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 your podcasts. Subscribe so that you never miss an episode!
Listen on Spotify | Listen on Apple Podcasts | Listen on Amazon Music
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, January 17th, and you’re joined today by me, Alyssa Badger, and Cara Murphy. HighGround published our Global Dairy Commodity Price Forecast this week on Tuesday, the 14th, and as always, held a live webinar at noon the following day to discuss in detail all those topics that we covered. We will cover a few of them here today, as well as new data published this week and the ongoing events impacting the dairy industry around the world. But first, let’s get started with the CME Spot Market Recap. Cara?
(0:54) Cara Murphy:
The cheese market is about as calm as a roller coaster this week. Blocks were up $0.09 one day, down $0.08 the next, and up $0.07 again the next day. All this to say, blocks closed today at $1.89 per pound with a total of 13 trades. Barrel cheese was slightly less spirited, also settling today at $1.89 per pound with 7 trades on the week. Butter has been moving down from the $2.60 per pound mark seen last week, ending this week at $2.53 per pound with 31 trades, while nonfat dry milk is, to say it nicely, an absolute snoozefest, very comfortable at $1.3675 per pound where it closed today with 6 trades in total. Nothing quite new to say about dry whey either, trending around $0.74 per pound today it settled at $1.7375 with a total of 4 trades on the week.
(1:39) Alyssa:
Thanks, Cara. As we mentioned earlier, HighGround released the first Global Dairy Commodity Price Forecast of 2025 this week. You and Betty, our Contributing Dairy Economist, cover off on the domestic side of things. What were some of the topics that you covered this month?
(1:55) Cara:
Well, of course, we always discuss the market movements of dry whey, butter, cheese, and nonfat dry milk, but this month we took a deep dive into cheese prices as the recent disparity between the US and European product should result in larger exports in 2025. We also took a look into California milk production in November, which was a doozy to say the least as the state suffers under the impacts of bird flu. Then as California is the top butter-producing state in the nation, we had to discuss the baffling butter situation. California output was down in November, but central region churns and other western states pumped out so much butter, total US output was actually up 4.4% year-over-year. In 2024, we saw a rampant increase in protein demand driven by health-conscious consumers and greater use of GLP-1 medications, which we expect to continue in 2025, and dairy is perfectly poised to meet this demand. Lastly, we discussed the influence a strong US dollar and interest rates have on the macroeconomic environment and trade volatility, as we anticipate, given the hard stance the incoming Trump administration has taken with top dairy trade partners like Mexico, China, Canada, and the EU. All of this, including the webinar recording, is available to subscribers on the HighGround Dairy website, and if you’re not a subscriber, request a free trial today for immediate access.
(3:12) Alyssa:
In that same forecast report, we also provide an in-depth analysis of international markets, which I’ll cover off on shortly, but before that, was there anything interesting from a data perspective this week that you feel is important for listeners to know?
(3:25) Cara:
There always is, but I’ll cover the top ones that come to mind. Firstly, November Dairy Supply and Utilization Data was released yesterday, and butter consumption marked an all-time high on record levels of domestic butter intake. Americans sure do love their butter, and manufacturers have certainly provided this past year. In 2025, this might not be the case, but you’ll have to check out the Global Dairy Commodity Price Forecast for why that might be. Dairy Cow Slaughter volumes for Week 1 of 2025 were released this week, and this was the smallest total US slaughter volume for Week 1 since 2008, and the smallest volume for Week 1 in Region 9, the West, including California, since 2004. Cream multiples were published, and despite bird flu in California, it appears cream in the western region of the country is quite plentiful, as the all-class average for the Midwest marked the lowest value since May 2020, and the smallest Week 3 value on record since reporting began in 2019. Lastly, the Spot Class III Milk Price for the Upper Midwest popped last week, and this week it marked the highest value for Week 3 since 2014, as milk availability in the region tightens.
(4:31) Alyssa:
Those Dairy Cow Slaughter volumes are pretty interesting. Replacement heifer inventories are still tight, which keeps prices high. We will get those updated numbers at the end of the month, so be on the lookout for that. Producers are certainly keeping cows in the herd for longer, as they also navigate bird flu. We do hear reports, though, that the bird flu situation in California is improving, as some of the first-hit herds begin to recover. Alas, as soon as one animal health concern seems taken care of, another one arises. Cara, you’re our resident veterinarian expert. Would you like to take it from here?
