Key Takeaways:
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Class III is finally gaining some momentum after months of sharp declines, driven by improvements in cheese and dry whey prices. In the CME spot market, block and barrel Cheddar began to climb in early December, while dry whey surged to $0.7925/lb. on December 13—its highest level since February 2022. Lower production, tighter inventories, seasonal cheese demand, and robust interest in high-protein whey products are all contributing to the recent rally. However, the long-anticipated increased cheese capacity is finally coming online, which should help replenish inventories, likely keeping prices from skyrocketing.
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In contrast, Class IV markets tell a different story. Despite California—the top butter-producing state—facing significant declines in butter production due to the impacts of bird flu, there remains an abundant supply of butter. Butter prices fell to their lowest value of 2024 ($2.4650/lb.) on December 13, weighed down by ample inventories, strong milkfat production, and the conclusion of holiday buying. Despite these pressures, Class IV futures remain historically elevated, reflecting ongoing market strength.
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Milk prices remain strong, feed costs are low, and margins are among the most favorable seen in the past decade. With the commodity markets prone to volatility, it’s crucial for producers to capitalize on opportunities like these while they last.
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