Market Reports

CME spot butter soared an astounding 28.25ȼ this week and closed right at the $3 mark. Exports are out of the question, but domestic demand is firm, and butter churns are running light.

The Class III markets took a big step back this week. Cooler weather has boosted yields, providing a little more milk for cheese vats. Loads of spot milk still command a premium in the Midwest, but they are slightly cheaper than they were in early September. Dairy cow slaughter is not running as hot as it did this summer, which suggests that dairy producers were feeling a little more hopeful in late August and early September.

Higher temperatures fired up the dairy markets over the past few weeks, but now the mercury has fallen and so have cheese prices. Cheese output waned in July to 1.16 million pounds, 0.7% less than July 2022, marking the steepest year-over-year drop in U.S. cheese production since August 2020.

Midwestern dairy producers report that milk yields dropped hard last week and then recovered. They’re bracing for the next heat wave. Temperatures are projected to run 15˚ to 25˚ above normal in the Northern Plains starting today, with sweaty conditions moving eastward over the next few days.

U.S. milk output turned negative in July, as the heat took a terrible toll on milk yields. The milk production map and the July weather maps look nearly identical. The August weather map – and presumably the milk production map – will look much different.

Milk powder prices plummeted at Tuesday’s Global Dairy Trade (GDT) auction. Whole milk powder (WMP) plunged 10.9% to a seven-year low. Skim milk powder (SMP) values dropped 5.2% to their lowest level since early 2019.

Juxtaposed with the recent fireworks, the spot markets may have seemed downright boring to some as prices moved mostly sideways with just a few flashes of activity. Buyers and sellers appeared content to bide their time and wait for information that will push the markets one way or the other.

Dairy producers are getting pummeled, and the bruises are starting to show. In California and the Southwest, where feed costs are highest, slaughter volumes have been elevated all year. When May milk checks hit the mailbox many dairy producers got far less than that as cheap spot milk – and dumped milk – resulted in steep discounts.

Cheese and butter prices both jumped once again this week. The sudden strength in the cheese market reflects a shortage of Cheddar that is fresh enough to trade at the spot market in Chicago, a phenomenon that can lead to dramatic but often short-lived spikes in the sultry summer months.

Like the mercury in Phoenix, the dairy markets just kept climbing this week, and the heat wave began in the most unlikely of places. CME spot Cheddar staged a torrid rally on Thursday and blazed higher on Friday as well.