Let’s Chat Dairy – 21 February 2025

Let’s Chat Dairy 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 podcasts. Subscribe so that you never miss an episode!

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Transcript:

(0:15) Alyssa Badger:
Hello everyone, and welcome back to Let’s Chat Dairy, your favorite weekly market podcast powered by HighGround Dairy. Today’s Friday, February 21st, and you’re joined today by Alyssa Badger and Cara Murphy. Late Friday, we released our February Global Dairy Commodity Price Forecast, available to subscribers on the HighGround Dairy website, along with a recording of the live webinar that was held at noon on Tuesday of this week, where we did a deeper dive into the forecast topics and answered all of your burning questions. The remainder of the week, we saw a Global Dairy Trade Event, European Export Data for December 2024, as well as European Milk Production for the same month, New Zealand Milk Production came out for January, and later today, just two hours, US Milk Production for January 2025 will be out at 2 pm Central Time. It’s heavy on the international markets this week, though, but there is certainly enough to cover, so let’s get started with the CME Spot Market Recap of the week, Cara.

(1:17) Cara Murphy:
Fantastic. The block cheese market was relatively stable this week, settling at $1.90 per pound with a total of three trades, while the barrel market trended lower, closing today at $1.80 per pound with four trades on the week. The butter market found a little support, this week moving back into the $2.40s per pound. It closed today at $2.4150 per pound with a total of 38 trades. But the dry products are moving lower. Nonfat dry milk closed today at $1.24 per pound with a total of four trades, while dry whey settled at $0.5450 per pound today with no trades this week at all at dry whey.

(1:56) Alyssa:
Yeah, dry whey prices have been falling pretty fast. The Dry Whey Mostly Midpoint for the central US fell once again this week to mark a $0.15 decline over the past three weeks. That’s the largest three-week decline since reporting started in 2008. Then, the National Dairy Products Sales Report printed a $0.05 decline week over week, and that was the largest we’ve seen since July of 2022. Those high prices in the half of 2024 weighed on export interest, and the loss of international buyers is certainly helping to cool prices.

(2:31)
Another item on the radar is the fact that there have been tariff exemptions in place from China for imports from the US for the past four years on some important US products. That’s set to expire at the end of February, which means US whey for feed into China will no longer be duty-free. The US mostly ships feed-grade whey, which the Chinese primarily use for livestock feed. This expiration and heightened trade tensions with the country could have a significant impact on the US whey market.

(3:06) Cara:
Shifting trade dynamics will certainly be one to watch in 2025. In whey specifically, those high prices in the US drove international buyers towards Europe in search of cheaper product. As a result, annual whey shipments from the EU-27 bloc + UK surpassed 800,000MT mark for the first time ever. Asia is a top destination for EU whey, with places such as China, the Philippines, and Indonesia all marking gains of more than 10,000MT from 2023.

(3:36)
On the topic of European trade, annual 2024 total dairy Exports for the EU-27 bloc + UK, were down 2% from 2023 when adjusted for the 2024 leap year. Fluid milk and cream and milk powders took the brunt of this loss, with skim milk powder sailings down 8.7% and whole milk powder shipments down 23% from 2023. China remains the top destination market for EU dairy, with 16.3% market share. However, shipments to the nation are on the decline, falling 11.6% from 2023, mostly due to fluid milk and cream and skim milk powder losses. The main bright spot for the EU, however, is whey and also cheese, but there are some concerns here as well. In recent weeks, US President Donald Trump has signaled the EU is the next target for intended tariffs. The US accounts for 15% of EU cheese and 32% of EU butter exports, of which the US tariffs would have the greatest impact. The EU has been aggressively pursuing trade agreements with other nations like Mexico and the South American Mercosur bloc, as they try to reduce reliance upon US markets.

