Let’s Chat Markets – 16 June 2023

Let’s Chat Markets is a weekly podcast, hosted by HighGround Dairy’s top analysts. Every Friday, they sit down to recap the week in dairy markets and summarize recent reports and relevant news. The podcast can be found here on our dashboard, or wherever you listen to your podcasts. Subscribe so that you never miss an episode!

Subscribe on Spotify | Subscribe on Apple Podcasts | Subscribe on Amazon Music

Transcription:

[00:10] Betty: Happy Friday to all of you and thank you so much for tuning into Let’s Chat Markets, your favorite weekly dairy market podcast powered by HighGround Dairy. Today is Friday, June 16th and I’m Betty Berning, HighGround’s Contributing Dairy Economist, and I’m here to give you some highlights on what’s happened in the industry this past week.

The team at HighGround just wrapped our monthly forecast webinar. If you missed it, as I like to say, catch it in reruns and get some great insights from our team!

I also wanted to add that I’m looking forward to seeing many of you at our Outlook Conference next week, June 20-22, in Chicago. I’m looking forward to my trip and hearing more about what is going on in the industry and getting some insights for myself. We have great speakers and it’s always fun when dairy people meet up! I’m very excited to hear from our panelists—we have a great line-up, ranging from producers to end-users, and from price outlooks to policy reforms so riveting stuff!

[01:20] Time to talk markets. Report-wise, it was a quieter week, report-wise. April Supply & Utilization data was released and domestic usage improved across most commodities. Total cheese consumption of 1.1 billion pounds was up 1.6% versus last year, and American cheese, which we’ve made a lot of in 2023, grew by 3.4% in April. Overall cheese utilization year-to-date through April is 1.2% ahead of the same period in 2022. Despite the much lower butter exports in 2023, domestic usage of butter has been strong. It’s up 6.6% year-to-date, and on the whole, butter utilization is trending 4.1% ahead of January to April 2022. April whey utilization fell domestically and internationally compared to April 2022, with the total figure declining 9.4% year-over-year. Nonfat dry milk and skim milk powder utilizAtion improved in April, climbing 3.6% year-on-year, but year-to-date trails 2022 by 0.1%, due to the decline in export markets.

[02:38] Let’s move on to spot markets and grain markets, where all of the excitement was happening this week. Block cheese just kept moving lower and today settled at $1.375 per pound today as a lone lot traded. Barrels finished the week at $1.5250 per pound on just a volume of three. That’s the lowest volume since November 26, 2022. Midwest spot basis has spent half a year at historically low levels, registering this week anywhere from $3.50 to $12 under class price. There are very heavy milk supplies in the Upper Midwest, or there has been and that’s been flowing into cheddar vats, pushing markets down and that’s what we’re seeing come to fruition in the spot markets. Butter and nonfat dry milk were quieter markets this week, with butter staying below $2.40 per pound and nonfat dry milk averaging just under $1.16 per pound on the week. Whey markets tested $0.28 per pound for the first two trading days, only to close a half-cent lower, $0.275 per pound, today.

[03:45] So let’s talk about weather and the grain markets, shall we? This has been a May weather market. New crop corn and soybean futures have rallied. December corn was up nearly 50 cents on the week—from Monday until today—and has rallied nearly a dollar since May 19th. Drought now covers 57% of the corn crop and 51% of the soybean crop. That’s pretty significant but take into account too that last week, these number were drought covers of 45% of the corn crop and 39% of bean crop. These numbers are increasing. The weather situation definitely bears close watching as we head towards the critical part of the growing season, and higher crop prices with these multi-year low cheese prices will definitely squeeze producers’ margins even more, creating more red ink. We will be closely watching this because of all of the volatility that is occurring right now. Some well-timed rain certainly could take pressure off in the crops market, but for the time being, there is a lot of risk priced into that market.

Stay tuned next week for the Milk Production and Cold Storage skims and analysis. For any of you coming to Chicago, safe travels. We look forward to seeing you at our second annual Global Dairy Outlook Conference. Have a wonderful weekend and we will talk with you again next week.