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!
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Transcript:
[00:09] Alyssa: Hey, everyone, 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 19th, and, as always, you’re hearing from Alyssa Badger, Vice President of HighGround Dairy, and Cara Murphy, our Senior Manager of Market Intelligence. The HighGround Global Dairy Commodity Price Forecast was published during this shortened holiday week and our Monthly Webinar was held on Wednesday. Customers can check out the forecast as well as view a recording of the webinar on our website to get the scoop on what’s impacting dairy today. Also, we are excited to see so many of you at the IDFA Dairy Forum this next week in Phoenix. With that let’s get started with the CME spot recap of the week.
[00:58] Cara: Alright, the cheese market was on the downhill run this week with blocks falling by 7 cents to $1.4450 with a total of 21 trades. Barrels caught a slight lift on Tuesday but fell the rest of the week until Friday, where it jumped to $1.4675 with 16 trades. The block versus barrel spread now a 2.25 cent inversion. Dry whey has come off the $0.43/lb. mark we saw last week but is quickly climbing back, now at $0.4275 with 11 trades. In the Class IV world, butter is still hovering in the mid-$2.50s, with a total of 33 trades this week—17 of those occurring on Thursday and 15 today. Lastly, nonfat dry milk is down to $1.1750/lb. with a total of 15 trades.
[01:48] Alyssa: Thanks, Cara. We also got finalized Supply and Utilization figures from the USDA durin November. Any noteworthy news from that?
[01:57] Cara: Yes, total cheese usage marked a new record high with data back to 2011. Although domestic consumption of both American and Other-cheese held above the prior year, the standout was Other-cheese exports, up 17% year-over-year, the largest monthly volume since April 2021. On the flip side, butter consumption was the lowest November since 2014 on lower domestic demand and lackluster exports, which have trailed 2022 for most of the year. Nonfat dry milk disappearance continues to struggle on limited domestic and international demand but dry whey usage was up slightly from strong internal consumption while exports are still quite sluggish.
[02:37] Alyssa: With the turn of the calendar, we are finally getting some data into the new year here. Anything interesting for the start of 2024 to talk about?
[02:46] Cara: We gotta talk about slaughter! Dairy Cow Slaughter for the first week of the year was published and boy was it something! Total US Dairy Cow Slaughter marked just 48,500 head, down 15,000 head, or 23%, from the same time in 2023—the largest year-over-year loss since December 2021. Now, sometimes year-over-year data can be skewed due to a holiday falling on different days of the week, however, this was not the case. On Monday last year, nearly 3,000 head were slaughtered while this year there were 0. The rest of the week also saw lower volumes than a year ago, too. From a regional standpoint, big losses were seen across all major dairy-producing regions with Region 9 (the West, including California) and Region 6 (the South Central, including Texas and New Mexico) marking the largest year-over-year decline since May 2021. Wow! It’s impressive to see those slaughter volumes turn around from the elevated levels we saw last summer. We get the biannual Cattle Inventory report next week which will give us more insight into the replacement heifer situation, which is likely to be rather tight. It is very easy to cull cattle but takes about 3 years or more to breed a cow and raise that calf to maturity so even with reduced slaughter rates, it will take some time to build the herd up again.
What’s cooking on the international side, Alyssa? This week was pretty busy with a GDT Auction and EU Exports on Tuesday.
[04:13] Alyssa: Yeah, it was certainly a busy Tuesday as we finalized our forecast report and dug in deep to that Global Dairy Trade Auction, which was green across the board on the key commodities that feed into that New Zealand milk price. Fat markets were bullish but the rest of the complex was unable to achieve the loftier expectations that were set by the Singapore Exchange traders ahead of the event. North Asia’s market share, typically made up of China (or lack thereof), continues to be a key story this season as it sank to the lowest level that we have seen at this time of year since 2016—that’s 8 years. There are promising signals, though, that Chinese demand could rebound into the second half of the year. However, the tariff-free window offered by New Zealand into 2024 has not simulated demand on GDT like some had thought. Instead, it has removed the usual seasonal urgency among Chinese buyers, who are now more likely to adopt a cautious “wait and see” approach throughout the calendar year. Kiwi dairy farmers have the Middle East to thank, though, in recent weeks and months as the region has really stepped in to replace lost volumes to China.
[05:26] And since you brought it up, we can move on to discussing the November European Trade Data that was also out this week. Total cheese exports out of Europe grew again, with steady volumes sailing to the US, along with gains to Japan, China, and Saudi Arabia. Butter exports remained strong, marking the largest export volume in November since 2019. However, Skim Milk Powder exports retracted yet again in the month, following a slump in October’s data as well, which is kind of unsurprising considering that Skim Milk Powder production in key countries throughout the Union have lagged the year prior throughout much of 23. Exports to Algeria were the key contraction, though, on Skim Milk Powder. And, from a Milk Production standpoint, while data is still getting filled in, the early figures from some key countries are pretty ugly in November. Ireland dropped nearly 20% from prior year, Dutch milk collection losses are still around 4%, and France fell nearly 5% in the month from the prior year. Now, when we look at the weekly figures that we get consistently from France, Germany, and the UK we are seeing some better numbers so the slowdown on losses will certainly help to alleviate some supply concerns but the long-term picture in Europe isn’t really bright for 2024.
[06:51] That about does it for data releases this week. While we are in Phoenix next week, some important information is expected to come out such as China’s Import Data durring December, US December Milk Production number, as well as the Cold Storage numbers here so there will be a lot to discuss as the industry gathers in Phoenix for the IDFA Dairy Forum. As always, thanks for being here with us and tuning in to Let’s Chat Markets. Cheers.
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