Dairy Market Performance September 16-20:
AgResource Market Comment: Cheese and class III last week ended flat. Forward butter futures ended sharply lower as end users proactively secure holiday needs, which along with the recent modest break in Oceania cash prices suggests highs in the butter market were scored in late summer. It’s difficult to be bearish of butter on breaks below $2.70, basis Q1 2025 contracts, but a seasonal relaxation in values lies ahead. Class III and cheese must still contend with US production contraction and abnormally tight US cheddar inventories. Class III gains on Class IV through the remainder of the year.
US milk production in August was a bit above trade expectations, but still contracted year-over-year, and AgResource’s work suggests production into Feb 2025 will be at/slightly below year-ago levels, and significant herd expansion is needed thereafter for production growth.
There may be some liquidation of long positions in class III early this week, but actual cash milk prices into mid-autumn are forecast above $23 per CWT. The correlation between class III and cash milk prices on a monthly basis is displayed above. Milk is still viewed as rather valuable, and we note nonfat day and whey prices continue to move higher.
Most importantly, the US financial market reacted positively to the Fed’s 50 basis point rate cut on Wednesday. Capital will be freed into the marketplace, a recession is unlikely nearby, and global food consumption is projected to score a new record high in 2025.
US Milk Production in August Contracts for 14th Month: US milk production in August totaled 18.82 billion pounds, down 0.1% from the previous year and on a per-day basis US milk production contracted for a 14th month. Not since 1995/96 has the duration of contraction been as long. There’s hope that production is unchanged year-over-year by Nov/Dec, but certainly no major expansion is anticipated.
AgResource projected US milk production in August to be down 0.3%, and so (relative) improvement was anticipated, but a jump in per-cow output leaves open the possibility that worst-case production scenarios will be avoided.
Yet, we do mention autumn/early winter is the wrong time of a year to see recovery, given outright pounds produced are seasonally weak. Additionally, dairy product demand rises seasonally in autumn and during the holidays.
Per-cow production in August was 2,018 pounds, up .4% year-over-year and up modestly for a second month. Notable improvement in milk production was recorded in California (+2% year-over-year), South Dakota (+8.5%) and Texas (+8%). Contraction persists in Wisconsin, New York and across the Southwest. Cheese processors face a tightening of milk supply availability.
The US dairy herd was unchanged at 9.33 million head, vs. 9.37 million a year ago. We strongly doubt cows will be added until late winter, and still the beef market remains elevated. The select cutout last week traded at $296 per CWT, vs. $285 a year ago in mid-September and vs. $230 in 2022.
It’s unlikely that beef crosses fall out of vogue during the autumn months. There are no signs that major beef cow inventory expansion occurs until spring/summer 2025, and overall high beef prices, on the margin, work against dairy herd expansion in early 2025.
The forward outlook has changed a bit in that production through the remainder of 2024 will be closer to year-ago levels – though this still implies US milk production growth will have been absent for three consecutive years – but milk production growth is unlikely.
Assuming the cow herd is unchanged, and per-cow output averages 0.3-0.4% growth, ARC estimates US milk production in September at 18.14 billion pounds, down 0.2% year-over-year, and production in October at 18.1 billion, down 0.1%.
And USDA’s 2024 annual milk production forecast is still viewed as slightly too high.
AgResource estimates 2024 US milk production at 225.7 billion pounds, 200 million below USDA, and which implies annual contraction in 2024 of 0.3%.
USDA also projects milk production in 2025 to rise 1% to a record 227.9 billion pounds. It’s premature to debate this number, but this does imply a major change in both cow numbers and per-cow output. Assuming per-cow production growth 0.5%, cow herd expansion of 50-55,000 head is still required to validate USDA’s 2025 estimate. The graphic above shows that herd expansion between January and June of 55,000 head is reasonable, such expansion has been fleeting since 2015.
However, AgResource’s strategy is unchanged. It’s difficult to pass on margins where they exist currently. Lock in milk prices/production margins into Q1 2025 at the current market. Be mindful that even amid bullish input, a seasonal high in milk is probable at some point in the first half of October.
ARC Milk/Cheese Commentary: Class III and cheese scored yet newer highs before retreating on Friday. A choppier market is forecast through the balance of the year – current prices have digested most bullish news – but the US cheese balance sheet is forecast to tighten further in Oct-Nov, and breaks will be well supported in the near and medium terms.
Thus far, cheese has not found the price that trims demand. Actual American cheese disappearance in July totaled 484 million pounds, a record for the month. Importantly, larger consumption occurred despite high prices, which indicate real demand growth. Notice also that a seasonal increase in consumption typically occurs in the Oct-Dec period.
We maintain a strategy of using rallies to sell forward (at near-record prices). Fundamental input is positive, but concern is still centered on the normal seasonal decline in cheese consumption in Q1 and the seasonal decline in cheese prices after October. 
ARC Butter Commentary: Butter prices last week ended sharply lower. Market-specific news was lacking, but seasonal trends do turn negative in early autumn, and we maintain that end users in 2024 are better prepared for Oct-Dec supply tightness. The bull market in butter this year was anticipated. The volume of sales has been robust in the last 30 days, which likely reflects end users extending coverage into late year. The market very likely scored its annual high in early September.
