The Latest: May - 2026
The Short Squeeze Is Over
When Wile E. Coyote plummets off a cliff, Warner Brothers inevitably plays a “descending slide whistle.” That heart-dropping sound echoed across LaSalle Street this week as the bottom fell out of the milk powder market. The short squeeze is over. The two milk powder manufacturers who were desperately bidding for product to meet the commitments they could not fill with their own supplies due to food safety recalls have likely caught up and are back to using their own powder. And sky-high prices have killed demand from other buyers.
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The bulls and bears squared off in Chicago this week, and the dairy markets lurched this way and that as the two sides fought for control. By Wednesday and Thursday, the bears won the upper hand, fueled by news that the U.S. economy contracted in the first half of the year, and that the Federal Reserve hoped to tamp down inflation by raising interest rates yet again.
View reportAfter seven months in the red, U.S. milk production exceeded year-ago volumes in June, topping June 2021 by 0.2%.
View reportU.S. inflation accelerated to 9.1% last month, reducing Americans’ purchasing power at the fastest rate since 1981. The dairy markets suffered too.
View reportPrices for dairy commodities moved lower both at home and abroad as the markets sort through supply and demand dynamics. Concerns about economic cooling, inflation, and the resulting impact on dairy demand seems to have been sufficient to push back on pricing.
View reportCME spot butter leapt 9.5ȼ to $3.01 per pound. That’s the highest spot butter price since 2015. The other spot products also climbed, however milk futures struggled.
View reportRed ink flowed on LaSalle Street this week as the trade reckoned with the fact that, although milk production continues to shrink, cheese abounds. Ongoing concerns about demand also pressured the markets.
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