(5:05) Cara:
No problem. Right you are. While the US gets bird flu under control, Europe is now entrenched in concerns of foot and mouth disease (FMD) after Germany confirmed the virus in three water buffalo on January 10. Although foot and mouth disease poses no risk to human health, it’s a highly contagious virus in cattle, goats, sheep, and pigs that causes lesions around the mouth and lameness in the feet, hence the name foot and mouth disease. Cows with this disease suffer a loss in milk production, which would be the largest concern to the dairy industry. However, on top of that, farmers may take the route of precautionary culling. In 2001, when a major outbreak of foot and mouth disease occurred in the UK and parts of Europe, 6.5 million animals were culled in order to stop the spread. The virus can live in feed, manure, hides, blood, frozen and cured meats, and improperly pasteurized dairy products. As a result of this finding, the World Organization for Animal Health revoked Germany’s free-from-foot-and-mouth disease status, which means the country no longer has access to necessary licenses to export meat, milk, and dairy products outside of the EU. South Korea, Mexico, and the UK have also announced bans on certain products from Germany. We are watching this case very closely, as this could be a disaster for the European dairy market and, at the minimum, will likely materialize and reduce exports from the bloc in the coming months as Germany is the top milk-producing country in the EU. Even though export restrictions currently only apply to Germany, it’s possible international buyers attempt to avoid the EU in general as a precaution in case the virus does spread to other countries. So not too good at all.
Coincidentally, yesterday November EU Trade Data was released and November EU Milk Production came out today. While foot and mouth disease could drastically change things in the future, Alyssa, what did the November data provide?
(6:51) Alyssa:
We are currently digging through these numbers to provide our subscribers with a more in-depth analysis after the long weekend, but there are some things that stood out right away. In the November EU Trade Data, whey shipments hit the highest November volume on record at 70,000MT. Since October, the US CME spot dry whey price has held at a nearly 10-cent premium to the EU, and this gap then widened to nearly 20 cents per pound in late November and December. It appears international buyers have turned to the EU in search of cheaper product, but of course, this could change due to foot and mouth disease. Infant formula and lactose were the only other products to report gains over prior year. Skim milk powder exports popped from their lows in October to bring them flat against 2023 levels.
(7:40)
Onto November EU Milk Production, Eurostat reports EU-27 + UK Milk Production was up 1.9% on growth from France, Spain, Denmark, Poland, in some phenomenal numbers, out of the UK up 5.5% year-over-year, but let’s talk about Ireland, up 33.6% from prior year. Irish milk flows in November 2023 were pretty dismal, so this gain is against a weak comparable. Nonetheless, milk prices in Europe have been on the rise, and farmers in Ireland and the UK are certainly responding. German milk output dragged the previous year by 1.9% from prior year. The country struggled with a blue-tongue outbreak in 2024 and has yet to recover to prior year levels. Now foot and mouth disease poses another challenge to the German dairy industry.
(8:31) Cara:
What other international fundamentals were covered in our forecast this week?
(8:35) Alyssa:
We like to take the top five approach, and really what we kind of dug into was all the uncertainty clouding China’s economic outlook. We did an in-depth analysis of EU’s 2025 calendar year milk production forecast. We dug in a little bit to some global trade and supply chain dynamics, as there is some volatility happening there. Fourth, the strength in the US dollar has been absolutely amazing and hampering purchasing powers from some key buyers. Lastly, we also did a deep dive into high proteins. Both whey and milk protein concentrate, as demand around the globe is red hot.
(9:16) Cara:
Alyssa, those Pre-GDT numbers came out today. What are we watching ahead of next week’s auction?
(9:21) Alyssa:
So Fonterra actually announced a reduction in Offer Volumes for whole milk powder, skim milk powder, and then an increase in anhydrous milk fat volumes. So the 12-month forecast whole milk powder offer volumes were brought down by 5,000MT, with about 1,500MT removed for next week’s auction, a 9.5% reduction from the previous forecast. With the remaining 3,500MT reduced from each of the February auctions. The 12-month forecast offer volumes for skim milk powder have been brought down by 3,000MT, with 300MT being removed from next week’s auction, 800 from the first event in February, 1,900 from the second event in February, which accounts for the bulk of that reduction. The 12-month forecast for anhydrous milk fat offer volumes has been increased by 2,395MT, which is 3.4%. Only about 105MT were added to next week’s auction. The key standout here is that SGX whole milk powder futures have bounced from recent lows with a week of furious trading pushing the forward curve back towards the resistance point that was met in the end of 2024. At present, traders are pricing in a 4.5% jump on whole milk powder next week. With the European market in the grips of an animal disease threat, a foot-in-mouth disease, this does have the potential to upend the market and certainly bring more business to Oceania to fulfill nearby needs. Combine that with Fonterra’s reduction in forecast volumes, and we could have a very exciting auction next week. However, to temper the outlook a little bit, it would be pragmatic to remember that the Lunar New Year celebrations are about to kick off in China, which could lead to lower participation from this key market. Either way, the market is poised for volatility.
There is never any shortage of key market fundamentals happening around the world, and as a reminder, a great place to read about it would be our Global Dairy Outlook Report that just came out this week, so be sure to head to the dashboard to dig into that analysis and our price forecast to help you plan ahead for 2025. Well, that wraps up this week’s episode of Let’s Chat Dairy. Thank you so much for tuning in, and as always, we’ll be here every week to bring you the latest market insights and updates to keep you ahead in the dairy industry. 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.