Limit market moves and action-packed cash markets gave dairy prices some excitement to close out January. Nonfat Dry Milk exploded higher with butter taking us on a rollercoaster ride. Milk futures had a strong close last week and have given some indications of strength to be continued this week.
The news cycle for the dairy industry has been packed with government support from the new food pyramid guidelines, continued tension with tariffs, Dairy Margin Coverage triggering the only payment for 2025 in the month of December, formula recalls, screwworm cases approaching the U.S., dramatic outside markets, and weather concerns across the country. Each day was a new story bringing big swings in prices.
The weather from the last two weeks played a major role in the volatility. Consumers and retailers alike had panic buying ahead of reports of incoming snow and ice across the south. Concerns over the ability to not only travel to the store but to get products shipped caused some short-term buying activity that turned into a buyer quarrel in the cash market. This may have triggered not only the assumption that the lows have been set, but also some excitement around buying opportunities.
The growing milk production reports, the abundance of cream, and the lackluster demand in the food service industry made butter buyers think they had plenty of time to purchase their needs. When the storm news started looking worrisome, a little buying action happened which triggered those that thought they had more time to sit on their hands to grab at what they could to fill inventory. Everyone wanted to fill freezers with cheap products but thought they missed out on the bottom. It created a buying frenzy, then a sell-off with the speed at which prices increased and another rush of buying from those that thought they missed the first opportunity.
What is uncertain is how the butter inventory has pulled back with the availability of cream over the last few months. Exports have been strong and retail has been moving product, however production should have had an advantage with the endless supply of cream in the market. Should inventory continue to decline, we could be setting up for a positive impact on prices in the coming months.
Milk prices have been supported by increasing butter, dry whey and nonfat dry milk despite the increasing milk production numbers. While there is no big red flag saying prices should jump higher, you can see the willingness of buyers to step in and be aggressive with the fear of missing out. Fundamentals do not support a major rally today but the recent price volatility in dairy markets suggests a change is on the horizon.
Sarah Jungman is a commodity broker with AgMarket.Net and AgDairy, the dairy division of John Stewart & Associates Inc. (JSA). JSA is a full-service commodity brokerage firm based out of St. Joseph, MO. Sarah’s office is located in Winterset, Iowa and she may be reached at 515-272-5799 or through the website www.agmarket.net.
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