Market Reports

The bears went into hibernation a little early this year, and the bulls enjoyed raucous celebrations on LaSalle Street. Milk and dairy product futures soared to life-of-contract highs amid continued barriers to growth.

U.S. milk output has trailed prior-year volumes for 13 straight months. In Wednesday’s Milk Production report, USDA slashed its initial estimate of June milk output. The agency now reports a 1.7% drop in milk production during the tail end of the flush.

Like Katie Ledecky in a Paris pool, the dairy spot markets hit one milestone after another. CME spot Cheddar barrels gave a standout performance, blocks tied for their highest mark since January 2023, butter leapt to its loftiest value since last October, and spot nonfat dry milk (NDM) cleared the bar for the first time in 18 months.

Hot temperatures continue to challenge output in some areas, but the suffocating heat and humidity seen in recent weeks has largely subsided. Even so, spot milk remains tight, and manufacturers are paying a premium to get their hands on extra loads.

In its weekly summary of the milk and dairy product markets, USDA’s Dairy Market News specifically mentioned tight milk or seasonally lighter milk production in each of its sections covering fluid milk, butter, cheese, nonfat dry milk (NDM), whey, dry whole milk, casein, dry buttermilk, and lactose.

As befits the season, the dairy markets heated up this week. The trade is becoming increasingly concerned that milk will remain tight, as a hot summer, avian influenza, and the heifer shortage overpower market signals to make more milk. U.S. milk output totaled 18.8 billion pounds in June, down 1% from the year before. In the first half of the year, the U.S. dairy industry made 0.9% less milk than in the first six months of 2023 and marked its lowest first-half production since 2020. Of course, thanks to higher components, U.S. milk solids and butterfat output continues to outpace year-ago volumes, but not by enough to satisfy U.S. dairy processors.