The dairy markets have increased in volatility over the past few weeks with Class III futures posting limit moves up and down. I have written about this previously and it has unfolded earlier than expected. It may become more volatile as the summer progresses. Traders are quick to buy or sell on underlying cash movement or the perception of price movement. Milk futures indicate milk prices may be much better than last year if spot prices will hold. Milk prices will improve if demand improves, and supplies tighten. Cheese inventory so far this year has not exceeded last year leaving a higher probability supplies could tighten if domestic and international demand improves. Manufacturers report that cheese demand is improving but not enough to reduce inventory.
International cheese demand has improved. Cheese exports in March totaled 50,022 metric tons, up 20.5% from a year ago and the highest level of cheese exports recorded. This continued in April with an increase of 27% over April 2023 totaling 46,271 metric tons. This is the second highest month of exports recorded. The outlook for cheese exports has improved substantially and is providing solid support under the market.
It had been anticipated butterfat exports would improve as the year progressed and this did take place in April. Butterfat exports totaled 2,881 metric tons, up 23% in April compared to a year earlier and the first monthly year-over-year increase since November 2022. This may set the stage for record butter prices again this year. The reason is due to the current price being the highest price butter has ever been during this time of year with demand improving. Increasing domestic demand and the potential for increasing international demand may set the stage for a significantly higher price.
The April income over feed price was $9.60 per cwt and the second consecutive month with no Dairy Margin Coverage program payments. The current outlook for grain prices and the present prices seen in milk futures suggest there may be no further payments under the program. There have been some planting delays, but it has not impacted grain prices. The initial crop condition for corn indicated the crop is 75% good/excellent. This is one of the highest initial ratings seen for a crop. This may result in a large crop and a large supply of corn available for use. This may result in lower prices and significantly improve income over feed.
For more on milk prices, read:
- Springers, Calves and Beef-Cross Animals all Bring Big Money
- Two Big Reasons Why Cheese Prices are Leveling Out
- Will Milk Production Hold Strong this Year?
- EU Milk Collections Could be Stabilizing
- Dairy Profitability Remains Elusive, Regardless of Weaker Milk Supply
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.
The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in trading commodity futures and options on futures. It may not be suitable for everyone. This material has been prepared by an employee or agent of JSA and is in the nature of a solicitation. By accepting this communication, you acknowledge and agree that you are not, and will not rely solely on this communication for making trading decisions
