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!
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Transcript:
(0:14) Alyssa Badger:
Hello, everyone, and welcome back to Let’s Chat Dairy, your favorite weekly market podcast powered by High Ground Dairy. Today’s Friday, December 20th, and you’re joined by Alyssa Badger and Cara Murphy. It snowed lightly in Chicago this week as things wind down into the Christmas holiday, and as a reminder, the CME Spot Market and Globex Futures and Options will be closed next Wednesday, December 25th, in observance of the Christmas holiday. Dairy markets will also close early on Christmas Eve at noon central time, but we will still have a Spot market. We know that all of you are excited to sit back, relax, and enjoy the season with your families, so let’s get started today with the CME Spot market recap. Cara?
(0:50) Cara Murphy:
After a swift climb, the dry whey market backed off slightly this week, settling at $0.74 per pound today with 11 trades. The block cheese market moved up slightly to the end of the week at $1.8525 per pound with 13 trades, while the barrel market lags behind at $1.76 per pound with 11 trades in total. Butter has been bouncing within a 4-cent range near $2.50 per pound since late November, but today we saw a spike closing at $2.5550 per pound with 19 trades in total. And lastly, nonfat dry milk has held within a tight 1-cent range for nearly 2 weeks, but today we also saw a spike in this market as well, with the price settling today at $1.3925 per pound with 15 trades in total.
(1:47) Alyssa Badger:
Thanks, Cara. The big report of the week was November US Milk Production which came out yesterday. With bird flu running through California’s dairy herds, expectations were for milk to not look so good in the state, and that certainly was the case. What are your thoughts?
(2:03) Cara Murphy:
Yeah, total US milk production fell 1% year-on-year after 3 consecutive months of year-on-year growth. The total was dragged down by California, the top milk-producing state in the nation. The impacts of bird flu resulted in a 9.2% year-on-year decline in California milk output. At 2.975 billion pounds, this was the smallest amount the state has produced since January 2004. Unsurprisingly, given the symptoms of bird flu, cow milk yields plummeted as well, down to 1,730 pounds, the lowest mark on a 30-day adjusted basis since July 2006. Elsewhere in the nation, the story was similar to last month. Milk volumes increased in Texas by 7.3% year-on-year as cows and milk per cow rose as well. From October, cows were added to the milking herd in Iowa, Indiana, and New Mexico, but were lost in Oregon and Washington. Speaking of the prior month, the USDA yet again issued revisions for the third month in a row, taking October total milk output up 32 million pounds, and adding 5,000 head to the October herd size. Interestingly, the USDA dropped Arizona milk per cow down 15 pounds from the initial October print, and South Dakota milk per cow down 20 pounds, but increased Illinois milk per cow by 40 pounds and Michigan milk per cow up 25 pounds. All in all, though, the big takeaway from this report was the significant decline in California milk output in November. The result does raise some supply concerns in the short term. This report may be price-supportive temporarily, as the market did not anticipate such a large loss from the state. For example, we saw prices for both butter and nonfat dry milk move up today on the CME Spot market to products heavily produced in California.
(4:00) Alyssa Badger:
Yes, it will be interesting to continue to watch how markets react to this situation. In addition, the November US Cold Storage Report will be released on Monday, December 23rd at 2 pm Central, which could shake things up a bit more as well. Sticking with milk production, European Milk Production was released for the month of October this week, and just this morning, New Zealand released November Milk Collections data as well. I think we’ll start off in Europe, then round out our podcast today with Oceania in China.
