October 2024 Dairy Producer Market Update

October 2024 Dairy Producer Market Update

 

Key Takeaways:

  • Dairy commodity prices have experienced significant declines in the CME spot market after reaching record highs. Barrel Cheddar cheese surged to an unprecedented $2.6225/lb. on September 18 due to a supply squeeze of 4 to 30-day-old Cheddar. However, by October 21, the market corrected sharply, with barrels plummeting $0.6425/lb. (-24.5%). Butter prices also faced a downturn, sliding $0.4675/lb. (-14.6%) from their August 27 peak, as holiday demand tapered off and butterfat remained plentiful. As prices reach elevated levels, heightened volatility often follows.

  • This swift correction in spot prices pressured nearby Class III and IV futures, dampening margin projections compared to last month. Despite this, milk futures remain at historically high levels, while feed costs have dropped to lows not seen since 2020, thanks in part to bearish sentiment in the feed markets driven by record corn and soybean yield projections.

  • Even with the recent price drops, the margin outlook remains highly favorable for producers. The futures market continues to offer exceptionally strong margins going forward, with historically elevated levels expected in the months ahead. We strongly encourage producers to capitalize on these opportunities to lock in future margins and mitigate risk against potential market volatility.

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