Milk futures are as bearish now as they were bullish a year ago. The attitude is completely different. The industry and traders were concerned over milk supply a year ago due to heavy culling. Now, cow numbers are at their highest level since August 2021 at 9.435 million head.
Buyers of dairy products have not been aggressive on the daily spot market as they have been able to purchase product in the country as well as on the spot market without having to aggressively bid for it. Over the past few weeks there has been quite a bit of cheese and dry why that has been traded on the daily spot market even at these lower prices. Sellers have been bringing it to the market to move supply. This indicates supplies are plentiful or manufacturers intend to hold less product in inventory. The most recent cold storage report showed American cheese and total cheese inventories nearly the same a year ago. Other cheese and Swiss cheese inventories were lower than a year ago. That should not be a bearish factor on the market.
This makes one wonder if buyers and sellers are somewhat of the same mind for different reasons. Sellers want to hold less inventory and would rather move supply to the market as quickly as possible. Buyers on the other hand do not want to aggressively purchase and build inventory for later demand at this time of year. However, buyers are willing to purchase at these lower prices as long as sellers are offering it. But even though there has been quite a bit of trading activity on the spot market, overall inventories have not been building. So, demand must be absorbing it. Yet, reports do not indicate there is exceptional demand out in the country. This leaves the market in a certain state of confusion which most often can be bearish to a market.
May 3, 2023