January 31, 2017

The Tale of Two Markets

 |  By: Know Your Market

By Mike North, Commodity Risk Management

The combination of last week’s milk production report and cold storage reports had one theme: more cows, more milk, and more product. Demand from both food service and retail has remained strong as buyers and processors prepare for the upcoming Super Bowl weekend and forthcoming Easter holiday. Butter makers have been busy putting bulk product into cold storage, while cheesemakers are taking advantage of milk supplies to keep the vats full.

With all of the conversation centering around domestic needs, little attention has been given to the export market. When comparing butter and cheese it quickly becomes obvious we are looking at a tale of two markets. To quote last Friday’s national dairy market news, “Butter demand and interest from global markets is sluggish as tender values from several international manufacturers are below the current domestic prices.” To that point, U.S. imports of butter in the month of December totaled 2.3 million lbs. a 267.8% increase from one year ago.

On the flip side of this discussion, recent weakness at the CME spot market has created budding optimism for the increased export of cheese, a potential saving grace for a market that seems to be in dire straits lately.

Listen to Mike daily on DairyLine radio.