However, keep in mind cash butter in Western Europe remains perched above $4.00 per pound. Support in Dec-Jan is projected at $2.60-2.75, basis Jan-Mar CME contracts. The world’s demand for fat has found a new elevated plateau. Large production in the US, New Zealand and Europe is required for sub-$2.50 prices in 2025. End users are recommended to lock in longer term coverage on price weakness during the winter months.
ARC Feed Market Commentary: Feed markets ended slightly lower as hedge-relating selling pressure caps rallies – and likely continues to cap rallies into the early or middle part of September. Heavy rain will impact the Central Plains and western Midwest early next week, but thereafter there will be few disruptions to harvest into Oct 6-7. We maintain that some 4.5-4.7 billion bushels of corn and 900 million bushels of soybeans will have been harvested by Oct 1. The bears point to large existing US supplies; the bulls point toward enlarged Chinese demand for soybeans, and decently sized longer term demand growth in corn. Additionally, dire drought in central and northern Brazil becomes more important if it’s extended beyond the next two weeks.
Interior cash corn markets are clearly reflecting that the pipeline is soon to be full. Basis at major markets fell sharply in late August, and we expect this year’s recovery to be muted between now and mid-autumn. Be prepared for a lack of movement in cash feed markets in the short run.
Longer term price discovery hinges heavily upon South American weather. The concern today is the already-late arrival of Brazil’s monsoon. The following graphic shows that September isn’t an overly wet month at key tropical latitudes of Brazil – where 60% of the country’s soybeans are grown – but subsoil moisture today is absent completely, and key in the next few weeks is whether regular rain occurs in October.
Recall soybeans this year can’t be planted until some 3-4” of rain falls. Brazilian seeding dates are important. Whether Brazil’s soybean surplus becomes available in late January or late February will be determined by Mother Nature over the next 30 days. Also recall soybean seeding dates have a direct impact on winter corn planting dates in Feb/Mar, and so a watchful eye will be kept on extended range weather forecasts in Brazil. The 10-day forecast is bone dry. 11-15 day outlooks feature hints of elevated humidity, but confidence is low.
Risk now lies to the upside, but the speed and intensity of this season’s recovery will be a function of final US crop sizes and the details of South American weather. Add to corn supply coverage below $4.00, basis December CBOT, and to meal coverage below $310.
Grain & Oilseed Prices
Dairy Charts
Dairy Market Performance September 16-20:
AgResource Market Comment: Cheese and class III last week ended flat. Forward butter futures ended sharply lower as end users proactively secure holiday needs, which along with the recent modest break in Oceania cash prices suggests highs in the butter market were scored in late summer. It’s difficult to be bearish of butter on breaks below $2.70, basis Q1 2025 contracts, but a seasonal relaxation in values lies ahead. Class III and cheese must still contend with US production contraction and abnormally tight US cheddar inventories. Class III gains on Class IV through the remainder of the year.
US milk production in August was a bit above trade expectations, but still contracted year-over-year, and AgResource’s work suggests production into Feb 2025 will be at/slightly below year-ago levels, and significant herd expansion is needed thereafter for production growth.
There may be some liquidation of long positions in class III early this week, but actual cash milk prices into mid-autumn are forecast above $23 per CWT. The correlation between class III and cash milk prices on a monthly basis is displayed above. Milk is still viewed as rather valuable, and we note nonfat day and whey prices continue to move higher.
Most importantly, the US financial market reacted positively to the Fed’s 50 basis point rate cut on Wednesday. Capital will be freed into the marketplace, a recession is unlikely nearby, and global food consumption is projected to score a new record high in 2025.
US Milk Production in August Contracts for 14th Month: US milk production in August totaled 18.82 billion pounds, down 0.1% from the previous year and on a per-day basis US milk production contracted for a 14th month. Not since 1995/96 has the duration of contraction been as long. There’s hope that production is unchanged year-over-year by Nov/Dec, but certainly no major expansion is anticipated.
AgResource projected US milk production in August to be down 0.3%, and so (relative) improvement was anticipated, but a jump in per-cow output leaves open the possibility that worst-case production scenarios will be avoided.
Yet, we do mention autumn/early winter is the wrong time of a year to see recovery, given outright pounds produced are seasonally weak. Additionally, dairy product demand rises seasonally in autumn and during the holidays.
Per-cow production in August was 2,018 pounds, up .4% year-over-year and up modestly for a second month. Notable improvement in milk production was recorded in California (+2% year-over-year), South Dakota (+8.5%) and Texas (+8%). Contraction persists in Wisconsin, New York and across the Southwest. Cheese processors face a tightening of milk supply availability.
The US dairy herd was unchanged at 9.33 million head, vs. 9.37 million a year ago. We strongly doubt cows will be added until late winter, and still the beef market remains elevated. The select cutout last week traded at $296 per CWT, vs. $285 a year ago in mid-September and vs. $230 in 2022.
