California Market Summary For May 11

The California overbase price in May continued to inch upward this week, aided by a particularly strong Class 4b price. Indeed, the $15.09/cwt price this month is the highest Class 4b price since November 2017. Dry whey gained 1.5 cents this week, climbing to $0.2950/lb, the highest level since December 2017. DMN continues to report positive news about dry whey, with “manufacturers reporting stocks are tight and production is mostly just keeping pace with buyer requests. A few processors report they are currently working to fulfill contractual obligations for other dry dairy products in lieu of making dry whey powder right now”. Export data showed dry whey exports were up 26% year-over-year in March. According to USDEC, 55% of U.S. dry whey production was exported in March.

Even the Class 4a’s performance, while below 4b, was the highest since October 2017 at $13.75/cwt. Butter is the leading commodity in the category. Indeed, butterfat represents $8.97/cwt (or 65%) of the Class 4b price while solids nont fat contributed $4.78/cwt (or 35%). Still, powder prices have been showing slow signs of improvement. They may be delayed in California with prices still in the low $0.70/lb, but spot prices in western U.S. states averaged $0.8275/lb this week, up 3.75 cents from last week and the highest in 7 months. Powder exports in particular have been performing well, with volumes these past two months at record high levels. More specifically, U.S. powder exports in March were up 37% from last year. There may be market forces preventing a rapid climb in powder prices, but it appears the lows are behind us for 2018. As reflected in the chart below, a slow progressive climb toward the end of summer is in the forecast.