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Supply Keeps Dairy Demand Satisfied


The outlook for milk prices certainly does not look very good at the present time. The June Class III milk prices will be the lowest is has been since May 2020. The Class IV price may be slightly higher than the previous month. This will again be quite a difference between the two classes. If the previous “higher of” pricing were still being used and what is being proposed to move back to with the Federal Order reform, it would be more beneficial. However, the blend price is used which created pricing problems in 2020 when Class III and Class IV had substantial differences.


With the inability of cheese, butter, whey, and nonfat dry milk to find sustained support keeping the market choppy, subsequent contract months continue to erode any price premium the market may be holding on a seasonal basis. Any price increases of underlying cash have been short-lived. There is sufficient product available to satisfy demand. Buyers of dairy products are not concerned about supply and continue to purchase as needed and are slowly increasing inventory, but not to any great extent. More contracting may be taking place rather than the actual physical being purchased. That eliminates storage and assures the product will be received when needed.


The May Cold Storage report bears this out as inventory for all categories of cheese is running below a year ago. Inventory in May increased seasonally, but not as much as it had a year ago. This would set the stage for stronger prices later in the year if demand increased significantly and inventory would decline more rapidly than usual. This may not take place as retail prices remain rather high limiting a strong increase in demand.


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By ROBIN SCHMAHL

June 28, 2023

dairyherd.com

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