Markets
The recent decline of butter price has been a surprise. But there have been other years of substantial price weakness for various reasons.
Class III milk markets finished Friday slightly higher for the first time in what seems like forever.
The U.S. butter inventory finished November at 200 million pounds.
Class III Q1 milk futures averaged $19.04, down just over 17 cents.
After some volatile stretches through the year, feed prices are posting a lower drama level as 2022 wraps up.
The end of the year generally brings slower demand, and this year may be impacted more than usual due to higher food prices.
China has eased some COVID protocols, but that did not translate into significant news for dairy.
Q1 Class III markets plummeted to $19.29, giving up 33 cents on the day.
Q1 Class III Futures gave up 28 cents settling in at $19.62/cwt as Q1 All-cheese futures declined almost 2 cents to $1.9943/lb.
Class III Milk futures have sustained their rally from the end of last week, with December settling upward 7 cents at $20.48.
A sideways spot trade fed the week of falling milk prices.
Wide price swings have become more frequent over the past year. These price swings have taken place over short durations as market participants have been quick to enter and exit positions.
According to the USDA Cold Storage report, U.S. butter stocks totaled 239.6 million pounds in October, down 14.1% on the year.
Compared to last year, the 2022 herd now stands 31,000 higher.
With the uncertainty over milk prices and input prices, it becomes necessary to establish price floors for milk and price ceilings for feed. Not doing anything is making the decision to leave your whole farm at risk.
CME spot dairy index prices performed stronger on Friday as cheese led the way.
Despite spot cheese moving lower, class III milk futures rallied.
Prior to the release of the USDA Dairy Products report, the CME spot trade and futures kept the momentum moving higher.
Dairy products were steady to higher Thursday in the CME spot dairy product auction.
Through this economic swing between bull and bear markets, risk management becomes paramount to negate volatility.
The CME spot dairy auction saw butter take the dip that most had expected for quite some time.
It certainly has not seemed like there’s been a seasonality to cheese prices this year, but price movement shows otherwise. However, milk futures have not reflected that due to an overall bearishness in the market.
Class III milk futures slid 32 cents lower for the month of December.
Milk continues to struggle to find momentum higher. Here’s where the prices landed today.
Many farmers have not developed a marketing plan to protect milk prices. This leaves the farm open to risk and the possibility of significant financial loss which could put the farming operation in jeopardy.
Class III milk futures markets regained a very small portion of what was lost from Friday.
A shortage of fresh barrel cheese has been driving the inverted price spread.