Let’s Chat Markets – 12 May 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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[00:10] Betty: Hello and happy Friday! Welcome to Let’s Chat Markets, your favorite weekly dairy market podcast powered by HighGround Dairy. Today is Friday, May 12th and I’m Betty Berning. While there were fewer reports to analyze this week, the markets kept us on our toes!

Let’s jump into Spot markets to lead off our podcast today. Blocks and whey both made 2023 lows this week. On Thursday, Spot whey closed at $0.30/lb., the new 2023 low, and a price not seen since July 2020. To end the week, whey eeked up a quarter-cent, with the total volume on the week at a robust 42 loads.

Cheddar blocks plummeted in Friday’s trading, closing at $1.53/lb., a price not seen since July 2021, as 20 loads moved for the week. Barrels settled below $1.50 during Friday’s trade with a total of 58 loads exchanging hands this week.

[01:09] Spot basis in the upper Midwest has remained persistently low all spring, moving back to the $12 to $4 below Class pricing this past week. Producers, unfortunately, will bear the brunt of the heavily discounted milk. That, coupled with the lower cheese prices, do not bode well for farm finances.

As producers deal with tighter margins, slaughter rates have maintained a steady clip in 2023, up 4.8% year-to-date relative to 2022. For the week ending April 29, 2023, rates climbed 14%, with Region 9, which is mostly California and Arizona, up 31.3% versus the same week in 2022. Chatter of herd dispersal auctions are starting to pop up in California, the region most impacted by the tightening margins and many producers are selling lower-producing cows to optimize profitability, or just generate some cash flow.

[02:09] Feed prices are moving lower, though. USDA released the World Agricultural Supply and Demand Estimates and increased corn acreage slightly from an already big number. With yields for corn and soybeans pegged at record highs, a bumper crop is expected. USDA also increased ending stocks for 2023-24 corn and beans, and revised US exports downward to four-year lows.  New crop corn prices are knocking on the door of piercing through a psychological support line of $5 per bushel.

[02:41] Shifting to the international front, GDT Pulse was held this week, where whole milk powder prices moved lower as supplies were enough to meet demand, without buyers pushing prices higher. This comes after three events (two auctions, and one Pulse) where prices moved higher.

Looking ahead to next week’s auction (find our Pre-GDT Auction Volume Analysis here), it will play a key role in setting next year’s farmgate milk price, as Fonterra gears up to announce its forecasted price. Some butter was taken off the auction, as Fonterra cites cream demand elsewhere as the reason. WMP prices for May increased this week at SGX as traders anticipate another gain at next week’s auction. For SMP, though, HighGround expects a lower price, as some buyers have stepped away and product is plentiful worldwide.

That is our recap for this week! Thank you so very much for listening and remember, if you haven’t,  get registered for our Outlook conference. It is going to be great and you can listen to an interview with one of our panelists, Lynne Wildman, to get a sneak peek of the content we are offering. Visit highgrounddairy.com/conference to learn more and get signed up.

There’s also our forecast webinar next Tuesday, May 16, be sure to sign up for that if you haven’t!

Happy Mother’s Day to all the Moms and we’ll talk next week!