GLOBALLY, U.S. CHEESE PRICES HAVE FALLEN to the lowest values among the big three exporters. In early November, U.S. spot Cheddar blocks and barrels traded close to the $1.80 range, while Europe was near $2.15 per pound and New Zealand sold for $2.26 on the GDT.
THOSE PRICES HAVE ENCOURAGED EXPORTS. In September, the U.S. sent 86.3 million pounds of cheese to international customers, making it a record sales total for that month. Shipments to Mexico were 19% higher when compared to the same time last year.
EXPORTS WILL BE A KEY DEMAND FACTOR moving forward as three major cheese facilities are projected to come online incrementally in late 2024 and through mid-2025. As a result, there will be significant new U.S. cheese production seeking a home both domestically and internationally.
THIS NEW CHEESE OUTPUT HAS BEEN ONE OF THE REASONS that a price inversion has reappeared in the Class III and Class IV futures. November and December Class III futures averaged $19.70 per cwt. compared to a $21.15 average for Class IV butter and powder contracts.
MOVING INTO THE NEW YEAR, CLASS IV WAS $2.20 higher than Class III contracts for the January-to-June bundle average. Overall, Class IV contracts average $21.30, and Class III netted $19.10 on the CME.
GLOBALLY, BUTTER MARKETS MIRRORED CHEESE with U.S. spot butter trading near $2.65 per pound. Meanwhile, New Zealand butter sold for $3.17 and European butter fetched upward of $3.60 per pound. While the U.S. had been over $3 per pound during the fourth quarter of 2022, 2023, and the summer of 2024, strong U.S. production beefed up supplies.
POWDER MARKETS HAVE BEEN JUST THE OPPOSITE, with U.S. nonfat dry milk bringing top values among the major three exporters. Overall supplies remain tight as milk moves to new cheese plants. It’s one of the main reasons that Class IV futures have been trading higher than Class III on the CME for the next 12 months.
REPLACEMENT HEIFERS REMAIN EXTREMELY TIGHT with Holstein springers ranging from $2,800 to $3,600 at some auctions. Just one year ago, prices were between $1,300 and $1,600. As a result, dairy farmers have sent an unprecedented 486,500 fewer cows to slaughter from September 2023 through October 2024 to shore up herd numbers.
WITH AN INABILITY TO GROW THE DAIRY HERD, margins should remain strong, largely driven by lower feed costs. The September Dairy Margin Coverage (DMC) was the best on record. Read more on page 594.
