Market Reports

There is no surplus of cheap milk in the traditional cheese states, which has likely slowed production of commodity Cheddar. It’s possible that European vendors don’t have enough cheese in inventory to satisfy foreign demand. If that’s the case, the bulls might take up residence in the dairy pits for a while.

The cheese markets are heating up, and this time barrels are not left out in the cold. The USDA Cold Storage report reveals the largest April-to-May drawdown on record. Despite lower production in the Midwest and Northeast, milk seems to be widely available. Cheap spot milk has encouraged cheese processors to top up their vats.

Buyers doused a little lighter fluid on the barrel market, helping to narrow the still-wide deficit to block prices. They still have a lot of ground to make up. Strong volume at these higher prices suggests cheese demand is firm. The dairy market recovery could continue for a while.

U.S. dairy product exports fell well short of the record-high volumes set in April 2018. Rising prices, the strong dollar, and increasingly acrimonious trade relationships combined to stifle foreign buyers’ appetite for dairy products made in America. Still, year-to-date exports are the third-highest ever. For dairy producers, feed quality and availability may be a bigger issue, especially for forage.

President Trump announced that the U.S. will impose a 5% tariff on all Mexican imports beginning June 10. Even if Mexico does not retaliate with a tariff on dairy products there are important consequences for the U.S. dairy industry. For now, however, global demand seems strong.

The dairy markets have come a long way in the past few months. But while lower milk output and firm demand are clearly underpinning prices, the bulls must be fed with fresh news every day. In the absence of additional fodder, the rally will quickly lose steam.