Insight Focus
Dairy markets were mixed as powder weakness contrasted with firmer fundamentals. US nonfat dry milk prices continued to decline as Mexico remained absent from the market, limiting export demand and increasing the risk of inventory growth. Meanwhile, tighter milk supplies supported cheese and lactose markets, while butter prices eased despite favourable export demand and steady domestic buying.
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Mexico’s Absence Weighs on US Powder Markets
Dairy product markets were mixed this week, as persistent weakness in nonfat dry milk contrasted with tightening milk supplies and stronger fundamentals for cheese markets.
Nonfat dry milk prices continued to decline as traders waited for export demand to improve following the spring correction. However, US powder remained priced above competing global suppliers. Mexico, the largest export destination for US nonfat dry milk, remained on the sidelines after covering its needs during the heavy spring production period.
Traders said Mexican buyers typically step back while prices are falling and are unlikely to return aggressively until values stabilise, estimating that stronger buying interest could emerge if prices reach the mid- to low-USD 1.40/lb range. If Mexico remains out of the market while California’s abundant milk production continues to supply dryers, inventories could build through July.
Milk Supplies Tighten as Butter Prices Ease
Elsewhere, dairy markets were supported by increasingly tight milk supplies across much of the country. California remained flush with milk, while production in the Midwest and Northeast tightened considerably following recent heat. An extended heatwave across parts of the East, particularly Pennsylvania, added uncertainty to near-term production. Planned and unplanned processing downtime also created localised disruptions to fluid milk movements.
Butter prices declined. Western butter production remained active as plentiful California milk supported manufacturing, although some processors said demand for unsalted butter outpaced production. Export demand was favourable, while domestic buying remained steady ahead of the typical seasonal pickup approaching Labor Day.
Cheese and Lactose Markets Supported by Tight Supplies
Cheese prices advanced as hot weather tightened milk supplies in parts of the Midwest and Northeast, limiting production and keeping barrel inventories snug. Some traders expected spot supplies to tighten further in the coming weeks if production remains constrained. Both domestic and export demand remained steady.
Dry whey markets were mixed. Manufacturers continued to prioritise higher-value protein streams. Lactose markets strengthened at the upper end of the range as spot inventories remained exceptionally tight, with little to no availability through the third quarter.
