Let’s Chat Markets – 14 April 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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[00:09] Eric:  Hello, everyone, and welcome back to another episode of Let’s Chat Markets—your favorite weekly dairy podcast.  Today is Friday, April 14th and I’m Eric Meyer, President here at HighGround Dairy.

With the 15th of the month coming tomorrow, the HighGround team decided it would be a great idea to get our monthly Comprehensive Forecast report out early – and wouldn’t you know it, there is plenty happening this week to create impressive volatility in the spot and futures markets.  The team will be scrambling this afternoon to ensure the report is out by the end of the day, so we’ll keep this week’s podcast short and sweet.  That said, subscribers will also have plenty to chew on with the release of our Forecast as well as our monthly outlook webinar on Monday at Noon Central Time.  Did you know that if you miss our monthly webinar live, subscribers can watch the recording right on our website?   If you don’t subscribe to HighGround’s market intelligence, be sure to sign up on our website at www.highgroundairy.com today for a free trial!

[01:08] Let’s start today with the CME spot markets.  Records were broken this week!

Both CME spot block and barrel cheddar set new 2023 lows on Friday, with blocks at $1.7750 per pound and barrels at 1.5125.  I would have never thought barrels could have dipped into the upper $1.40s but we are dangerously close from seeing those kinds of numbers, and barrels sellers at the exchange were aggressive this week, pushing a total of 70 loads for the week, the highest weekly volume in nearly five years!  The weekly average caved 11% to settle at $1.5715, down 19.4 cents.

Blocks didn’t disappoint market bears either, setting its own 2023 lows at $1.7750 per pound and its lowest level since last September.  A much lighter week-over-week decline, down just 1.5c or less than 1%, but the price did breach the $1.80 mark with the wee average settling at $1.7990 per pound.

[02:13] What’s next for the cheese market?  After a brief March rally to bring blocks to $2.10 per pound, and the early week Class III/cheese futures kneejerk bump off some unfortunate news, the party seems to be over as cheese sellers begin to get more aggressive into further rumblings of an actual recession playing out later this year.  While there seems to be plenty of value in the barrel market for buyers and traders to load up the warehouses, tying up all that cash into an uncertain economic outlook may give those market participants second thoughts.  Perhaps there’s more product coming to market in the near term and if so, inflated futures may have too much premium into them.

[02:54] In the other CME spot markets, both NFDM and Butter also saw declined but both weekly indices dropped by less than 1% on lighter volumes exchanging hands.  On the other hand, dry whey prices saw its weekly average drop by more than 12% on 47 loads traded, a bearish signal and the most volume traded at the CME in over three years on a weekly basis.  It is widely known that the CME spot market is a market of last resort, that sellers typically come to the exchange when they cannot find a home for it in the secondary markets.  If these prices were declining on light volumes it would be one thing, but the fact that CME spot barrels and dry whey are seeing not only strong price declines but also heavy volume, it gives a little more credence to the bearish moves.

[03:41] In some very unfortunate news on Monday, a massive barn fire at a dairy farm in the Texas Panhandle reportedly saw in upwards of 18,000 head of cattle perish, a total loss.  The dairy farm was one of the largest in the United States and if all 18,000 cows were in milk, would represent nearly 3% of Texas’s milking herd or 0.2% of the nation’s herd.  Given the size of the dairy, futures traders saw a kneejerk bullish reaction in most CME dairy markets on Tuesday and Wednesday, only to realize that given that spring production peak is in full swing, the impact to today’s current supply/demand balance was minimal, and futures have succumb lower, back to the bearish macroeconomic picture.  That said, later this year, the loss of these cows could help accelerate commodity prices, particularly in the Class IV complex, if demand returns in a way that flips the current downward price trajectory.

[04:41] There was plenty more than happened this week, but we’ll save the details for our brokerage and market intelligence customers.  Want to know how to get on the HighGround bandwagon?  Visit our website at www.highgrounddairy.com to learn more.

And don’t forget!  HighGround is hosting its annual Global Dairy Outlook Conference in Chicago on June 21 and 22 at the Historic Union League Club.  We have put together a fantastic speaker and session lineup for you this year – come join us!  Seating is limited, so be sure to visit our website, again at www.highgrounddairy.com and get registered today!

That does it for this week – We look forward to seeing many of you in town in less than two weeks for the American Dairy Products Institute (ADPI) Annual Meeting, right here in Chicago.  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.