Monday Morning Huddle – 30 January 2023

Monday Morning Huddle – 30 January 2023

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IDFA Conference Fails to Prompt CME Spot/Futures Rally 
The International Dairy Foods Association’s annual Dairy Forum was this past week in Orlando, Florida where over 1,100 global dairy leaders gathered to discuss dairy’s path for the upcoming year.  From a market perspective, HighGround’s observations were that bearish sentiment persisted with demand sluggish amongst a number of dairy commodities. Severely under Class milk within the Upper Midwest was prevalent and those that had excess capacity were taking advantage. Discussions of Europe’s high pay prices back to farmers in the face of crumbling product sales prices had some concerned that a rollback in milk production will take time.  Buyers will need to step in at some point, but their purchases may be more limited to what’s needed rather than cleaning up excess inventories, and done more sporadically given higher financing costs.

For the past few months, US milk production has not lived up to expectations, falling short once again with USDA’s release last Wednesday (Dec ’22 UP just 0.8% vs. prior year) and now the second straight month of healthy herd declines. However, the market is paying more attention to weaker demand than limited supply growth at the moment and prices were unable to gain any steam back to the upside. In fact last Friday, CME spot barrel Cheddar fell to its lowest level since November 29, 2021 ($1.5525/lb settle) and spot Nonfat Dry Milk also settled at its lowest price ($1.1525/lb) since March 24, 2021.

This week is a quieter one, so not a lot from glean from government data. USDA will announce January 2023 Class & Component Prices on Wednesday afternoon and will release the December 2022 Dairy Products Production & Dry Stocks report. Even with lighter-than-expected milk production growth, we are anticipating decent gains in YoY butter and cheese output.  

Last, HighGround continues to monitor the situation in New Zealand that saw massive rains in the Auckland area and other parts of the North Island late last week. HighGround will provide additional information as we learn more about any potential impact to the dairy supply chain.


Last Week’s Reports & Analysis

December 2022 US Milk Production Report Analysis  
US milk production continued its growth streak in December, now at six straight months of year-on-year gains. However, initial expectations that profitable milk checks in 2022 and poor comparables from 2021 would drive annual growth to 1.5-2.0% range by the end of the year… Full Report

December 2022 Cold Storage Report Analysis 
For the first time since July 2021, butter stocks increased over the prior year, likely due to strong December production carrying similar trends as November. Stocks are now 17 million pounds above 2021 and well above the five-year average for the month, somewhat bearish… Full Report



Reports This Week
  • December 2022 New Zealand Dairy Export Data – Monday, January 30
  • GDT Pulse – Tuesday, January 31
  • Weekly EU Dairy Commodity Prices – Wednesday, February 1
  • Jan ’23 USDA Announced Class & Component Prices – Wednesday, February 1
  • Weekly National Dairy Products Sales Report (NDPSR) – Wednesday, February 1
  • Pre-GDT Forecast Volume Analysis – Thursday, February 2
  • USDA Dairy Market News Midpoint Prices – Thursday, February 2
  • USDA Weekly Dairy Cow Slaughter – Thursday, February 2
  • Dec ’22 US Dairy Products Report – Friday, January 3

1.27.23 MMH