The bulls bellowed and bucked this past week, and the bears fled. The dairy markets bettered their prices by leaps and bounds. Although the rally faded May 15, the magnitude and velocity of this past week’s recovery are astounding.

Cheese led the charge. Chicago Mercantile Exchange spot Cheddar blocks increased 47.5 cents this past week to $1.78 per pound. Barrels soared 45 cents to $1.72, a new best price for 2020. Both blocks and barrels are at more than year-ago levels, a truly impressive feat given the state of the economy. Butter vaulted 35.5 cents this past week to $1.645. CME spot nonfat-dry milk rallied 11 cents to 93.5 cents. Whey lost 0.75 cents to 39 cents.

The futures gained considerable ground. June Class III settled at $16.85 per hundredweight, an increase of $3.17 from the previous Friday. The June contract has increased by more than $5 in the past three weeks. June through December Class III futures sit comfortably at more than $16.

The 2020 Class IV futures added more than $1.50, on average this past week. But at less than $15 per hundredweight they are still a long ways from covering dairy-producer costs. The dairy markets in general, and the cheese and butter markets in particular, have been buoyed by a perfect storm of purchases. U.S. cheese was a bargain a couple months ago. Now exporters are loading containers to fill orders that were booked earlier this year. Grocers are still moving dairy products in huge volumes. They are competing with restauranteurs who are restocking after spending most of March and April on the sidelines.

Meanwhile some companies that registered to supply nonprofits with food boxes under the U.S. Department of Agriculture’s “Farmers to Families” program are scrambling to secure the yogurt, dips, cheese, butter and fresh milk needed to fill them. In the near term processors may need to increase output to meet those simultaneous requests. Meanwhile ice cream season has arrived, tightening the cream markets and reducing butter production.

Dairy processors are hurrying to squeeze large orders into a very short timeframe, but dairy consumption may be less-concentrated. Dairy products are moving rapidly from processors to cargo containers, food banks, commercial kitchens, grocery pallets and in-home refrigerators. But consumers probably aren’t eating a lot more dairy than they were just a few weeks ago. The USDA is donating dairy at such a scale that it’s likely to cannibalize retail sales. Restaurant goers will also need fewer groceries. Importers who stocked U.S. cheese when it was on sale won’t need to buy as much later. Orders are not expected to maintain their current heady pace.

Whatever the future brings, improved demand has ushered the milk market into balance at a time of year when that can be difficult to achieve. Reduced output has also helped. Preliminary data shows European milk collections have increased just 0.8 percent from a year ago in March. The USDA’s “Dairy Market News” reports that increased cull rates and variable feed quality have tightened milk supplies in the Northeast. Co-op penalties and self-imposed production cuts are reportedly weighing on milk yields in the Central region. In the Southwest and California, the heat is decreasing production. For the week ending May 2, dairy-cow slaughter was 58,467 head, an increase of 2.5 percent from the same week a year ago. It was once again the biggest total ever for this time of year, excluding 1986. Although the futures promise better days ahead, there is still immense pain on the farm. This past week’s vigorous rally suggests the dairy downturn may be ending sooner than we had feared.

Grain Markets

The corn market went nowhere at all this past week. July corn futures finished right where they started, at $3.1925 per bushel. The USDA published May 12 its first official supply and demand estimates for the 2020-2021 crop year. With massive acreage and no sign of planting trouble, the agency projects end-of-season corn stocks at more than 3.3 billion bushels, the most since the 1987-1988 season. Soybean futures decreased 12 cents this past week to $8.385. Exports are increasing but the depressed corn price suggests farmers may switch some ground into soybeans, which is not helping prices. The currency is also an impediment. This past week the Brazilian real fell to an all-time worst against the dollar, making South American soybeans extremely attractive for foreign buyers.

Sarina Sharp is with the Milk Producers Council. Visit www.milkproducerscouncil.org for more information.