markets
August 12, 2019

Is This The Best Milk Price We Will Get?

 |  By: Robin Schmahl

For a while, it seemed as if milk prices were going to increase as the year progressed. That was mostly true so far this year with the July Class III and Class IV prices reaching to the highest levels since December 2014. Class III price dipped slightly in February and June, but continued the uptrend.

For a while, it looked as if August was going to dip lower also, but that changed significantly during the first full week of the month with futures now trading above the July price. The August contract will virtually be priced by the end of this week with only price adjustments thereafter based on the weekly AMS prices. If price holds, it will keep the overall uptrend intact. Current Class II futures show price increases through October with Class IV showing an increase through November. 

Current spot cheese prices seem comfortable at current levels. Cheese production is steady with demand being able to absorb production despite slower exports. The June inventory report showed cheese stocks decreasing which is providing support. Spot milk prices are higher and in some cases are difficult to find, but manufacturing plants are able to meet demand without difficulty.

Milk supply to manufacturing will decrease soon as more milk moves to bottling for school systems. Inventory will need to be dipped into to meet demand. However, the market is not expected to be tight as many buyers have already purchased supply for upcoming expected demand and have been able to increase ownership as sellers have not been shy in offering supply to the spot market. It has been a buyer’s market as buyers have not had to aggressively bid up in order to obtain product. It currently seems that this may be the pattern through the rest of the year. 

Butter has had a story of its own. Currently, price is following the pattern of the three years during which price declined in August and later in some of those years. Historically, butter price generally increased in the fall sometimes moving significantly higher as demand increased. However, that pattern has changed due to buyers being more aggressive earlier in the year rather than waiting for order to come in before purchasing more aggressively. They would rather pay storage than chase the market when demand increases. In actuality, the market has been in a sideways price range since late 2017. Prices have been higher and lower than the current level, but the higher or lower trend has been minimal with the range somewhat confined. 

The possibility here is that a somewhat range bound butter, nonfat dry milk, and dry whey markets may keep the potential for cheese prices limited. Milk prices are slowly moving the right direction, but unfortunately it may be too slow and too late. 
 

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