Let’s Chat Dairy – 9 August 2024

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:

(0:12) Alyssa Badger:
Hello, everyone. Thank you so much for tuning in to Let’s Chat Dairy, your favorite weekly market podcast powered by HighGround Dairy. Today’s Friday, August 9th, and you’re hearing from Alyssa Badger and Cara Murphy. We are back, and wow, does time fly fast. The summer is nearly gone, and the first day of school is right around the corner, which means it’s also state fair time. Shout out to all the kids and their families who have worked tirelessly over this year for this culminating moment. We wish you the best of luck and a purple ribbon in your future. Well, with that, we’ve got plenty to cover in this week’s dairy world, so let’s get started with the CME Spot Market Recap. Cara?

(0:56) Cara Murphy:
Righty-ho. The cheese market is rather volatile this week, with blocks starting off on Monday at $1.84 per pound, then jumping by $0.1250 cents to $1.96 per pound by Wednesday. The later end of the week saw the price slipping back again, where it closed at $1.9575 today, with a total of 17 trades. Barrels moved in a similar manner, although not quite with the same bravado, up from $1.91 per pound on Monday to $1.96 on Thursday, then up again today to settle above the $2 per pound mark, with just 7 trades in all. In another world, butter remains range-bound, gradually heading lower over the week to close at $3.0975, with 11 trades, all of those occurring on Thursday. Meanwhile, nonfat dry milk and dry whey both headed south. Nonfat dry milk closed this week at $1.20, with 27 trades, while the dry whey is down to $0.5625 per pound, with 10 trades in all.

Alyssa:
Thanks, Kara. The June US Dairy Products Production data, as well as US Trade Figures for June both came out this week. How did those look?

(2:03) Cara:
Well, my biggest takeaway for the Dairy Products Report in June was that cheese production dropped, in line with slowing milk volumes. American cheese volumes were lower yet again, and have been below the prior year for every month in 2024 so far. Specifically, cheddar output continues to struggle, and marked the smallest June figure since 2020. On the other hand, mozzarella and gouda production continue to show strength, with mozzarella marking another all-time high for the month of June. That said, when looking at Italian cheese varieties as a whole, output fell slightly year-over-year, which was primarily due to less parmesan, as parm output marked the lowest monthly level since August 2020.

In other commodities, unsurprisingly, butter output rose year-on-year, turning in the highest output for the month, with year-to-date totals trending 45 million pounds ahead of 2023 as we head into the autumnal holiday demand season. In less-than-stellar news, nonfat dry milk dryers turned out the lowest June volume since 2007. Still, stocks declined marginally, indicating the drawback in production aligned with demand. And lastly, dry whey production fell against the prior year. High-protein whey, WPC, and WPI demand remains ever-robust, as inventories declined from the prior month and previous year.

(3:21) Alyssa:
Interesting. I’m pretty fascinated by this cheese story. So, US cheese exports have been pretty strong throughout the first half of 2024, but we expected that it would slow once prices began to rise back in April. Did that show up in the June Export Data?

(3:36) Cara:
Indeed it did. After surpassing 100 million pounds in March, April, and May, cheese shipments slowed to 85.7 million pounds in June. The total is still above the prior year. However, the month-on-month slowdown reflects what we would expect from international buyers, once the US no longer held that strong competitive edge in pricing over Europe and New Zealand. Global demand for whey protein concentrate continues with strong US export shipments to Asia, while dry whey exports also rose year-over-year as demand from China picks up steam. Skim milk powder ceilings declined compared to June 2023 on lower shipments to Mexico, but have improved to Southeast Asia. And lastly, tight butter supplies in the global market has US butter exports surpassing the 3,000MT mark for the first time since March 2023. They still have a long way to go from the record shipments sent abroad in 2022 and 2021, however.

(4:31) Alyssa:
Perfect, appreciate that update, Cara. Well, it was kind of a quiet week for international data releases, but there was still plenty to watch and absorb. Early in the trading week, we were hit with a rather surprising Global Dairy Trade event, and it wasn’t just a shock for us. Much of the dairy industry was not expecting this counter-seasonal move. With an overall increase of 0.5% on the index, it ended up being bullish whole milk powder, butter, anhydrous milk fat, lactose, mozzarella, and European skim milk powder, while cheddar and Fonterra skim milk powder were neutral versus our expectations. Singapore Exchange Futures were pricing in further declines ahead of this auction on whole milk powder, especially with trading in the session prior to the auction following along that trend as well. However, we saw North Asian buyers more adamant to secure whole milk powder volumes, which pushed prices higher across all shipping periods. Milk fats continue to remain supported, although desperation for spot butter dissipated at this event. The same could not be said for anhydrous milk fat, with buyers chasing C1 prices back above the $8,000/MT mark. For our full analysis, you’ll have to check out the comprehensive breakdown on our dashboard.

(5:48)
And then shortly after this auction came out, Stu Davison released our New Zealand Milk Price Market Update, and that highlighted our own New Zealand milk price calculator, returning a value of $8.61kgMS. It may be the busy point in the season for New Zealand dairy farmers, but markets are presenting a solid opportunity, so if you are interested in opening up a count and locking in your milk price at these levels, we would love to work with you.

(6:16)
Moving on to Europe, on Wednesday, as we always do, we sent out our weekly European Indices update, and everything we tracked moved higher in US dollar terms. To keep it simple, butter demand strong and supplies are tight. Naturally, the result is higher prices, with German and Dutch product moving above the €7,000/MT mark for the first time since early October of 2022. Contributing to the overall constraint in the market is high prices for cream. The tale of cheese is nearly the same as butter, however, while more cheese was made in the European Union this year versus last, consumption continues to narrowly outpace production, leaving prices grinding higher. After declining since the start of June, skim milk powder prices marked their second consecutive week of gains as well, following that supportive GDT result for European skim milk powder.

(7:10)
Also on our radar globally, consumer prices in China rose at a slightly higher rate than anticipated in July, driven in part by weather-related disruptions to food supplies. However, producer deflation continued, contributing to subdued consumption trends across the country. The economy is grappling with weak domestic demand, which has emerged as a significant challenge. Meanwhile, prospects for an export-driven recovery are being dampened by escalating trade tensions with the West, the imposition of tariffs on Chinese goods, and growing concerns about a potential US recession. Backing up a bit, though, to those weather-related disruptions in China. According to the South China Morning Post, China’s central government on Tuesday issued 238 million yuan, the equivalent of 32.8 million dollars, in emergency funding for recovery in agricultural production in five provinces. The money is intended to help curb agricultural losses and lay a solid foundation for a bumper autumn grain harvest, which would account for the bulk of the year’s food output, according to the Ministry of Finance and Ministry of Ag and Rural Affairs in a joint statement. Increased occurrences of extreme weather events in recent years have compounded stress on China’s food self-sufficiency drive, which Beijing has placed unprecedented emphasis on to feed its 1.4 billion people amid an increasingly uncertain global market. You can find more detail about this in our Global Dairy Forecast report that will be out on the 15th next week.

(8:47)
The other fundamentals we’ll be discussing within the global context will be global stock market volatility, chaotic freight rates, New Zealand milk production expectations, and a nice currency overview.

Well, that’s all from the HighGround Chicago office this week. Thanks again for tuning in. We appreciate your support and business. Cheers!

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