Let’s Chat Markets is a weekly podcast, hosted by HighGround Dairy’s top analysts. Every Friday, 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!
[00:10] Alyssa: Hello and happy Friday to everyone! Thank you so much for tuning in to Let’s Chat Markets, your favorite weekly dairy market podcast powered by HighGround Dairy. Today is Friday, November 17th, and you’re hearing from Alyssa Badger, Vice President of HighGround Dairy. Joining me to chat markets is Cara Murphy, our Dairy Market Intelligence Manager. There were some interesting movements in the dairy world this week, particularly in the international market. We also published HighGround’s Global Dairy Commodity Price Forecast on Wednesday with our team presenting on those topics in our November webinar held on Thursday. Customers can find both the forecast and the webinar recording on the HighGround Dairy website so be sure to check those out when you have time. With that, let’s kick off today with the CME Spot market recap.
[00:59] Cara: Butter, butter, butter. Did you know it’s actually National Butter Day? Fitting, to say the least. This week we saw the spot butter price drop to $2.4900 per pound, the lowest price since July 11th, after soaring to a record high just a month prior. Between the peak on October 6th of $3.5075 and this week’s trough, the butter price has fallen over a whole dollar. After the $0.65 cent drop we saw at the same time last year, this outcome has raised some concerns about potential repeat scenarios we might see in Q3 and Q4 of next year.
[01:34] In the cheese market, the block and barrel price spread has been inverted for nearly a week, but the 11-cent decline on today’s spot market left barrels to close at $1.5600 per pound while blocks remained unchanged at $1.6000, ending the barrel premium. Blocks marked a total of 14 trades on the week while the barrel volume was just 9. Dry whey climbed to $0.4200 per pound on Tuesday but recoiled a bit to close the week at $0.41 cents with 10 trades. Finally, Nonfat Dry Milk (NFDM) rose to $1.2200 on Monday before sliding to $1.1975 by the end of the of the week, trading a total of 13 times.
[02:11] Alyssa: Awesome, thanks, Cara. I actually have some fun facts about butter because why not? Did you know New Zealand consumes the most butter per capita with almost 13 pounds of butter per citizen? Here’s another fun one: in the US, the top three cities to report the strongest butter sales are New York, Los Angeles, and then Chicago at number three with 35 million metric tons sold. I’m kind of shocked LA outpaces Chicago! Alright, back to markets. Let’s keep rolling with what data came out from the domestic market this week, Cara.
[02:44] Cara: Absolutely. September Supply and Utilization data was released this week. Total cheese consumption inched above prior-year levels, lifted by rebounding domestic demand for American-style cheese following a dismal August and impressive other-cheese exports, which marked the highest September volume on record with data back to 2011. Butter utilization remained above 2022, held aloft by domestic demand overtaking weak exports. NFDM consumption was up only slightly from last year with month-on-month domestic usage moved in opposition to exports. On a year-to-year basis, NFDM exports tanked, dropping to the smallest volume since August 2019.
Alyssa: Thanks, Cara. Anything else to note from the US?
[03:30] Cara: Yes, lastly, stateside—before we hop across the pond to discuss what’s happening in Europe—US slaughter rates continue to trend well below the prior year. Higher liquidation in the summer months from attractive beef prices and difficult on-farm margins keep year-to-date slaughter levels above 2022. However, that gain has since begun to wane, where year-to-date slaughter once marked over a 100,000 head difference compared to the previous year, it now only sits at 75,000 as declining slaughter rates in California, the Upper Midwest, and even the South-Central region of the US have slowed substantially throughout the autumnal months. This trend will likely persist into 2024 as farmers become more hesitant to cull cows while lower feed costs help to improve margins and outlook.
[04:17] Alyssa: Awesome, perfect, Cara. As a reminder for US market participants, we do have a shortened holiday week next week for Thanksgiving with the CME dairy markets closed on Thursday and Friday. While some of us will be loading up on tryptophan and red wine, some of the team will still be around for our international clients so don’t hesitate to reach out if you need anything at all. Alright, let’s chat international markets. So, the US price action was pretty mixed but in Europe, there’s quite a bit of support shown on the European Energy Exchange (EEX) and here’s why.
[04:51] European milk production flipped into negative territory in September’s dataset, which was just released this week, falling 1.0% versus the previous year. That was a dramatic change considering the growth that we’ve seen over the last 12 months. The growth momentum from Northern European countries, such as Denmark and the Netherlands, has slowed considerably and looks unlikely to be revived prior to the conclusion of 2023, adding to the sluggish production from Southern Europe. Germany posted slight growth in September, but those weekly collections that we track continue to confirm that German milk slowed significantly throughout October and poor weather in November is reported to have impacted milk flows further. French milk continues to tank as well, with the decline measured in September likely to be repeated in October’s data, too.
[05:46] Cara: And considering those losses, [European] September trade data out this week was pretty strong too across certain products.
[05:53] Alyssa: Yeah, exactly. While total volumes were slightly lower, there was notable strength on cheese, skim milk powder, and fat-filled milk powders! But with price action the way it is, and a slightly weaker US dollar, the EU is quickly becoming uncompetitive against the US.
[06:09] Shifting to the Southern Hemisphere, Fonterra released their offer forecast volumes ahead of the GDT event next week. The 12-month forecast for Butter has been brought down by 2,650MT. The Anhydrous Milk Fat (AMF) 12-month forecast reducing by 2,330MT, reportedly due to changing market dynamics and strong demand across other sales channels, as Fonterra stated. The bulls remain in charge on the futures market, forecasting strong gains across the board at the auction next week. Be sure to check out our full analysis to see what we expect on the dashboard.
[06:50] In general, the key theme in the marketplace is deteriorating supplies with the demand side of the market very much looking like a question mark to us. There is still very little visual confirmation that demand is strong. It’s improving, but it’s not strong enough from the likes of Southeast Asia, the Middle East, and North Africa. Above and beyond that, there are still a lot of concerns regarding the US economy and consumption.
Well, have a great weekend, everyone, and be sure to enjoy the last few days of nice weather here in the Midwest because winter is coming. Stay tuned for more commentary into next week. Cheers.
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