Let’s Chat Markets – 21 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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Transcription:

[00:10] 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 21st, and you’re hearing from Alyssa Badger, Vice President of HighGround Dairy. A lot happened this week! From a bearish Global Dairy Trade event to a slightly bullish US Milk Production report, we covered it all and can’t wait to dig in here with all of you. Joining me today is Cara Murphy, one of our very talented analysts on the team who actually just celebrated one whole year here! I must say, for only being in dairy markets for one year, I am always impressed by how quickly you’ve learned these markets, Cara. We are so lucky to have you.

[00:54] Cara: Well, thank you Alyssa. I’m so very happy to be here. Ag has always been a passion of mine and getting to meet and work with all the amazing people from across the industry and the globe is truly a blessing.

[01:06] Alyssa: Alright, Cara, we had some positive movement happen on the spot market this week. Can you give us a little breakdown?

[01:13] Cara: Yeah, so dry whey bounced around a bit throughout the week and nonfat sits at $1.12 per pound. Butter rallied today and with 37 trades, this was the most in single day for butter since November 2020. But the real highlight this week was cheese. Blocks climbing nine cents on Tuesday and another 13 and a half cents on Thursday, into the upper $1.70s now after starting the month near $1.40/lb. Barrels also gaining, up 12 cents on Thursday to settle in mid $1.60 by Friday’s close.

[01:45] Alyssa: Thanks, Cara. Reverting back to the beginning of the week, the team put European trade data analysis for the month of May which was another month that agrees with the price bears, driven by a fundamental supply and demand mismatch. Drought conditions continue to be a key concern for dairy production for the coming months in Europe. However, the current problem is finding a home for the excess production.

[02:11] Cara: European milk production was also finalized this week and that also leaned bearish as it came in stronger than the market was expecting for the peak month of May.

[02:19] Alyssa: Yeah, those volumes from Poland, the Netherlands and Germany are just so impressive.

[02:25] Moving on to the Global Dairy Trade Auction, North Asian buyers were missing in action at this event yet again, marking the lowest market share from the region at this time of the year for seven years. Buyers in general just continue to lack urgency as the supply side of the equation on the global scale leans bearish nearby. As a result, all indices fell lower with the exception of AMF, which really just brought prices closer aligned with where butter has been trading. Even with Southeast Asia and the Middle East swooping in to take on stronger whole milk powder volume, C2 regular fell yet again. I think those were the real key points there but be sure to check out our comprehensive breakdown of what happened at this event on our dashboard.

[03:13] So, we focus a lot on the Global Dairy Trade analysis about the fact that China or North Asia is buying at much lower levels yet we received June import data from China overnight and it tells another story. On the surface, there was a lot of strength across key commodities for China’s import data but overall market share from the US and Europe was weaker versus prior year with US losses led by a reduction in demand for dry whey and in the form of infant formula from the Europe. However, it is worth noting that a bulk of gains observed in the June data was derived from the New Zealand market.

[03:53] Cara: Heading back stateside, June milk production was flat against the prior year, a slightly bullish outcome from our expectations. Declining cow numbers drove the lowered output. The herd has not declined year-over-year since August 2022, as heavy culling starts to take effect. Texas and New Mexico production really stood out as the states saw steep milk production losses and shrinking cow numbers.

[04:16] In breaking news, the USDA just announced a public hearing will be held on August 23rd, to consider and gather evidence on 22 proposed amendments to the pricing formulas across the 11 Federal Milk Marketing Orders. The proposed amendments include changes to pricing formulas for Class III and Class IV milk, adjustments to the make allowances for butter, nonfat solids, and other dairy products, as well as modifications to the base Class I skim milk price and Class I and II differentials. We’ll continue to provide more updates as they are released.

[04:51] Alyssa: Well, I think that about covers everything for the week! Have a fantastic weekend and we’ll see you next week on Let’s Chat Markets!

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