Market Reports

Milk powder prices plummeted at Tuesday’s Global Dairy Trade (GDT) auction. Whole milk powder (WMP) plunged 10.9% to a seven-year low. Skim milk powder (SMP) values dropped 5.2% to their lowest level since early 2019.

Juxtaposed with the recent fireworks, the spot markets may have seemed downright boring to some as prices moved mostly sideways with just a few flashes of activity. Buyers and sellers appeared content to bide their time and wait for information that will push the markets one way or the other.

Dairy producers are getting pummeled, and the bruises are starting to show. In California and the Southwest, where feed costs are highest, slaughter volumes have been elevated all year. When May milk checks hit the mailbox many dairy producers got far less than that as cheap spot milk – and dumped milk – resulted in steep discounts.

Cheese and butter prices both jumped once again this week. The sudden strength in the cheese market reflects a shortage of Cheddar that is fresh enough to trade at the spot market in Chicago, a phenomenon that can lead to dramatic but often short-lived spikes in the sultry summer months.

Like the mercury in Phoenix, the dairy markets just kept climbing this week, and the heat wave began in the most unlikely of places. CME spot Cheddar staged a torrid rally on Thursday and blazed higher on Friday as well.

The dairy markets bounced off the bottom this week, hinting that prices may have finally fallen far enough to stimulate demand. They are certainly low enough to begin reducing supplies. Every day, more dairy producers succumb to the tidal wave of red ink that is swamping the industry. In the week ending July 1, dairy producers sent 59,332 cows to slaughter, the highest late-June head count since 2009.