Insight Focus
Nonfat dry milk prices extended recent declines. Weak domestic and export demand continued to pressure nonfat dry milk, while cheese markets found support as Midwest heat began reducing milk output and component levels. Butter softened on lighter holiday buying, and traders also monitored uncertainty surrounding the USMCA review, which could affect the long-term outlook for US dairy trade with Mexico and Canada.
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Nonfat Dry Milk Weakens
Dairy product markets were mixed last week, as another decline in nonfat dry milk outweighed mostly steady conditions across the rest of the complex, while an early summer heatwave across the Midwest began to tighten milk production.
Nonfat dry milk prices continued to weaken as domestic and export demand remained sluggish. Traders said Mexican buyers showed interest only at the lower end of the market, while CME prices fell steadily throughout the week in search of a floor. Spot inventories remained tight, and plant managers scheduled extended holiday downtime, constraining spot market activity as buyers and sellers went quiet ahead of the long weekend.
Cheese markets were mixed, with blocks advancing and barrels slipping. Milk production in the Central region began to ease as high temperatures reduced cow comfort, with most Midwest contacts expecting this week’s heatwave to further trim output and component levels in the coming weeks.
Butter markets softened as holiday schedules and a lack of buying temporarily increased cream availability, though the same heat driving lower milk output was also beginning to reduce butterfat production. Churns remained active, with manufacturers continuing to build inventories for seasonal baking demand. Export interest was steady but below earlier-year levels.
Dry whey, lactose and whey protein concentrate markets were steady. Lactose supplies were exceptionally tight, with some manufacturers sold out through the third quarter, while whey protein concentrate 34% inventories were committed through year-end. The focus remained on higher-value protein production.
USMCA Creates Uncertainty
Beyond near-term weather, traders were also monitoring trade policy after the US declined to extend the current United States-Mexico-Canada Agreement, opting instead to open an annual review of the pact. While there was no immediate disruption to North American dairy trade, the review introduced uncertainty over the long-term framework governing exports to Mexico and Canada, the two largest foreign markets for many US dairy products.
