Continued Strength in Dairy Markets

Class III milk futures were the big winners of the week with December contracts gaining $1.51 per CWT to settle after Friday’s trade at $20.35.  December Class IV contracts were both volatile and higher on the week, gaining 13 cents to settle at $21.47, but also managed a low of $20 during Wednesday’s trade. Spot butter took a massive hit this week, falling 53 cents from Monday to Wednesday, recovering during Thursday and Friday to shed just over 36 cents per pound on the week. This massive selloff has the spot butter price under $3 per pound for the first time since late August. Other major spot markets were mixed this week with whey gaining nearly 4 cents per pound, powder down 3 cents, and cheese up a nickel. The dead cat bounce may still be true here but follow-through buying on yesterday’s gains may indicate further gains next week. The Dairy Products report from the USDA on Friday detailed September’s production numbers. Cheese was 0.4% above 2021 levels but 1% below August 2022; butter production down against 2021 levels and August of 2022, 1/4% and 1.3%, respectively; total whey production up 5% from September 2021; and nonfat dry milk powder down a substantial 11.3% from September 2021.

• The Global Dairy Trade event on Tuesday continued on trend with a 3.9% decline, third negative auction event in a row, and well off all-time highs from March of this year
• September dairy exports, reported 11/3, were up 8% YoY but down 4% from August, total exports for September came in at 234,375 metric tons
• As the Fed continues to fight recession with interest rate hikes, the dollar index reached a high above 113 but settling closer to the 110 mark on today’s close
• Cattle prices continue to be extremely strong; December live cattle closing out the week above $151, with feedlots never able to max out capacity throughout the year due to high feed prices and substantial drought throughout the US