We saw strong follow through to yesterday’s gains in the Class III space on the heels of additional spot cheese recovery. The other component in Class III (whey) slipped some but remains above 70 cents. The Q1 Class III futures average bumped above $19, offering a look at $18 floors – producers light on coverage for early 2025 should take a hard look. While cheese is usually the focus, keep in mind any slip in whey could also knock Class III from these levels – every penny move in whey amounts to six cents in Class III (so even a 10-cent decline in whey would amount to $0.60 per hundredweight in Class III). There is no DRP today given release of the Dairy Products report, so watch tomorrow’s markets closely for opportunity, especially with the Q1 deadline approaching next week.
Today’s Highlights
- CME cheddar markets continued yesterday’s climb. Blocks advanced to $1.7000 per pound, adding three cents, while barrels rose to $1.6675, $0.0175 higher. Three lots of blocks and four of barrels traded. Spot butter also stepped higher, adding $0.0175 to reach $2.5400 per pound, with 10 loads exchanged. The CME spot NDM market decreased just a half cent to $1.3700 per pound, but volume was heavy, with 15 loads changing hands.
- US cheese, at $1.67 per pound, remains far below New Zealand ($2.13) and EU ($2.28) pricing. New Zealand’s butter prices dropped 5% on the week to $2.96 per pound, well below $3.80 in Europe, but still above US prices at $2.52. NDM/SMP is $1.26 in both New Zealand and the EU, just behind the US’s $1.38 per pound.
- According to USDA’s October Dairy Products report, the US made more cheese and butter than last year. Total cheese production reached 1.226 billion pounds, up 1.0% (+11.8 million pounds) on the year, and butter output totaled 167.5 million pounds, up 3.1% (+5.0 million pounds) versus 2023. Combined NDM+SMP output dropped 9.0% (-16.5 million pounds) to 166.2 million pounds. Dry whey stocks and output were well below prior-year levels, giving an explanation for recent higher spot prices. Production totaled 62.7 million pounds, down 12.3% (-8.8 million pounds) on the year, while stocks reached 47.7 million pounds, 33.1% lower (-23.6 million pounds) than 2023.
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