Skip to main content

Price forecasts for cheese and butter were raised due to tighter stocks and firm demand


As reported last week, the Agriculture Department raised its milk production estimate for the first time in a while in its latest World Agricultural Supply and Demand Estimates report (WASDE), citing expected higher dairy cow numbers.

Price forecasts for cheese and butter were raised due to tighter stocks and firm demand. Non-fat dry milk prices were raised fractionally while whey prices were lowered. Class milk price projections were also raised.

2022 production and marketings were estimated at 226.3 and 225.3 billion pounds respectively, up 300 million pounds on both. If realized, 2022 production would mirror output in 2021. 

Cheese is now projected to average $2.15 per pound in 2022, up 12 cents from last month’s estimate, and 47.5 cents above the 2021 average.

Butter was projected at $2.64 per pound, up 6.5 cents from a month ago and 90.75 cents above 2021. 

Nonfat dry milk was projected at $1.7450 per pound, up a half-cent from last month’s estimate and 47.6 cents above the 2021 average.

Whey is projected to average 69 cents per pound, down 2 cents from last month’s estimate but 11.6 cents above the 2021 average.

The 2022 Class III milk price was projected to average $22.75 per hundredweight, up $1.10 from what was expected a month ago, and $5.67 above the 2021 average of $17.08. 

The Class IV average was projected at $24.05, up 35 cents from a month ago, and $7.96 above the 2021 average of $16.09.

The WASDE stated that Russia’s recent military action in Ukraine significantly increased the uncertainty of agricultural supply and demand conditions in the region and globally.

This month’s corn outlook is for offsetting changes to feed and residual use and corn used for ethanol production, with unchanged ending stocks. Feed and residual use was lowered 25 million bushels to 5.625 billion. Corn used to produce ethanol was raised 25 million bushels.

Ending stocks were unchanged at 1.44 billion bushels. The season-average farm price was raised 15 cents to $5.80 per bushel based on observed prices to date. 

Global coarse grain production was forecast 2.7 million tons higher to 1.5 billion. This month’s foreign coarse grain outlook is for higher production, reduced trade, and larger ending stocks relative to last month. Foreign corn production was forecast higher with increases for Brazil, Indonesia, Pakistan and the EU. 

Soybean supply and use changes included increased exports and seed use, and lower ending stocks. Soybean exports were raised 25 million bushels to 2.12 billion, partly offsetting lower exports from Brazil, Ukraine and Russia. Seed use was raised in line with record soybean plantings indicated in the March 31 Prospective Plantings report. 

Soybean ending stocks were projected at 260 million bushels, down 25 million from last month. Soybean oil changes include increased exports and lower ending stocks. Despite relatively high soybean oil prices, export sales have been stronger than expected through March. A lower soybean meal export forecast is offset by slightly higher domestic disappearance. The season-average soybean price forecast was unchanged this month at $13.25 per bushel. Soybean meal prices were also unchanged at $420 per short ton. 

The global supply and demand forecasts include lower production, crush, trade, and ending stocks. Global soybean production was reduced 3.1 million tons to 350.7 million on lower crops for Brazil and Paraguay.

Estimates for Ukraine’s corn and wheat exports were reduced, citing the shutdown of Black Sea ports. The USDA says Ukraine’s corn exports will drop to 23 million tons, down 4.5 million from last month’s estimate, while wheat exports were lowered to 19 million tons, down 1 million tons from the previous estimate.

The Agriculture Department’s second Crop Progress report of the year shows 2% of the U.S. corn crop has been planted, as of the week ending April 10. That’s unchanged from the previous week but 2% behind a year ago and 1% behind the most recent five year average. 

Texas had the biggest planted percentage at 63%, up from 54% the previous week, and 6% ahead of a year ago, followed by North Carolina at 3%, up 14% from the previous week, and 3% ahead of a year ago.

In the week ending April 2, 61,000 dairy cows were sent to slaughter, down 3,200 from the previous week, but 1,000 head or 1.7% above a year ago.

The Good Friday Week gave us some startling news from the Bureau of Labor Statistics, which reported that inflation hit a 40-year high of 8.5%, as fuel and food prices skyrocket.

The U.N. Food and Agriculture Organization’s food price index hit record levels for three months in a row, according to Chicago-based StoneX Dairy Group, up 34% from a year ago. The February jump alone was up by 12.6%, largest single month rise ever, says StoneX.

“These are prices as high as seen since the last major food crisis in 2008 and 2011,” and while “This is not exactly fresh news it is an unfolding story. Food price inflation on this scale can lead to famine for less developed countries, political instability, mass migrations and ultimately commodity market volatility.” 

Speaking in the April 18 Dairy Radio Now program, broker Dave Kurzawski said food and fuel is the big difference between today and 1981. Core inflation, which is everything but food and fuel, was only up three tenths of one percent, he said, which is the slowest increase since last September.

Kurzawski said overall core inflation, on an annualized basis, is up about 6.5%, which is well above the Fed’s desire of 2.5%, “So we’re missing the mark. It seems reasonable to see government cut spending, they should have done that a while ago, and it has to raise interest rates and do it with vigor.” 

He believes we will see demand issues but offered some hope, stating that the crude oil price has pretty much surrendered most, if not all, of its gains since the start of the Russian Ukraine war and there are other markets doing something similar. He admits inflation is not going away overnight but says “It’s interesting to note that while there was a burst of price increases across many of these markets, courtesy Russia-Ukraine, those markets are starting to calm down on those fears.”

