Insight Focus
Dairy markets were mixed last week. Nonfat dry milk prices extended their decline as supplies improved, while cheese markets diverged and butter traded within a narrow range. Meanwhile, US milk production rose 2.3% year on year in May, supported by a larger dairy herd and higher yields per cow, with weather risks remaining a key watchpoint for milk supplies later in the year.
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Dairy Markets Mixed as NDM Weakens, Cheese Diverges
Dairy product markets were mixed last week, as nonfat dry milk continued to weaken while cheese markets diverged, and butter held within a narrow trading range. Dry whey and whey protein concentrate strengthened on steady protein demand, while lactose and casein values were unchanged.
Nonfat dry milk prices extended their recent decline as supplies became more readily available following several weeks of tightness. Traders said the market had anticipated the correction once production returned to more typical levels. Buying interest resurfaced in the mid-USD 1.50/lb area, providing support after the slide.
Export activity also remained in focus. “There’s a lot of product at the border for Mexico that was produced and bought at higher prices, that many will likely take a bath on with the falling market,” one trader said. Those shipments are expected to move through the pipeline despite declining values.
Butter prices were little changed. Unsalted butter was tighter than salted product but remained available, depending on the manufacturer. Cream supplies tightened due to strong Class II demand.
Source: Investing.com
Cheese markets were mixed, as CME barrels advanced while blocks edged lower. Domestic production outpaced consumption, prompting traders to focus on export demand to move additional product, especially heading into the second half of the year.
US Milk Production Continues to Expand
The USDA’s May Milk Production report, published on June 22, showed US milk output increased 2.3% from a year earlier.
Source: USDA
This was driven by both a larger dairy herd and gains in production per cow. Strong demand and expanding processing capacity have been able to absorb the additional milk.
Source: USDA
Milk availability remained balanced despite growth in production and components. Forecasts calling for prolonged heat across major dairy regions may pressure milk yields if realised, potentially tightening supplies heading into the fourth quarter.
Meanwhile, Class II processors continued to purchase milk and cream to meet seasonal demand. Class III spot milk offers were somewhat limited, while butter manufacturers maintained active churn schedules to build inventories ahead of fall demand.
