Let’s Chat Markets – 9 June 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 on our dashboard, or wherever you listen to your podcasts. Subscribe so that you never miss an episode!

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Transcript:

[00:09] Alyssa: Happy Friday to all in the dairy industry and thank you so much for tuning into Let’s Chat Markets, your favorite weekly dairy market podcast powered by HighGround Dairy. Today is Friday, June 9th and I’m Alyssa Badger, Vice President of HighGround, here to give you some updates on what has been going on this past week and officially back from maternity leave. We welcomed a beautiful baby girl to our family, Josie Lois, back in March and we are just so in love and having a great time as first-time parents. Now putting my analyst cap back on, let’s cover what happened in spot markets this week!

[00:48] Chop and lift describe the block and barrel market. CME Cheddar blocks started the week where they ended at about $1.43/lb. on six loads trading hands, and began to move up on Tuesday and Wednesday, but that choppiness set in on Thursday as blocks dropped a nickel. To wrap up the week blocks neared their 2023 low, falling another $0.05/lb. to settle at $1.4225/lb. Barrels remained at a premium to blocks and moved higher through Wednesday, only for the rally to dissipate pretty quickly on Thursday. Friday was pretty quiet, with the market unchanged, with the week ending at $1.57/lb. Nonfat dry milk remained in a tight range this week with minimal losses of about one cent per pound from prior week. Butter dropped to one-month lows of $2.36/lb. on Wednesday with a very small recovery into Friday with the weekly average settlement experiencing the worst loss in five months. There was a lot of action for dry whey today especially as 19 loads traded a majority of the weekly total of 25 loads. Prices moved slightly higher throughout the week and settled today at $0.2750, which is where the market was two weeks ago.

[02:06] Onto another interesting stat observed this week: the weekly cow slaughter numbers were pretty ugly. Livestock slaughter jumped in week 21 by 14% (+7,100 head). That was a near 4% increase week over week and was considerably higher than the five-year average of a typical 2% decrease into that week, indicative of some pretty heavy culling as producers continue to face tight margins. The week 20-21 increase of 3.8% was the largest increase for these two weeks in 10 years. Definitely something to talk about there.

[02:48] I know we already put out a Dairy Skim episode discussing the April 2023 dairy products report but just in case you missed it, the key highlights were: Butter production as it soared year-over-year and was up in all regions of the country, pretty bearish to expectations. The story in the cheese complex in April was very similar to March. Total production was down nominally versus prior year with Cheddar up significantly as heavy milk volumes in the Upper Midwest drove Natural American output growth. Combined nonfat dry milk and skim milk powder production declined as skim milk powder plummeted on low export demand. Still, nonfat dry milk production and stocks are pretty healthy, providing a neutral outlook against current price expectations.

[03:39] There was a mixed global dairy trade auction this week as well and the initial auction for the new dairy season has not reignited the market’s ambition to pick a direction higher or lower. This auction keeps the overall indicator needle in a steady state, pointing slightly lower, but within an expected range for the time being. Be sure to check out that Skim episode as well as Stu Davison does a nice recap of what happened there.

[04:10] Lastly, updated US trade data for April came out this week and our analysts were hard at work digging into those numbers. Cheese exports tanked from the prior month on continued slow buying from South Korea and Japan into April, combined with a seasonal decline from Mexico. However, it is important to highlight that demand from Mexico was really strong and set a record for the month of April, a trend that has persisted each month since last November. Dry whey exports also weakened from March as well as from year-ago levels in April, as buying from China has really dried up. US butter exports fell to their lowest level since November 2020, as few buyers were interested in higher-priced US product. And then I think I’ll close on year-to-date exports of nonfat dry milk and skim milk powder officially flipped from running ahead of 2022 to falling below prior-year levels as April’s export numbers were quite dismal.

We sure hope you enjoyed this market recap and also look forward to seeing many of you here in Chicago for our second annual Global Dairy Outlook Conference. Be sure and head to our website for more details as it will be an event you won’t want to miss filled with fresh takes on global markets and even some bourbon tasting for our attendees. Have a lovely weekend and we will chat markets with you next week. Cheers.