Let’s Chat Markets – 3 March 2023

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, or wherever you listen to your podcasts. Subscribe so that you never miss an episode!

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Transcription:

[00:09] Alyssa: Hello, everyone, and welcome back to another episode of Let’s Chat Markets, your favorite dairy podcast, which is just a nice, easy recap of what happened in dairy markets this past week and what’s on tap in to the days ahead. Last week, we had the privilege of introducing you to Betty Berning, and today we have another exciting announcement to share before we dig into the market commentary. We have Stu Davison on the podcast, the newest member of the team, specializing in international insights—Stu’s background will provide HighGround with an even more unique perspective on global markets and we are so excited to have him. Welcome to the team, Stu!

[00:52] Stu: Thanks for having me! I’m super excited to be able to work with the HighGround team and I’m really enjoying my time in the windy city—albeit a little colder than the summer I’ve just come from!

[01:00] Alyssa: March certainly isn’t the best time to be here but don’t worry, we have plenty of indoor attractions to keep you busy! I would love for you share a bit about your background for our listeners because many people know you from your time with NZX but before entering the world of dairy market insights, you were a Sharemilker in the Waikato, weren’t you?

[01:20] Stu: Yeah, that’s correct. So, instead of my farming career, I went to Lincoln Uni for undergrad, and refined my grass farming management and farm business skills in the Waikato on a family farm and off on my own as well. I’ve since spent close to three years with the NZX dairy insights team using my knowledge here in New Zealand’s unique pasture-based production system, to communicate with the world the ongoings of the New Zealand dairy industry. I get very passionate talking about the dairy industry as a whole and am always happy to discuss what’s happening in New Zealand, and the likely effects on the global market.

[01:52] Alyssa: Thanks for that Stu—super excited to have you here. Well, let’s chat markets, shall we? Here in the US, weekly CME Spot averages weakened across each product except butter. Where should we start, Eric?

[02:06] Eric: Thanks, Alyssa. Let’s start with the cheese market. Both block and barrel cheddar, as you had mentioned, were down versus previously week. Still a ridiculous block-barrel spread with blocks settling at $1.9160 for it’s average and barrels way down below $1.60 at $1.5675. One thing of note, though, on Friday, both blocks and barrels made moves above their weekly averages with blocks settling at $1.95 and barrels, up 4.5 cents at $1.5750 with a total of 20 trades and that represented the vast majority of barrel trades for the week at 25. That said, we think that the futures market did not necessarily respond in kind and so we are a little nervous that perhaps the support that we saw in the blocks may cave next week. On the nonfat side we did fall nearly 3% down to $1.1830 on moderate volume. Butter was up just 0.2 cents to $2.3940, although the price did come down late in the week, just settled this previous Friday at $2.3450 per pound. And then on the dry whey side we finally saw a little break in the action here with the weekly average at 45 cents which was down nearly a penny. prices are staying very close to that and we are starting to see a bit more volume pick up on that side as well. so, as we get into March, some interesting things happening in the dairy markets.

[03:32] Alyssa: Thanks for that, Eric. It wasn’t too busy of a week—though we did crank out our January Cold Storage Analysis over the weekend. The high-level takeaway there was that butter inventories continue to build, signaling that the weaker butter prices throughout 2023 has been warranted and declining cheese stocks here in the US are being brushed off by the market as recent milk production data was stronger than expected in the US  to kick off 2023 and international suppliers are carrying a steep discount.

On Tuesday, there was a GDT pulse event—anything to glean from that event, Stu?

[04:13] Stu: It was an interesting event, with whole milk powder prices easing further at GDT Pulse event number 17 on the last day of February—sliding 2.3%, settling at $3,210/MT. SGX-NZX whole milk powder futures have traded slightly higher over the last week, but there doesn’t seem to be too much evidence from the futures market that whole milk powder prices will shift much higher at next week’s GDT event. As with the last 11 months, the Oceania market remains at the whim of Chinese buyers, and I’m not expecting too much to change on that front at the coming GDT events.

The downside that arises from weak GDT events going forward is that Kiwi dairy farmers forecast milk price is anticipated to be much weaker than expectations earlier in the season. Of note here for our global listeners, this might put further downward pressure on New Zealand milk production moving forward. New Zealand farmers are really good at cutting costs when trying to protect their profit margins, which usually results in less milk, too. This isn’t an issue right now (we expect a couple more positive months of milk production), but something to keep an eye on during New Zealand’s autumn months and when the new dairy season starts in June.

[05:15] Alyssa: Thanks Stu—that’s a great recap. Other notable market shifts this week were observed within Europe. Weekly EEX indices were mostly positive but the futures moved lower this week suggesting that while demand may have returned, supply remains robust as peak milking season approaches into the Northern Hemisphere spring.

Something we wanted to call out—we have had a lot of customers looking for the January China import volume analysis this past week. Starting in 2020, China started releasing January and February trade data together and skipped the January release altogether. We thought that that was temporary but that is continuing into this year so we will not have the January trade data until March 20th when the February data will also be released.

Into next week, we look forward to digging into a fresh global dairy trade event, January US trade data and a World Agricultural Supply and Demand Estimate release from the USDA as well. As always, thanks for tuning in and we look forward to coming on next week to chat markets. Cheers.