Downes-O’Neill dairy broker Dave Kurzawski said Monday’s Milk Production report was “a surprise.” Most analysts expected a 1-1 1/2 percent gain and he warned that this kind of bearish news should bring weaker prices but, if it doesn’t then the market likely believes July output will be hurt by the hot weather.
Kurzawski expects cheese prices to top $1.60 for the short term though he cautioned that “we’re in uncharted waters as far as forecasting how high this price will go.” “Will this be the case 60 or 90 days from now is too early to tell,” he said, “But that is the case right now.”
The butter price is the highest it has been in several years and showing no signs of weakness, according to Kurzawski. “Cream multiples in the country are still trading at $1.50 plus, meaning, if you buy a load of cream, you’re paying a butterfat plus this cream multiple.”
Typically at this time of year trading runs around $1.20, according to Kurzawski, so there’s real good strength in the cream market and on the butterfat side of things and he doesn’t see that going away either, any time soon. “Both the strength in the CME spot cheese market and the butter market right now may override this bearish milk production number,” he concluded.