Let’s Chat Markets – 7 July 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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[00:09] Alyssa: Hello and happy Friday to all of you! Thank you so much for tuning into Let’s Chat Markets, your favorite weekly dairy market podcast powered by HighGround Dairy. Today is Friday, July 7th, and you’re hearing from Alyssa Badger, Vice President of HighGround Dairy. Here in the US, it was a shorter, holiday week as we celebrated Independence Day by grilling meats and gathering with family but once again, there is a lot to discuss! Joining me today is Cara Murphy, our Dairy Market Intelligence Manager. Cara, what happened this week on the CME dairy spot market?

[00:44] Cara: So, we set some new 2023 lows this week on the spot market. Dry whey slid downward throughout the week settling Friday at $0.2275/lb.—the lowest price ever recorded on the CME since trading began in March 2018. Nonfat dry milk also set a new 2023 low on Friday, falling to the lowest price since November 2020. On the flip side, we saw some modest gains in butter and cheese. Although there was a dip in the middle of the week block Cheddar rallied off its 2023 low—recorded the last week of June—and barrels saw a bit of a revival from its low set on Monday. Barrel cheddar also reached the most trades in a single session since December 2017 on Thursday, this brought the total weekly volume for barrels to the highest since that time as well.

[01:32] Alyssa: Appreciate the recap, Cara! While we are talking about the US, let’s discuss what other data came out this week and what it means to the marketplace. There were three key reports out yesterday that all underline and pretty much help explain current price behavior on the CME. We had updated US weekly cow slaughter figuresMay US dairy product production data and May US trade figures. Let’s talk about those slaughter rates, they are still pretty high.

[02:01] Cara: Indeed they are! Slaughter in the Upper Midwest continues to hover at those elevated levels, especially for this time of year with the week of June 24th seeing the largest year-over-year growth since last October. The Pacific Northwest region also marked the biggest increase compared to 2022 since April. Interestingly though, slaughter in region 6, covering the Texas-New Mexico area took a nosedive, recording the lowest weekly volume since November. However, this did not break its streak of year-over-year gains and slaughter in the region remains above the previous year for all of 2023 so far.

[02:39] Alyssa: Interesting. Yeah, the Upper Midwest is really driving those year-on-year gains.

[02:44] Cara: Given how on-farm margins are looking in the region, those old cows gotta go!

[02:49] Alyssa: Shifting to the Dairy Products Report, butter was bearish to expectations, setting a new May record for production. Year-to-date totals are ahead of the same period last year and close to the same timeframe in 2020 which was a record year.

[03:05May cheese production saw similar dynamics to March and April’s, with American up, non-American down, and the total only slightly down versus prior year. Dry whey production grew for the first time since January and nonfat dry milk volumes had their second-highest month ever and rose counter-seasonally from April to May. We recorded a Dairy Skim episode yesterday discussing those fundamentals so be sure to check that out if you haven’t already.

[03:35The generally strong production numbers were met with weak export figures during the month, in line with expectations.

[03:44] Cara: Yes, of the top 10 destination markets for US dairy in May, eight observed negative sales with only Mexico and Canada reporting year-on-year gains. Similar to April, the steepest losses were observed to South Korea and Japan in the form of cheese, followed by Malaysia and Indonesia due to weaker powder sales.

[04:04] Alyssa: And US dairy exports to Southeast Asia are certainly struggling with May shipments the weakest for the month since 2019, counterbalancing what we’ve seen as record sales into Mexico so far this year, which has meant stronger growth in Mexico’s market share of total US dairy exports, which have accounted for a third of sales so far this year, versus 22% last year.

[04:29] Globally, while US markets were closed on Tuesday, we were actively working and watching the Global Dairy Trade Auction in New Zealand. As a result of extremely light demand arriving at this auction, a severe price correction transpired across all key commodities. The biggest shift was measured in butter. However, the most important correction for the global market was the skim milk powder result.

[04:55The negative GDT event spilled over into European dairy markets which also continued to experience price consolidation this week despite concerns about drought conditions as demand is simply quiet on a global scale and inventories are reportedly high within Europe. What’s on tap for next week, Cara?

[05:16] Cara: Well, the team will be busy working on our highly anticipated monthly forecast report which we will be pushing out on Friday the 14th.

[05:24] Alyssa: That’s right Cara—and if you’re a customer, don’t forget to take advantage of our webinar where we will have our team on to present our data, findings and opinions on where prices are heading over the next 18 months. That webinar will take place on the 17th. As always, we hope you have a great weekend and look forward to coming on next week to chat dairy markets with you. Cheers.

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