(4:32) Cara Murphy:
Sounds good to me. Milk prices in the EU have been on the rise, incentivizing European producers to make more milk, and they have. Milk production for the EU-27 + UK was up 0.9% year-over-year in October. Irish and British milk flows have risen substantially year-over-year. October 2023 was a week comparable for Irish milk output, but nonetheless, milk in the region is rising in response to higher milk prices. Understandably, Irish butter production has then increased as well, up 21% from a year ago. On the mainland, French milk output rose 1.1% year-over-year in October and, according to Eurostat, more milk found its way into cheese fats as France produced the largest amount of cheese since March 2014. German milk flows have yet to recover, languishing behind prior year levels, however, milk component values are near their seasonal peak. Greater protein and fat content in the milk allowed the country to produce more butter and cheese than last year. Germany was also chasing those high cheese prices in October, producing the largest cheese volume for the month, with data back to 2000. Lastly, worth noting, Eurostat and the Italian Ministry of Agriculture did revise September Italian milk production from -22% to +0.3% and +0.5% respectively. In October, Italian milk output followed its seasonal month-to-month decline to come in slightly below 2023 levels.
(6:04) Alyssa Badger:
And the European Union also released their October Trade Figures this week as well. Did anything stand out amongst those numbers for you?
(6:12) Cara Murphy:
Oh yes, the most noticeable data point was the fall in skim milk powder exports, which fell to their lowest monthly volume on a 30-day adjusted basis since August 2016. Year-to-date total EU dairy exports plus the UK are down 1.6% compared to 2023, but ahead of the same period in 2022. The biggest decline is unsurprisingly China, while growth has been seen to the United States, Philippines, and South Korea. Cheese and whey exports continue to surge. Currently, European whey is priced at a nearly $0.20 per pound discount to the US, which is likely capturing some attention from international buyers and may result in continued growth in whey exports from the EU.
(6:54) Alyssa Badger:
Indeed, well, late this morning we received November Trade Data from both China and New Zealand. But before we talk about those regions, let’s talk about that Global Dairy Trade event that happened on Tuesday, which apparently confirmed that most products have hit a ceiling. The whole milk powder squeeze also appears to have ended, helping to pull the overall auction lower. As signaled by last week’s weaker pulse event and broader market chatter, Chinese buyers were notably absent with Southeast Asia-Oceania region stepping in as the top whole milk powder buyer for the first time in five months. Also unsurprisingly, milk fat values continued to slide, with anhydrous milk fat succumbing to combined pressure of extra volume being offered on the platform and easing global milk fat pricing. This auction result reflected a market that is in transition, with shifting regional dynamics and clear signs of buyer hesitancy in key segments. But of course, be sure to head to the website to read our full comprehensive analysis.
(7:59)
Moving on, Chinese Dairy Imports for November received a significant boost as shipments from New Zealand reached their shores. Fluid milk, whole milk powder, and butter imports from New Zealand were particularly noteworthy, with fluid milk and butter reaching record levels for this time of year. Whey demand showed strength, with the US continuing to dominate market share. And whey imports from the US just increased 3% year-on-year, where there was even larger gains coming in from Turkey and Ireland. High protein whey volumes were also impressive, with the US maintaining the top spot, though Germany is becoming a strong competitor, as imports from the country jumped over 300% from prior year. Skin milk powder imports remain under pressure, with notable declines from New Zealand, Australia, and Belarus.
(8:52)
Last but not least, let’s talk about those New Zealand November Trade Figures, which have started to show cracks in Chinese whole milk powder demand that we had been hearing about and as reflected on recent GDT events. Total trade across key commodities fell around 4% from a year ago, which was actually driven by losses to Southeast Asia and Latin America. Shipments to Algeria jumped 189% from prior year, primarily in the form of whole milk powder, and while losses were recorded to whole milk powder to China, gains were impressive in other areas, such as continued strength on butter, fluid milk, milk protein concentrates, and even skim milk powder into China. New Zealand’s November Milk Production figures also came out overnight, which recorded a 2.7% gain over prior year on a milk solids basis, which was slightly better than expectations. Watch those soil moisture maps closely, though, because it is drying out pretty quick. That being said, a very strong milk price and ample feed availability should keep the milk flowing.
Well, thank you for joining us today. As we wrap up, I want to wish you and your loved ones a very Merry Christmas and Happy Holidays. Whether you’re celebrating with family, friends, or taking some well-deserved time for yourself, I hope this season brings you peace and plenty of good cheer. Don’t forget to subscribe, share, and tune in next time for more dairy insights. Until then, take care and enjoy the holiday season. Cheers.
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