(4:47) Alyssa:
European Milk Production was also released this week. Now, one thing we have learned this year is that there’s always a possibility for a Eurostat revision. The agency listed German milk production as being down 4.3% from prior year in December, which would have been the lowest output for the month since 2012. But the German statistics office lists milk production as just being down 1.7%. Germany is the largest milk-producing country within the EU, so their revision could significantly change the EU-27 + UK totals, which as of now are down 0.3% from prior year, utilizing the Eurostat numbers. French milk flows were down 0.9% from prior year in December, along with lower production from the Netherlands, Italy, and Belgium. On the other hand, Poland printed another strong month of milk production. Polish butter fat was pretty decent during December, but the bigger number was this 25% year-over-year jump in skim milk powder output, the largest December volume since 2017. And lastly, milk continues to flow at astonishing levels out of the British Isles. In Q4 of 2024, British farmers pumped out an additional 152,000MT of milk versus Q4 of 2023, while Irish milk flows were 280,000MT greater during the same time frame. Now, Irish milk production growth was against a weak comparable at the end of 2023. Nonetheless, this really highlights the impressive capacity farmers have to produce more milk when incentivized.

(6:27) Cara:
Alright, let’s talk about that GDT event, Alyssa. Looked like a lot of red on that screen, but that wasn’t necessarily unexpected, was it?

(6:35) Alyssa:
Yeah, that’s exactly right, Cara. So after an impressive 12-auction run-up, some correction was anticipated at this event, with buyers hitting a level of resistance. Most commodities did weaken slightly, however, there was a notable bump higher in butter that stands out as a key takeaway. Demand for butter remains exceptionally strong, particularly from Asian markets, where buyers continue to chase prices into the upper range of historical levels. Fonterra’s flagship product, whole milk powder, printed a flat result, which was actually impressive given that SGX traders were pricing in steeper losses. Arriving demand, which is reflected in the demand-supply ratio at GDT, came in lower, so one would wonder, has demand been satiated or are prices being inhibitive? It seems more likely to be the latter.

(7:29)
North Asia was the top buyer of whole milk powder, over a third of market share, well above prior auction, while Southeast Asia and Middle Eastern buyers took a bit of a breather. Offer volumes are down year-over-year, yet EU and Latin American buyers saw remarkable growth on whole milk powder. Something else worth noting is that European buyers made a significant surge in not just whole milk powder purchases, but also skim milk powder, with the region capturing its highest recorded market share across all products on record, primarily driven by that skim milk powder demand. All this to say, although prices appeared weaker on the surface, they did hold up better than expected, outperforming XGX traders’ expectations.

(8:15)
New Zealand commodity prices are still promoting a very strong milk price, which is the primary reason Milk Production continues to be stellar through the tail end of their milking season. January Milk Production figures were out this week, and milk solids in the country jumped 5% from prior year. Those are some impressive numbers. Then again, that’s what a $10 milk price should do.

(8:39)
Normally, we would have received China’s trade figures for January this week, but as a reminder, over the last few years, they have been skipping these data releases and posting both January and February in their March release. Otherwise, there hasn’t been too much drama between the US and China specifically this week, but it does remain clear that the Trump administration, first and foremost, wants China to fulfill their end of the bargain from the trade 1 phase deal that was reached back in January of 2020, when China agreed to increase purchases of US goods and services by $200 billion against the 2017 levels during both 2020 and 2021. China specifically pledged to purchase an additional $32 billion in US ag products over two years compared to that 2017 baseline level, but by early 2022, the deal had effectively expired, and China had fulfilled only about 57% of the total $200 billion commitment across all sectors. The Biden administration did not renew or renegotiate the agreement and instead shifted focus toward broader trade and geopolitical tensions with China.

Well, that wraps up another busy week in global dairy markets. As always, things are evolving quickly, and we’ll be watching how global demand holds up, especially with China’s tariff exemption for US waste set to expire next week. Thank you all for tuning in to Let’s Chat Dairy. If you’re looking for even more in-depth insights, as a reminder, don’t forget to check out that February Global Dairy Commodity Price Forecast as well as the webinar replay, both available to HighGround Dairy subscribers on our website and dashboard. And of course, if you enjoyed the episode, be sure to subscribe, rate, and review the podcast. Your support helps us reach more dairy industry professionals like you. Well, we’ll be back next Friday to break down the latest market developments. Cheers!