Market Reports

Cheese stocks typically grow throughout the spring, as the flush pushes more cheap milk to cheese processors, and demand ebbs. But this year, spot milk wasn’t all that cheap, both export and domestic demand soared, and cheese stocks shrank.

Dairy producers did everything they could to keep their barns full last month after milk prices soared. Despite record-high beef prices – they lowered their standards on the milk yields required to keep a cow in her stall rather than sending her to the packer.

Strong domestic cheese demand propelled Class III futures to fresh life-of-contract highs this week. On Thursday, third-quarter contracts settled at an average of $21.28 per cwt., an astoundingly lofty value considering U.S. cheese production capacity and fierce competition for exports.

July through December Class III and a smattering of Class IV futures notched life-of-contract highs this week. While most Class III contracts ultimately settled a little lower than they did last Friday, Class IV futures added roughly 30ȼ.

After notching a new spring high last Friday, butter values plunged early this week. The Tuesday morning selloff was steep but ultimately short-lived. By Thursday, butter buyers were once again bidding with enthusiasm.

The markets are screaming at dairy producers to make more milk, but there are formidable barriers to expansion. Producers who have relied on extra heifers from their neighbors or the latest dispersal auction find they are increasingly scarce and expensive.