Market Reports

For once, barrels demonstrated the discipline of a seasoned runner, setting a steady, sustainable pace. It’s often difficult to rally the cheese markets at the height of the spring flush, but things are different this year. Slow growth in cheese production and steady increases in demand are helping to buoy the once-beleaguered cheese markets. Still, traders seem to have some doubts about the magnitude of the recent rally.

After dragging their feet for months, the Class III markets finally have a little spring in their step. Firm demand, slowing global milk output, and tightening stocks suggest that the worst of the dairy downturn is finally in the rear-view mirror. Near-term milk prices are far from exciting, but they are much better than where they were.

After a long winter, the cheese-market bulls were finally allowed to leave the barn, stretch their legs, and feast on tender green shoots. They were particularly frisky in the CME spot Cheddar barrel market, where prices surged to six-month highs. In addition, markets had two perplexing reports to digest last week.

The spot dairy markets took a step back this week, but – for the most part – they remain noticeably higher than where they began the year. The cheese market was hardest hit. CME spot Cheddar blocks fell 7.5ȼ to $1.535 per pound. Barrels slipped 4.5ȼ to $1.365. As the spring flush boosts fresh cheese supplies, the bulls have given back some of last month’s significant gains.

The dairy markets spun their wheels this week. Traders seem a bit lost as they seek to navigate the shifting landscape. In the distance, highlighted by the third consecutive decline in USDA’s annual dairy heifer estimates, is the promise of a smaller milk cow herd, and perhaps lower milk output. Closer to the fore, the spring flush looms large.

Early this year, we highlighted the combination of too much milk on the market and mysteriously low demand. Now, demand is stronger. So why haven't prices improved?