Dairy Processing - November/December 2023 - 72
COMMODITIES OUTLOOK
orders have been strong enough that butter makers have
been very focused on producing retail packaged butter at the
expense of bulk butter (25 kg or 68 lb blocks) production.
Only bulk butter can be traded in the CME spot market. The
result was a new record high for the CME spot butter price
again in 2023.
So the butter market rallied in 2022 because retailers (and
others) didn't lock in enough product ahead of the holidays. In
2023, they locked in plenty of product and left the bulk market
tight. What happens in 2024? It's not clear. It's unlikely butter
will rise above $3.00, but few people expected that in 2022 or
2023 and the market still ended up there.
For those who want to manage their butter (or cream/
milk) price risk, the CME offers a suite of futures products
tied to dairy prices. As of writing this (early November), the
futures for butter covering the second half of 2024 average
a little below $2.50 per pound. Actual prices might average
lower than that during the second half of the year, but for
those who absolutely do not want to experience butter over
$3.00 next year, locking in $2.50 butter now is possible.
Editor's note: This material should be construed as
market commentary, merely observing economic, political
and/or market conditions, and not intended to refer to any
particular trading strategy, promotional element or quality
of service provided by the FCM Division of StoneX Financial
Inc. ( " SFI " ) or StoneX Markets LLC ( " SXM " ). SFI and SXM
are not responsible for any redistribution of this material by
third parties, or any trading decisions taken by persons not
intended to view this material. Information contained herein
was obtained from sources believed to be reliable, but is not
guaranteed as to its accuracy. Contact designated personnel
from SFI or SXM for specific trading advice to meet your
trading preferences. These materials represent the opinions
and viewpoints of the author, and do not necessarily reflect the
viewpoints and trading strategies employed by SFI or SXM.
Nate Donnay is the Director of Dairy Market Insight at
StoneX Financial Inc. and has been applying his expertise
in large complicated systems and statistical analysis to the
international and US dairy markets since 2005.
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Dairy Processing - November/December 2023
Table of Contents for the Digital Edition of Dairy Processing - November/December 2023
Dairy Processing - November/December 2023 - Intro
Dairy Processing - November/December 2023 - 1
Dairy Processing - November/December 2023 - 2
Dairy Processing - November/December 2023 - 3
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