USDA Milk Production Data Pushes Prices Down; Cheese Demand Offers Market Support
Source: DairyNews.today
Higher milk production estimates from the USDA have softened dairy prices as 2024 draws to a close, with Class III milk futures trading near $18.50 per hundredweight (cwt), down from mid-year highs of $23 per cwt. However, robust cheese demand and tightening inventories have helped provide a measure of support to the dairy market, leaving traders divided over what the USDA's Dec. 19 report might bring.
Shifting Market Dynamics
Class III milk futures experienced significant volatility throughout 2024. Early-year weakness saw contracts trading near $16 per cwt, but a summer and fall rally pushed prices upward as lower milk production trends supported sentiment.
Recent USDA reports have reversed this narrative. October 2024 milk production totaled 18.7 billion pounds, a 0.2% increase year-over-year, while production per cow climbed to 1,993 pounds, three pounds above the prior year.
Additionally, the number of milk cows in the U.S. increased to 9.37 million head, up 10,000 head from October 2023 and 19,000 more than in September 2024.
Further complicating the outlook, the USDA revised September's production growth figures upward from 0.1% to 0.4%, amplifying the bearish sentiment.
Cheese Market Offers Stability
While milk production weighed on futures, strong fundamentals in the cheese market have provided a counterbalance. Cheese stocks have trended lower for much of 2024, hitting five-year lows in two months.
At the end of October, cheese inventories totaled 1.342 billion pounds, marking an 8% year-over-year decline and a 2% drop from the previous month. Tight stocks have supported cheese prices, which in turn have bolstered Class III milk futures.
Managing Risks and Opportunities
As 2024 concludes, market participants are advised to remain vigilant. The balance of rising milk production and strong cheese fundamentals makes for a dynamic, uncertain market. Navigating the risks while capitalizing on opportunities in the dairy complex will be key as traders prepare for 2025.
Class III milk futures experienced significant volatility throughout 2024. Early-year weakness saw contracts trading near $16 per cwt, but a summer and fall rally pushed prices upward as lower milk production trends supported sentiment.
Recent USDA reports have reversed this narrative. October 2024 milk production totaled 18.7 billion pounds, a 0.2% increase year-over-year, while production per cow climbed to 1,993 pounds, three pounds above the prior year.
Additionally, the number of milk cows in the U.S. increased to 9.37 million head, up 10,000 head from October 2023 and 19,000 more than in September 2024.
Further complicating the outlook, the USDA revised September's production growth figures upward from 0.1% to 0.4%, amplifying the bearish sentiment.
Cheese Market Offers Stability
While milk production weighed on futures, strong fundamentals in the cheese market have provided a counterbalance. Cheese stocks have trended lower for much of 2024, hitting five-year lows in two months.
At the end of October, cheese inventories totaled 1.342 billion pounds, marking an 8% year-over-year decline and a 2% drop from the previous month. Tight stocks have supported cheese prices, which in turn have bolstered Class III milk futures.
Managing Risks and Opportunities
As 2024 concludes, market participants are advised to remain vigilant. The balance of rising milk production and strong cheese fundamentals makes for a dynamic, uncertain market. Navigating the risks while capitalizing on opportunities in the dairy complex will be key as traders prepare for 2025.
