CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - November 21, 2024
By: Dairy Team - Chicago, Dairy Chicago
The highly anticipated October milk production report was released yesterday which produced better results than expected. Headline milk production was up 0.2% from last year, which was stronger than the -0.2% forecast. That was due to the USDA revising up the size of the heard for September by 18,000 cows and they also estimate the herd grew another 19,00 head in October which put the herd up 0.1% YoY, the first YoY increase since March 2023.
All eyes were on California yesterday. The USDA estimates California production was down 3.8% YoY which was in line with anecdotal comments. There is still the risk the USDA make revisions in next months report but the rest of the country is doing well. Milk production outside of California was up 1.1% compared to just 0.4% in September, which is a big improvement. If we assume California is only down 1% in December and the rest of the country continues to improve to 1.3%, that would put headline US production up about 0.9% in December, before adjusting for components.
A lighter trading day in Class III after trading nearly 3,200 contracts on Tuesday. 1,691 contracts traded yesterday as open interest rose by 209 contracts. The Class III reaction to the milk production report was subdued and was likely partially priced in given the move over the last 4 weeks. Now eyes move to the stability in spot and the possibility of shaving away some forward premium. Spot prices yesterday finished slightly higher but sellers signaled that there is plenty of cheese but for now aren’t willing to test last weeks lows.
Spot butter continues to make new lows falling 3.25 cents on 12 trades yesterday to 2.55. The lows in spot last year and into the new year were 2.45-2.50 so that looks like support short term. With a better outlook for milk production, it likely alleviates concerns of having enough milk next year as cheese capacity ramps up. The herd is rebuilding and heifer inventories have stabilized but we still have a bit to get all new plants to full capacity.
A market that had a reaction to the milk production report was nonfat as bids on futures dipped post report and have opened roughly a penny lower this morning. The spot market is probably still tighter but the outlook ahead looks better and the market is trying to build a slight carry. Global SMP prices have also been flat to weaker since GDT so that has also put pressure on NFDM.
China’s milk equivalent imports during October were down 10.7% from last year, which was on the low side of the expected -5% to -10% range. On the one hand, the numbers are still pretty disappointing. Imports have been below year ago for 15 consecutive months. But it is also clear that imported product was tight in China during August/September, so the recent weak imports are not keeping pace with demand and we’ll likely see some stabilization or small improvements for imports in coming months. The North Asia region became more aggressive on GDT during August. Most of the volume purchased on GDT would ship out of New Zealand in October and clear into China during November. We are going to get NZ export statistics for October next Monday (November 25) which is going to be the first good read on whether China is pulling significantly more volume of product or whether they have switched from contracting supply off of GDT to buying more volume through GDT.
- Dairy
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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