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Dairy prices headed sideways for now

Supply builds while demand may be softening

Naomi Blohm

July 28, 2022

4 Min Read
dairy cows grazing on pasture
Getty/iStockphoto/Peter Cade

Like many commodities, milk futures fell sharply the last month. Some Class III milk futures contracts are down nearly $5.00 from their early June price highs. While technical indicators are in the oversold territory, there seems to be little fresh news at the moment to justify any sort of price spike higher. Yet, overall, $20.00 continues to be solid support on technical charts.

Dairy demand

Spot cash cheese prices and spot whey prices both remain in downtrends currently. Cheese demand is said to be softening in different parts of the country while production has been steady. The powder market is starting to drop also.

Spot butter remains up near the $3.00/lb. level as buyers have been steadily showing up to secure needs in spite of butter prices remaining near historic high levels. Yet, we take note that global butter prices have started to weaken.

Export demand is strong, though. United States Dairy Exports in May totaled 262,722 metric tons. This is up 12,082 metric tons from May of 2021 and is up 13,057 metric tons from the previous month. Cheese exports led the way higher on a year-over-year basis, up 31% from 2021.

For the first time since November 2020, butter exports were actually down year-over-year. The likely reason for this is that global butter levels have fallen quickly while US prices are still near multi-year highs.

Supply builds

The most recent milk production report showed that U.S. milk production in June totaled 18.975 billion pounds, up 0.20% from the same month last year. Up .20% may seem small, but take note, this was the first report this year to show a growth in year-over-year production.

Milk production per cow averaged 2,014 pounds, up 20 pounds from the same month last year. Total milk cows on farms in the U.S. came in at 9.423 million head which is 78,000 less than June of last year, but up 4,000 head from last month.

State-by-state growth rates compared to last year: California (+0.20%), Wisconsin (+1.50%), Michigan (-1.00%), Iowa (+3.00%), Minnesota (-1.00%), and Florida (-7.50%).

Monthly Cheese in Cold Storage at the end of June 2022 totaled 1.506 billion pounds. This is up 5% from the same month last year but is slightly below the May 2022 totals. By comparison, the amount of cheese in storage in June 2021 was 1.435 billion pounds.

Monthly Butter in Cold Storage at the end of June 2022 totaled 331.80 million pounds. This is down 20% from the same month last year but up 3% from May. By comparison, the amount of butter in storage in June 2021 was 414.65 million pounds.

The steady bullish tone for milk and the dairy complex is starting to get muted. The situation is not bearish by any means; however the lack of immediate fresh bullish news will likely keep prices in a sideways price manner for the short term. $20.00 continues to be strong support nearby contracts for now.

Reach Naomi Blohm at 800-334-9779, on Twitter: @naomiblohm, and at [email protected].

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

About the Author(s)

Naomi Blohm

senior market adviser, Total Farm Marketing by Stewart Peterson

Naomi specializes at helping farmers understand how to manage cash marketing needs and understand the importance of managing basis, delivery point considerations, cash flow needs and storage capacity. She earned her Bachelor of Arts in Political Science with a minor in Agriculture Business at the University of Wisconsin in Platteville. She has a Master of Science in Adult Education with an emphasis in Ag Economics from the UW-Platteville and a Master Certificate in Global Education, from the UW-Oshkosh.

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