Flat US milk production and declines in year-over-year production in cheese producing states (Wisconsin, Idaho, New Mexico) helped build our hypothesis. But when examining yesterday’s Dairy Products Report, Class IV products (butter & powder) suffered while total cheese production remained firm.
We view the December Dairy Products Report as bearish cheese and NDM prices in the short-term while somewhat supportive of butter. However, we still believe the international market will dictate longer term price direction in the US and that any downward correction on the horizon will be brief unless US milk production makes a drastic comeback in the next few months.