It’s unlikely that beef crosses fall out of vogue during the autumn months. There are no signs that major beef cow inventory expansion occurs until spring/summer 2025, and overall high beef prices, on the margin, work against dairy herd expansion in early 2025.
The forward outlook has changed a bit in that production through the remainder of 2024 will be closer to year-ago levels – though this still implies US milk production growth will have been absent for three consecutive years – but milk production growth is unlikely.
Assuming the cow herd is unchanged, and per-cow output averages 0.3-0.4% growth, ARC estimates US milk production in September at 18.14 billion pounds, down 0.2% year-over-year, and production in October at 18.1 billion, down 0.1%.
And USDA’s 2024 annual milk production forecast is still viewed as slightly too high.
AgResource estimates 2024 US milk production at 225.7 billion pounds, 200 million below USDA, and which implies annual contraction in 2024 of 0.3%.
USDA also projects milk production in 2025 to rise 1% to a record 227.9 billion pounds. It’s premature to debate this number, but this does imply a major change in both cow numbers and per-cow output. Assuming per-cow production growth 0.5%, cow herd expansion of 50-55,000 head is still required to validate USDA’s 2025 estimate. The graphic above shows that herd expansion between January and June of 55,000 head is reasonable, such expansion has been fleeting since 2015.
However, AgResource’s strategy is unchanged. It’s difficult to pass on margins where they exist currently. Lock in milk prices/production margins into Q1 2025 at the current market. Be mindful that even amid bullish input, a seasonal high in milk is probable at some point in the first half of October.
ARC Milk/Cheese Commentary: Class III and cheese scored yet newer highs before retreating on Friday. A choppier market is forecast through the balance of the year – current prices have digested most bullish news – but the US cheese balance sheet is forecast to tighten further in Oct-Nov, and breaks will be well supported in the near and medium terms.
Thus far, cheese has not found the price that trims demand. Actual American cheese disappearance in July totaled 484 million pounds, a record for the month. Importantly, larger consumption occurred despite high prices, which indicate real demand growth. Notice also that a seasonal increase in consumption typically occurs in the Oct-Dec period.
We maintain a strategy of using rallies to sell forward (at near-record prices). Fundamental input is positive, but concern is still centered on the normal seasonal decline in cheese consumption in Q1 and the seasonal decline in cheese prices after October. 
ARC Butter Commentary: Butter prices last week ended sharply lower. Market-specific news was lacking, but seasonal trends do turn negative in early autumn, and we maintain that end users in 2024 are better prepared for Oct-Dec supply tightness. The bull market in butter this year was anticipated. The volume of sales has been robust in the last 30 days, which likely reflects end users extending coverage into late year. The market very likely scored its annual high in early September.
However, keep in mind cash butter in Western Europe remains perched above $4.00 per pound. Support in Dec-Jan is projected at $2.60-2.75, basis Jan-Mar CME contracts. The world’s demand for fat has found a new elevated plateau. Large production in the US, New Zealand and Europe is required for sub-$2.50 prices in 2025. End users are recommended to lock in longer term coverage on price weakness during the winter months.
ARC Feed Market Commentary: Feed markets ended slightly lower as hedge-relating selling pressure caps rallies – and likely continues to cap rallies into the early or middle part of September. Heavy rain will impact the Central Plains and western Midwest early next week, but thereafter there will be few disruptions to harvest into Oct 6-7. We maintain that some 4.5-4.7 billion bushels of corn and 900 million bushels of soybeans will have been harvested by Oct 1. The bears point to large existing US supplies; the bulls point toward enlarged Chinese demand for soybeans, and decently sized longer term demand growth in corn. Additionally, dire drought in central and northern Brazil becomes more important if it’s extended beyond the next two weeks.
Interior cash corn markets are clearly reflecting that the pipeline is soon to be full. Basis at major markets fell sharply in late August, and we expect this year’s recovery to be muted between now and mid-autumn. Be prepared for a lack of movement in cash feed markets in the short run.
Longer term price discovery hinges heavily upon South American weather. The concern today is the already-late arrival of Brazil’s monsoon. The following graphic shows that September isn’t an overly wet month at key tropical latitudes of Brazil – where 60% of the country’s soybeans are grown – but subsoil moisture today is absent completely, and key in the next few weeks is whether regular rain occurs in October.
Recall soybeans this year can’t be planted until some 3-4” of rain falls. Brazilian seeding dates are important. Whether Brazil’s soybean surplus becomes available in late January or late February will be determined by Mother Nature over the next 30 days. Also recall soybean seeding dates have a direct impact on winter corn planting dates in Feb/Mar, and so a watchful eye will be kept on extended range weather forecasts in Brazil. The 10-day forecast is bone dry. 11-15 day outlooks feature hints of elevated humidity, but confidence is low.
Risk now lies to the upside, but the speed and intensity of this season’s recovery will be a function of final US crop sizes and the details of South American weather. Add to corn supply coverage below $4.00, basis December CBOT, and to meal coverage below $310.
Grain & Oilseed Prices
Dairy Charts
