Class III futures have been somewhat stable for contracts through the end of the year. Contracts in 2024 have been developing a slight uptrend over the past 2 weeks and traders may be a bit more optimistic over milk prices next year. Class IV futures continue an uptrend even though butter price has shown some weakness recently. Recent support for Class IV had developed from strength in nonfat dry milk over the past two weeks providing the support needed to offset the weakness of butter.
Dry whey has been trending higher over the past two weeks but more importantly has been quietly moving higher since the middle of July. It has not been the focus of the trade and it has been choppy, and the trade generally puts greater emphasis on cheese and butter. However, price has been quietly trending higher without much fanfare. Price set a low on July 12th at 22.50 cents and has now risen to 33.50 cents. There have been some setbacks, but the trend is up. It is interesting to see that as price has been trending higher as demand has been increasing. Over the past month there have been 209 loads of dry whey traded on the daily CME spot market. That equates to about 9.196 million pounds of dry whey. One would think that inventory must be decreasing as demand is improving.
It is uncertain how much inventory will need to decline before it might have a greater impact on price. The aspect about dry whey that is different from cheese and butter is that it is not as seasonal. Holidays and special events such as demand during football season has a large impact on cheese and butter demand whereas demand for dry whey is generally more constant. It is used as an ingredient in feed, as an ingredient in many foods, and as an ingredient in beverages.
Export demand has suffered due in large part from the decrease of whey demand from China. China is a large importer of low protein whey used in large part to provide a feed ingredient for their hog industry. However, their hog industry has had an ongoing struggle with African swine fever that has reduced demand for whey. U.S. low-protein whey shipments to China fell 41% (-13,184 MT) in August from a year ago and were down 24% (-45,795 MT) year to date.
However, growth is being seen in the whey protein concentrate 80+ (WPC80+) category with an increase of 34% in August putting WPC80+exports 34% above August 2022. Year-to-date export of WPC80+ are 15% above a year ago. Demand for all whey is expected to increase through the rest of the year which may support price further and translate into better Class III milk prices.
The U.S Department of Agriculture has extended the application deadline for the Milk Loss Program (MLP) to Monday, Oct. 30, 2023, allowing more time for eligible dairy farmers to apply for much-needed, weather-related disaster recovery assistance. If you think you qualify for this assistance, make sure you take care of this.
For more on milk prices, read:
- USDA Lowers 2023 Class III Price Predictions, Raises All-Milk Prices
- Did the Holiday Butter Price Rally Strike Early This Year?
- Holiday Rally Sends Butter Prices to Unexplored Highs
Robin Schmahl is a commodity broker with AgDairy, the dairy division of John Stewart & Associates Inc. (JSA). JSA is a full-service commodity brokerage firm based out of St. Joseph, MO. Robin’s office is located in Elkhart Lake, Wisconsin. Robin may be reached at 877-256-3253 or through the website www.agdairy.com.
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