StoneX adds that “Developed nations may not face the brunt of the food insecurity that potentially lay ahead, but higher food prices are on the way. What we don’t know is the myriad of implications this will have on dairy demand. While some products, retail processed cheese, for example, might fare better than others, we believe more and more that the seemingly one-sided supply side story for the past six months will have stiff competition from growing demand side implications going forward.” 

On a brighter note, the April 8 Dairy and Food Market Analyst reports “Foodservice sales are hovering near pre-pandemic levels. The latest data from OpenTable shows seated diners down just 0.8% from 2019. This is a significant improvement from the more-than-20% declines in February Air travel also remains on an upward trend. The latest data from the Transportation Security Administration shows air travel was down just 9.5% from pre-pandemic levels, which was the best performance so far in 2022,” the DFMA reported.

One other bit of good news the DFMA offered concerned ports. The Marine Exchange of Southern California reports there were only 27 container ships waiting to berth in Los Angeles and Long Beach on April 8, which was down sharply from the all-time high of 109 on January 9th and comparable to prior-year levels.

Cash butter slipped to $2.7750 per pound Tuesday and closed Thursday at $2.7550, down 2.75 cents on the week, but 90.50 cents above a year ago, with 5 sales posted for the week.

The barrels finished at $2.44, 7.25 cents higher, 75 cents above a year ago, and an inverted 6.75 cents above the blocks. There were 8 sales of block on the week at the CME and 12 of barrel.

“Cheese market tones remain in a bullish stronghold,” says Dairy Market News. Midwest sales remain very strong from a myriad of cheese producers. Over 4,000 cheese industry leaders, suppliers, and marketers gathered this week in Milwaukee, Wisconsin for the annual Cheese Expo.

Hosted by the Wisconsin Cheese Makers Association and the Center for Dairy Research, attendees learned the latest in technology, new products, whey opportunities, product safety, marketing, and annual awards were presented.

StoneX learnings at the event included that “Transport is still far and away one of the biggest issues the dairy industry faces. Export demand is really good, or at least it could be really good if transport was better. While Cheese inventories are impressive, there may not be as much overhang in the fresh market as thought, and there is a widespread belief that impressive inflation is here to stay.”

DMN reports that difficulties remain among staffing and, more particularly, hauling sectors. Stunted production rates at some plants has made milk accessible, but “It’s a mixed bag according to cheese plant managers. Milk is more balanced, and some handlers are asking them to release contracted milk loads in order to fulfill other cheese and bottling plants' needs. Still, more discounts are being reported than Class prices.” 

Demand for cheese is steady in the West across retail and food service markets and international demand remains strong. CME prices have strengthened however cheese is still competitive to international prices. Same old story on port congestion and the shortage of truck drivers causing delays to both export and domestic loads. Milk production is steady to higher throughout the region, leaving supplies available for cheesemakers to run busy schedules and they are, with the exception of those still dealing with labor shortages, according to DMN.

Cash butter climbed to $2.7750 per pound Tuesday but back tracked to a Thursday close at $2.7550, up 2.75 cents on the week and 90.50 cents above a year ago, with 5 sales posted for the week.

Central butter producers report sales were boosted the previous week and into the weekend for last-minute orders ahead of the spring holidays. The emphasis now is on fall demand and export interests. As cream remains available, churning remains active despite continued staffing shortages. Bulk butter is tight, says DMN, and remains at a premium. Butter market tones are firm, with CME prices in a newfound range in the mid to high $2.70s.

Cream demand is strengthening in the West as cream cheese and ice cream producers increase production in preparation for warmer weather. Cream is available. Demand for butter is steady in food service markets, while retail demand has declined. Strong export demand is present, as U.S. produced butter is being sold at a discount compared to international product. International demand is strong but port congestion is preventing greater volume. Bulk butter inventories are available, though unsalted inventories remain tighter than salted. Contacts report that some purchasers in other regions are purchasing butter from the West to meet current demand. Butter output is steady to higher as butter makers are running busy schedules to work through available supplies of cream.

Grade A nonfat dry milk closed Friday at $1.8225 per pound, unchanged on the week but 60.75 cents above a year ago. 5 sales were reported on the week.

Dry whey held all week at 63.50 cents per pound, 13 cents below a year ago, with 2 sales reported on the week at the CME. 

Fluid milk sales continue to take a beating. USDA’s latest data shows Feb. sales of packaged fluid products at 3.5 billion pounds, down 3.0% from Feb. 2021.

Conventional product sales totaled 3.3 billion pounds, down 3.0% from a year ago. Organic products, at 225 million pounds, were down 3.9%, and represented 6.5% of total sales for the month.

Whole milk sales totaled 1.2 billion pounds, off 0.9% from a year ago, down 0.7% year to date, and represented 33.4% of total milk sales in the two months.

Skim milk sales, at 188 million pounds, were down 6.9% from a year ago and down 7.7% YTD.

Total packaged fluid sales for the first two months of 2022 amounted to 7.3 billion pounds, down 2.3% from 2021. Conventional product sales totaled 6.8 billion pounds, down 2.1%. Organic products, at 471 million, were down 4.7%, and represented 6.5% of total milk sales for the period.

The figures represent consumption in Federal milk marketing order areas, which account for approximately 92% of total fluid milk sales in the U.S. 

Lee Mielke is a graduate of Brown Institute in Minneapolis, MN. He’s formerly the voice of the radio show “DairyLine,” and his column appears in agricultural papers across the U.S. Contact him at lkmielke@juno.com.