Let’s Chat Markets is a weekly podcast, hosted by HighGround Dairy’s top analysts. At the end of every week, 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!
Listen on Spotify | Listen on Apple Podcasts | Listen on Amazon Music
Transcript:
[00:09] Alyssa: Good afternoon and happy Friday to all of you! Thank you so much for tuning into Let’s Chat Markets, your favorite weekly dairy market podcast powered by HighGround Dairy. Today is Friday, January 12th, and you’re hearing from Alyssa Badger, Vice President of HighGround Dairy and Cara Murphy, our Senior Manager of Market Intelligence. Winter has finally arrived in Chicago, as across most of the Midwest. It’s quite the blizzard out there, so let’s recap this week’s market movements while we hunker down and wait out this storm.
[00:40] Cara: Yeah, there was some interesting moves in the CME Spot market this week. The block cheese price gained 12 cents in the beginning of the week but lost some momentum towards the end to close at $1.5650 with a total of 24 trades. Barrel cheese also trended upwards and is now hovering in the mid $1.40s, with 42 trades. Dry Whey climbed to $0.4300 per pound—the highest price since April 2023—where it held Friday. However, it only traded twice throughout the entirety of the week—once today and on Monday. In the Class IV world, butter has found some support in the mid $2.50s, closing at $2.5675 with 15 trades while nonfat dry milk broke above the $1.20 per pound mark briefly on Tuesday but settled today at $1.1850 with 11 trades in total.
[01:28] Alyssa: Interesting. Well, before we move on to the data that was out this week, would you mind refreshing our listeners on some of the key takeaways that were on the US November Dairy Products Report?
[01:39] Cara: Absolutely. For a quick summary, nonfat dry milk volumes continued to fall on poor milk production in the West, but climbing skim milk powder output indicates that export demand may have increased, albeit slightly from the lackluster showing we have seen throughout 2023. Butter churns ran slower than they did a year ago, particularly in the Central US. The USDA revised October’s production figures, taking the print from a -0.9% year-on-year loss to a 0.1% gain. Total cheese production was positive for the second consecutive month, but cheddar and mozzarella volumes slid while other-than-American cheese rose. Lastly, the high versus low protein story persists in the whey complex. High demand for protein has manufacturers pushing out more WPC >80% and WPI, leaving WPC 34 and dry whey output and stocks to fall.
[02:34] Alyssa: Perfect. Thanks, Cara. Into this week, one of the more important data releases was the November US Trade Figures. In line with expectations, nearly all commodities reported losses against prior year.
[02:48] Cara: Absolutely. One of the big highlights of this report was cheese exports, which jumped on record shipments to Mexico. Grated and powdered cheese volumes increased by 44% with more product moving to China and Mexico. US cheese prices have been at a hefty discount to the EU since the fall, which provides greater opportunities for exports which we expect would materialize in Q2 of this year. That being said, when looking at total US dairy export volumes, dry whey and powders make up a sizable portion and with slow global demand and widespread macroeconomic concerns, it’s unlikely that we will see total shipments turn positive at least through the first part of the year.
What’s left, Alyssa?
[03:28] Alyssa: Well, this snowstorm is pretty rough. Any thoughts on how this weather might impact producers here in the US?
[03:33] Cara: Well, I’d be fibbing if I said I missed the days of feeding cattle in a snowstorm, but cows gotta eat. If you’re in the Midwest, snow is definitely no stranger, and we all know the bigger threat is the temperature and the wind. Wind chills are expected to reach subzero levels over the next few days across the northern part of the US all the way down into Kansas with unseasonably low temperatures reaching into the Texas Panhandle. This will certainly have some impact on milk output as cows push more energy to thermogenesis to keep warm and it could be particularly worse in areas who are not used to such cold weather.
[04:09] Alyssa: Thanks, Cara. Let’s move on to international markets. Weekly European Indices moved lower across milk powders, butter, cheddar, and mozzarella. A lot of the pressure on skim milk powder is thought to be caused partly by the shipping concerns that surround international trade. Global shipping rates are rising sharply as companies scramble to avoid disruptions to shipments after attacks on vessels in the Red Sea stymied traffic through the Suez Canal. Now, many shippers are adding war risk surcharges which is propelling costs higher. Prices are also under pressure in Europe because milk production is rumored to be bouncing back better than originally anticipated from Germany, France, and the UK. I do have to call out that there seems to be conflicting data points out there for Germany’s weekly figures. HighGround originally reported flat growth during the last week of the year in 2023 but it looks like there was a revision from ZMB that reflected Germany remaining in negative growth mode. That being said, there are positive figures being reported from France and the UK and we’ll be sure to reach out to ZMB for confirmation around those numbers. The cheese market seems to be in balance at the moment with demand from food service and retailers backing off following the end of the holiday season which is allowing stocks to steadily replenish.
[05:40] Ahead of next week, Fonterra released their Forecast Offer Volumes which were unchanged yet again. SGX traders continue to expect support to arrive at next week’s GDT event, building bullish outlooks across the key commodity products. If January 2024 contract settlements are realized, Fonterra C2 regular whole milk powder will need to rise 0.9% next week, Medium Heat Skim Milk Powder +4.3%, AMF +5.4%, and butter an impressive +7.9%. It might be a struggle to get to those sort of levels but slight support is still anticipated in our opinion.
[06:23] Otherwise, the team continued to work on our Global Forecast Report this week which will be out on the 16th because of the observance of Martin Luther King Day. Our webinar will be on the following day, the 17th at noon Central and you won’t want to miss it. Our top five fundamentals on our global radar are: optimism towards China beginning to return, New Zealand milk production growth extending into the new year due to a delay in El Nino weather effects, shipping turmoil that is adding costs to commodities, European milk improving slightly, and demand from the Middle East-North Africa region keeping markets balanced.
Well, that does it for today’s Let’s Chat Markets episode. As always, thank you for being here with us. As a reminder, US markets will be closed on Monday to celebrate Dr. Martin Luther King. May we honor his legacy by actively promoting unity, diversity, and inclusion. Cheers.
Be sure to subscribe so that you never miss an episode. And if you’re interested in receiving more information, as well as our analysis, please visit highgrounddairy.com to request a free 30-day trial today. Futures and options trading involves substantial risk and is not suitable for all investors.
