Let’s Chat Dairy – 24 January 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 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 24th, and you’re joined today by Alyssa Badger and Stu Davison, because Cara is taking a well-deserved day off. But there was a heck of a lot more international news this week, so who better to break it all down for you than the two global dairy analysts on the team? US markets were closed on Monday, and we kicked off Tuesday with a bullish Global Dairy Trade Auction. But before we get to that, let’s do a quick recap of CME spot markets.

(0:52)
Cheddar cheese blocks were quite volatile, opening up the week with a steep $0.11 drop on Tuesday, paired with a $0.04 drop on barrels, which sent Class III milk futures limit down. Modest losses continued into Wednesday, only for the market to reflect slight gains into Thursday and Friday, but weekly averages for both products reported losses, with blocks down 4.3% and barrels 2.6% from a week ago. Class III milk wasn’t the only market that traded limit down on Tuesday, as dry whey also fell back, though the spot market was a little less exciting than cheese. However, the market did settle at $0.6975 today, settling below $0.70 per pound for the first time in two months. Butter is unchanged week on week, but weekly averages did fall another 1.5% because of lower trading days on Wednesday and Thursday. Lastly, nonfat dry milk averaged $1.35 per pound this week, a 1.3% loss from a week ago. The market touched $1.3475 on Tuesday and today, which is the lowest spot value observed in nearly four months. So, a common theme this week across the CME complex was lower prices.

(2:08)
There wasn’t much else to report domestically from a dairy data perspective, though we are awaiting two big reports that will be out this afternoon, the December US Milk Production Report and the December Cold Storage Report. What wasn’t lacking, however, were all the headlines regarding the new administration. President Trump was sworn in for his second term as president this week and sharing that he will levy tariffs on imported goods from Canada and Mexico beginning February 1st. Both countries are, of course, key dairy trading partners for the US, and the changes could impact the ability for exporting dairy into these markets. Further, Trump has issued his plans for managing undocumented residents, which could be problematic for dairy farms, who rely heavily on this type of labor. Trump also stated that he’s considering a 10% tariff on China, but there has not been confirmation just yet. Speaking of China, Stu, how about that strong trade data that came in over the weekend?

(3:12) Stu Davison:
Yeah, you’re not kidding. That was the strongest China Dairy Imports for December in four years, with Q4 2024 marking the strongest quarter of the calendar year. Now, that’s a very unusual pattern for China imports, but less surprising given its increasingly unpredictable import behavior in recent years. New Zealand’s market share grew to 46.5% of total imports in December, the strongest share reported during Q4 since 2013.

(3:38) Alyssa:
Yeah, and ultimately, those December import figures really confirmed the market chatter that circulated throughout November as increased Chinese purchases drove a bullish global dairy trade auction alongside their own tightening powder market domestically in China.

(3:54) Stu:
Yeah, exactly. I think that while the combination of reduced milk production and China’s Q1 holidays is expected to sustain the noteworthy import demand, it does seem unlikely to match the intensity seen during December. That being said, I have to also bring up the fact that December exports from China were at an all-time high, a really impressive figure. Besides the normal exports to Hong Kong, North Korea holds top destination for these exports, with Singapore, Bahrain, and Nigeria rounding out the top five destinations, accounting for about 70.6% of exports.

(4:28) Alyssa:
Yeah, those were very impressive numbers, and really it seems like these will only strengthen for China as they continue to invest in impressive infrastructure. While we’re on the topic of China though, we should probably jump over to that bullish GDT auction.

(4:42) Stu:
Yeah, it was a very impressive auction to say the least, but somewhat expected. North Asia, which is basically China or Chinese buyers, was highly active at this auction, potentially making a final push ahead of the New Year celebrations, which kick off next week. They also continued to refill those pipelines that were very light at the end of 2024. Buyers from Southeast Asia and the Middle East were also well represented, while African buyers made the most notable step up from the previous auction, really turning up at this one. Overall, demand at this event was very impressive. It was also possible that fares rippling through the market compelled buyers to act very decisively, and by that we’re referring to the change in the US administration and the impacts on tariffs and trade, but not to mention foot and mouth that was alerted to us by German authorities. One case of three border buffalos has really upended the European market. It has been eerily quiet throughout this week on that news front, and supposedly the outbreak is contained. You can read the full comprehensive GDT analysis on our dashboard.

(5:47) Alyssa:
Yeah, and we covered European Trade and Milk Production last week, but those full reports are also now on the dashboard as well for you to dig into the numbers a little more closely.

Something else worth noting on the EU is that they have been aggressively pursuing trade agreements with other nations. In December of 2024, the EU finalized a trade deal with Mercosur, a bloc of South American nations including Brazil and Argentina, among others, reducing trade barriers on ag products. This week, the EU further announced negotiations have resumed with Malaysia for a free trade deal, as well as revived talks with Mexico. The new Mexican Free Trade Agreement would now include duty-free tariff rate quotes for several agriculture products including cheese, as well as reduced tariffs for infant formula and the elimination of tariffs on lactose among other ingredients. All this to say is that 2025 is likely to be quite volatile, but never fear, our team of analysts will keep our fingers close to the market pulse and consistently keep you, our customer, well informed.

Well, that wraps up this week’s episode of Let’s Chat Dairy but be on the lookout for our Dairy Skim Episode coming out later this afternoon. Thank you so much for tuning in. 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.

Back