MRV BLOG: MRV Market Commentary November 6, 2024

Check-in here to see the MRV commentary on what we have seen and are seeing in the dairy market.  These insights have been developed from MRV’s proprietary data, industry experience, and industry reports referenced below. Here’s our latest:

Domestic

Over the past few weeks, dairy commodity prices have shown varied trends. Butter prices have declined slightly, falling from $2.90 per pound in early October to around $2.71 per pound in early November, reflecting a plentiful supply of cream. However, with the holiday season approaching, demand is anticipated to rise. Cheese has also shown a downward trend, with prices for 500-pound barrels decreasing from $2.51 to roughly $2.00 per pound, while 40-pound blocks dropped from $2.26 to about $2.00 per pound. This decline is partly due to reduced demand in food service sectors. In contrast, nonfat dry milk prices have experienced a gradual increase, moving from $1.33 per pound in early October to $1.36 in early November, signaling consistent demand. Similarly, dry whey prices saw moderate increases, starting at $0.55 per pound and reaching approximately $0.58 per pound by early November, reflecting sustained demand for this product.

These shifts in dairy commodity prices are important for setting Class I costs in the upcoming month. These trends suggest that Class I prices may either decrease slightly or stabilize. The exact impact will depend on future market adjustments and the anticipated seasonal rise in demand.

Cold Storage

As of the end of October, cheese stocks were notably lower than anticipated. This decline is attributed to consistent demand, particularly for cheddar barrels, which are used widely in food production and remain in tight supply. This limited availability of cheese has led to fluctuations in Class III milk futures, as prices respond to the pressure from dwindling inventories​. Butter stocks, on the other hand, were surprisingly high, with levels approximately 7 million pounds above projections. This increase is unusual for this time of year and could exert downward pressure on butter prices if the trend continues. Typically, inventory increases are more closely associated with softer demand or overproduction, but the current market hasn’t yet shown significant price declines, possibly due to robust international demand​.

Exports

In September, U.S. dairy exports rose 8.5% year-over-year (YOY) in milk solids equivalent (MSE) terms, indicating rising global demand outside of China. This marks the third consecutive month of YOY growth and has resulted in the strongest quarter for U.S. dairy exports since late 2022. Export value also increased substantially, climbing 18% from the previous year, the second-highest monthly value recorded in 2024. This brought the year-to-date (YTD) export value into positive growth territory, up 0.4%, marking the first YTD increase in export value this year, despite adjustments for Leap Day.

Although overall exports have grown, reduced demand from China has impacted U.S. exports as well as those of major competitors. U.S. shipments to China fell by 13% YOY in September. While some products like whey, butterfat, and milk protein concentrate saw gains in China, shipments of nonfat dry milk/skim milk powder (NFDM/SMP), cheese, and lactose declined significantly, with cheese exports down by 85%. China’s reduced dairy imports are linked to slower economic growth. Chinese policymakers are working on new stimulus measures aimed at boosting domestic consumption and economic growth, but it remains uncertain if these efforts will significantly increase dairy import demand in the near future.

Summary

Over the past few weeks, prices for dairy commodities have varied, with butter and cheese prices decreasing slightly due to high cream availability and weaker food service demand, while nonfat dry milk and dry whey prices have increased slightly, indicating steady demand. The upcoming holiday season may drive up demand for butter, but high butter stocks could keep prices stable. Meanwhile, lower-than-expected cheese stocks, particularly for cheddar barrels, have affected Class III milk futures, contributing to market fluctuations. U.S. dairy exports in September saw an 8.5% year-over-year increase in milk solids equivalents, despite weaker demand from China, marking the strongest quarter for exports since late 2022. However, Chinese economic challenges and reduced dairy imports could continue to affect the U.S. export market, despite positive trends in other global regions. Based on these current market trends and MRV’s internal database, MRV projects Class I prices decrease for December.

This information cited by MRV Marketing, LLC is for informational and reference purposes only. It is not intended to be a conclusive statement of future market conditions. It is not legal advice or legal documents. The data used in these documents contains references to information created and maintained by other organizations or agencies. Please note that MRV Marketing, LLC does not control and cannot guarantee the accuracy of these outside materials.

Statistical data referenced here is gleaned from reports by MRV Proprietary Data, USDEC, CME Group, USFoods, and USDA.