CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
Early Morning Update - November 21, 2023
By: Dairy Team - Chicago, Dairy Chicago
October Milk production was down 0.5% from last year in October, which was weaker than the +0.1% forecast. The USDA did revise up the size of the herd and milk production for September, but they are estimating a 6,000 head drop in cow numbers between September and October. Growth in milk production per cow dropped off with October down 0.1% from last year compared to +0.2% in September.
Cow numbers have roughly flattened out since July and given the continued weak dairy cow slaughter, there’s an argument that the big drops in cow numbers are likely done. With all the new productive plant capacity slated over the next 18 months, we’re likely going to need to see cow numbers start to turn around here to stave off heated competition for milk in the second half of the year. But that is not a problem the market is highly concerned with this morning.
Production per cow remains weaker relative to trend and could make things interesting into next year. Feed is getting cheaper and looking at long term trends, we will likely see better production per cow.
The USDA will release the October Cold Storage report on Wednesday afternoon. We don’t expect any big surprises. We have cheese stocks shifting from being up 0.2% YoY in September to being down 0.3% in October. Given the weakness we’ve seen in cheese prices, the risk is cheese stocks come in higher than forecast. The relatively weak milk production for October likely pushed butter production below year ago levels which puts forecasted stocks at the end of October up 2.2% compared to the 3% that they were up in September.
Class III and Cheese continued to trade lower yesterday, creating new lows in nearby months. Blocks stayed unchanged while barrel cheese saw more sell side pressure falling 5 cents to $1.51. Futures volume was a bit over half of what it was Monday for Class III trading 1884 contracts. Cheese remained strong with 1,292 contracts trading. The open interest increase was stronger for Class III and Cheese rising 854 and 521 contracts respectively, with the majority of it seen in Dec23-Mar24 contracts.
New lows and rising open interest is bearish until it isn’t. Sometimes low price points are made when capitulation happens. We may not be there this week, but January Cheese futures has closed lower for each of the last 12 weeks in a row. And milk production was down 0.5% in October. Clearly there is demand problem, but such a one-sided market tends to have recoveries. With more of the same from the quiet/weak spot market expected this week, lower milk production just might be what staves off further declines for Class III and Cheese.
NFDM is leaning weaker this morning as some of the forward curve premium is worked off the market amid a weaker SMP price during the GDT Auction. Volume in the nonfat market was strong to start the week, with over 300 contracts traded. Given the supportive volume, open interest has been ticking higher day-to-day for the last several weeks. Production has been falling in the nonfat market, but so has demand so we don't expect a lot of change from the current futures curve prices given our current data.
- Dairy
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CME Cash Market Summary
Daily CME spot dairy market price summary
Dairy Team - Chicago
- Dairy
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