Market Reports

Rested up after a long weekend, the cheese markets came charging out of the gates but they gave it all back later in the week. Milk remains cheap in the cheese states which should result in higher cheese production. Weather issues, labor shortages, and mechanical problems have slowed cheese production all year, creating a chicken-and-egg conundrum.

Activity at the spot market in Chicago was mixed this week as prices moved modestly up and down, testing new boundaries. Milk remains plentiful in most parts of the country, especially the Midwest, but lower commodity prices appear to be doing the legwork of generating additional customer interest.

Typically, a fumble in the spot market and signs of surplus would weigh heavily on cheese and Class III futures. But the bulls reclaimed possession and shrugged off one tackle after another. Dairy – and especially cheese – will feature heavily in football-themed feasts this Sunday. But after the final field goal, there will be a seasonal lull until Easter.

A renewed focus on economic and demographic slowdown in China and a shift to higher milk output in the U.S. and Europe emboldened the bears. The powders were particularly pitiful but this week most markets came roaring back. It seems the dairy trade may have overindulged on pessimism.

U.S. milk output was not as strong as anticipated in December. Perhaps more importantly, the dairy herd is smaller than previously thought, and it’s getting smaller by the month. And yet, there is more than enough milk.

The bears were out in force this week, pressuring the dairy markets to new lows as supplies accumulated and global demand prospects dimmed. Though risks and challenges persist, milk production has generally been strong across the U.S.