It has been a wild ride recently in the spot markets. Butter moved to a new record high, while cheese prices fell back. This moved the butter price to double the values of cheese which has been the first time in history. It is shaping up to be another year of numerous new records being established with three months remaining.
The two areas of the dairy markets that have not shown much volatility with prices remaining under pressure have been the powder markets. Dry whey and nonfat dry milk prices have not seen much strength with nonfat dry milk generally remaining sideways for much of the year. The last time price has remained in a sideways pattern for this duration of time was in late 2008 into the third quarter of 2009. Price levels are not the same, but the duration of a sideways price pattern is similar.
A large part of the reason nonfat dry milk dry whey prices has remained as such is due to slower exports. Nonfat dry milk/skim milk powder (NFDM/SMP) exports have been struggling and running below the levels of a year ago. However, there is a bright spot in the recent export report for July which showed exports running 2.8% above a year ago and the second consecutive month of growth. Exports for the first seven months of the year are still 0.6% below the same period last year. The growth the past two months has been the result if increased exports to Mexico. In July, exports to Mexico increased 14% over July 2022. However, nonfat dry milk price has yet to break out and trend higher even though international demand looks more promising.
Dry whey has been struggling more from international demand as exports in July were 39.1% below July 2022 with year-to-date exports down 20.4% from the same period last year. The lack of exports to China is a large reason for slower international demand and back up of supply in the domestic market. Dry whey export volume has been decreasing for the past two years, which has had a significant impact on price. China has been a large buyer of whey as feed for their hog herd, but with their struggle with African swine fever resulting in less demand and their intent to purchase more agricultural products from other countries rather than the U.S. has had a large impact. This is not expected to change anytime soon.
The powder prices have a significant impact on the calculation of Class III and Class IV futures and the final monthly Federal Order prices. Each one penny move of dry whey price equates to a 6-cent move in the Class III price. Each one penny move of Grade A nonfat dry milk price equates to a 9-cent move in the Class IV price.
As a reminder, USDA announced Milk Loss Program (MLP) assistance earlier this month for eligible dairy operations for milk that was dumped or removed, without compensation, from the commercial milk market due to qualifying weather events and the consequences of those weather events that inhibited delivery or storage of milk during calendar years 2020, 2021 and 2022. Signup for MLP will continue through Oct. 16, 2023. I know it is harvest season, but anyone who has been impacted by the loss of milk due to these circumstances needs to take the time to investigate this.
For more on milk prices, read:
- Dairy Profit Margins Tank
- Will Seasonal Demand Support an Uptrend for Milk Prices?
- Higher Milk Prices May Not Mean Better Profitability
**If you are attending the World Dairy Expo this year that is being held during the first week of October, stop by our AgMarket.Net booth number 664 located in the Trade Center. I would enjoy meeting with you and showing you what we have to offer. I also will be speaking during the Knowledge Nook session at 1:30 PM Thursday on the topic, “Focusing on Income Over Feed Rather Than Just Milk Price”.
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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