Dairy Processing - September/October 2022 - 65

tight side and the market has been further
tightened by weak milk production in
the first half of the year and very
strong butter exports. That has left
the market undersupplied in the
lead-up to the year-end holidays
- 20% of butter is consumed in
November and December.
On the bright side, lower NFDM prices,
driven by weaker demand from China, should
bring Class II prices down a bit in September
and October despite the record high butter
price. But the longer-term outlook for 2023
calls for relatively high milk prices as milk
production remains weak across the major
dairy exporting regions.
The Class II milk price set
new record highs in June,
July and August with the
year-to-date average price
also at a record high, up
62.5% from last year.
Class II Milk Price
(USD/cwt.)
$11.00
$13.00
$15.00
$17.00
$19.00
$21.00
$23.00
$25.00
$27.00
$29.00
$9.00
Source: USDA
US Yogurt and Sour Cream Production
(12 month rolling total, Mil. lbs)
What can be done about the record high
prices? There are futures contracts that trade
on the Chicago Mercantile Exchange (CME) for
Class III and Class IV milk, but they do not have
a Class II contract for cultured dairy product
producers. However, the CME does futures
contracts for butter and NFDM that can be used
to easily hedge the Class II milk price. In early September the
futures market was allowing buyers to lock in a Class II milk
price of about $21.80 for 2023. That is still a high price from a
historical perspective, but it is a lot lower than the record high
$26.91 in August this year.
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
3,300
3,500
3,700
3,900
4,100
4,300
4,500
4,700
4,900
Yogurt
Source: USDA, StoneX Calculations
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. As a
consultant, he has worked with clients at all levels of the
dairy marketing chain from the farm level up to processors
and packaged foods companies, food distributors and
restaurants, as well as related industries such as banks,
private equity groups, government agencies and industry
associations.
DAIRYPROCESSING.COM | SEP-OCT 2022 65
Sour Cream (RHS)
U.S. Yogurt and Sour Cream Production
(12 Month Rolling Total, Mil. Lbs.)
1,100
1,150
1,200
1,250
1,300
1,350
1,400
1,450
1,500
1,550
Class II Milk Price (USD/cwt.)
USDA, StoneX
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