Market Reports

The dairy markets have come a long way in the past few months. But while lower milk output and firm demand are clearly underpinning prices, the bulls must be fed with fresh news every day. In the absence of additional fodder, the rally will quickly lose steam.

Are dairy producers turning their sights toward expansion? The United States, Mexico, and Canada have reportedly reached a deal to waive the Trump tariffs and it’s likely that Mexico will drop the punitive border tax on cheese. However, the trade headlines came too late to prevent a setback in spot Cheddar.

It was another wild week on LaSalle Street, as traders focused much of their attention on Pennsylvania Avenue. For now, however, milk output is in decline around the world. Dairy producers can enjoy much higher milk prices even as exports slip.

New highs! For dairy producers, those words are like the first glimpse of an oasis after four years wandering in the desert. And, with some better pricing in upcoming milk checks to wet their whistle, dairy producers can have some confidence that it’s not a mirage.

The dairy markets have had a slew of data to digest in the past two weeks, providing plenty of fodder for the bulls. The Global Dairy Trade (GDT) auction kicked things off last Tuesday with a mostly higher performance. U.S. trade data for February echoed the GDT; butterfat and cheese exports impressed, while milk powder shipments stalled. Less milk and more processing capacity is making for a tight milk market in the Midwest despite the spring flush.

Concerns are growing among nonfat dry milk (NDM) buyers that milk powder prices could reach into the $1.15 range if not higher later this year. The market sentiment now is that the longer prices remain in the high 90¢ range this spring, the higher prices could move up later this year. If the higher NDM price levels materialize, they could result in some of the highest-Class IV milk prices in a long time for western dairy producers, which would be much needed good news.