyer activity, as market participants anticipate robust demand for the Fall season and upcoming holidays.
With the new school year underway, a larger portion of milk is being diverted to satisfy the bottling needs of educational institutions. This shift has tightened the available milk supply for manufacturing purposes, leading to a rise in spot milk prices, which now range from at class to as much as $2.00 above class. Industry expectations suggest that spot milk prices will continue to climb in the coming months. The outlook for milk production remains concerning, with projections indicating that output may remain below year-ago levels for the remainder of the year. The USDA has already revised its milk production estimate downward by 600 million pounds in its latest World Agricultural Supply and Demand Estimates (WASDE) report, forecasting a total production of 226.3 billion pounds—100 million pounds less than in 2023.
Butter prices have also gained momentum after a period of stagnation, reaching their highest level since October 31, 2023. The week ending August 16th saw a record volume of butter loads, yet the price increase was tempered by a surge in seller activity. While strong buyer interest was evident, sellers were eager to capitalize on the higher prices, though they did not completely flood the market, choosing to retain some supply. Currently, the spot butter price is just 8.25 cents below its peak in 2022 and 32.75 cents under the record high of 2023.
June butterfat exports posted a remarkable 80% increase over the previous year, totaling 4,671 metric tons. Particularly notable were the exports of anhydrous milk fat, which skyrocketed by 490%, and butter exports, which climbed by 32%. Despite the underperformance of butter exports in the first half of the year compared to the previous two years, domestic demand has surged, tightening supply and pushing prices to record levels. Should exports continue to rise in the second half of the year, inventories could deplete rapidly, potentially driving prices even higher.
While the current environment of rising prices is favorable for dairy producers, it's important to recognize that high prices can also lead to market corrections.
With the new school year underway, a larger portion of milk is being diverted to satisfy the bottling needs of educational institutions. This shift has tightened the available milk supply for manufacturing purposes, leading to a rise in spot milk prices, which now range from at class to as much as $2.00 above class. Industry expectations suggest that spot milk prices will continue to climb in the coming months. The outlook for milk production remains concerning, with projections indicating that output may remain below year-ago levels for the remainder of the year. The USDA has already revised its milk production estimate downward by 600 million pounds in its latest World Agricultural Supply and Demand Estimates (WASDE) report, forecasting a total production of 226.3 billion pounds—100 million pounds less than in 2023.
Butter prices have also gained momentum after a period of stagnation, reaching their highest level since October 31, 2023. The week ending August 16th saw a record volume of butter loads, yet the price increase was tempered by a surge in seller activity. While strong buyer interest was evident, sellers were eager to capitalize on the higher prices, though they did not completely flood the market, choosing to retain some supply. Currently, the spot butter price is just 8.25 cents below its peak in 2022 and 32.75 cents under the record high of 2023.
June butterfat exports posted a remarkable 80% increase over the previous year, totaling 4,671 metric tons. Particularly notable were the exports of anhydrous milk fat, which skyrocketed by 490%, and butter exports, which climbed by 32%. Despite the underperformance of butter exports in the first half of the year compared to the previous two years, domestic demand has surged, tightening supply and pushing prices to record levels. Should exports continue to rise in the second half of the year, inventories could deplete rapidly, potentially driving prices even higher.
While the current environment of rising prices is favorable for dairy producers, it's important to recognize that high prices can also lead to market corrections.
