Market Reports

The U.S. dairy cow herd has been contracting for more than a year, and foreign milk production has fallen flat. At long last, that is translating into higher milk pricing. Dairy producers across the country will be seeing much better milk checks than those they have cashed in recent months.

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?

Now that an updated trilateral free trade agreement among the U.S., Mexico and Canada is tentatively in place, dairy industry players are combing through the details to get a sense of what will happen once the terms of the deal become effective in 2020.

News that American and Mexican trade authorities reached a tentative agreement on an updated NAFTA was welcomed by the dairy industry with open arms. But it's far from a sure thing: If Canada doesn't also buy into the deal, a new NAFTA will be sunk.

It’s strange how much can change over the course of a year and yet we end up almost where we started. Here we are again at the end of summer, back to talking about a butterfat shortage in Europe.