Let’s Chat Markets – 8 September 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, September 8th, and you’re hearing from Alyssa Badger, Vice President of HighGround Dairy. Joining me to chat markets is Cara Murphy, our Dairy Market Intelligence Manager. We had a very busy week with a wealth of new data hitting the marketplace. Let’s get started with our CME recap of the week, Cara.

[00:39] Cara: Dry whey climbed to a high of 32 cents per pound on Wednesday, the highest price since early May of this year before falling back slightly on Thursday and Friday and trading a total of 11 times. Meanwhile, the cheese market has been quiet with blocks ending the week at $1.9250 and barrels at $1.8275, with only 3 block and 2 barrel trades occurring on Friday for the entire week. The spot butter price has been on the rise for most of the week but sank back 5 cents on Friday with a total of 49 trades. And lastly, nonfat dry milk hit a low of $1.0575 on Tuesday, the lowest price since November 2020 but gained in the later part of the week to settle at $1.10 with 11 trades.

[01:26] Alyssa: Thanks, Cara. Some interesting movements occurred in the futures market this week after the USDA released the July Dairy Product Production report as well as July trade datafrom the US. Cara, can you give us some insight into the reports?

[01:41] Cara: For sure. Well, total cheese production fell year-over-year on smaller Cheddar and Mozzarella production—both for the second month in a row. Butter volumes climbed annually for the tenth consecutive month. While churns were slowing in the West, Central region processors turned 17% more butter than a year ago, boosting the national total. Most interestingly, nonfat dry milk production posted its lowest July value since 2013. Weak overseas demand coupled with much lower milk flows in nonfat-heavy regions primarily fueled the drop.

[02:13] Alyssa: Yeah that was a crazy number there. Speaking of overseas demand, the US owes a lot of thanks to Mexico for consuming so much dairy this year. What were the key takeaways in the July export data, Cara?

[02:24] Cara: Looking at exports, while production was down for nonfat dry milk, exports continue to move up on continued big shipments to Mexico in July and greater volumes to Vietnam. Dry whey and whey protein concentrates fell against the prior year with dry whey logging its largest percentage loss since July 2009 as sailings to China dropped 34%. On the cheese board, total cheese exports remain negative but were not nearly as bad as we have seen in the past several months. Even so, steep losses to South Korea, down 20,000 pounds year-to-date persists as the main driving factor. Cheddar shipments remain below 2022’s strong comparable but volumes are up to top Asian markets and Mexico in July.

And to your point, Alyssa, Mexico is the place in 2023 for US exports. A top destination for cheese, nonfat dry milk, and WPC <80% shipments this year.

[03:20] Alyssa: Absolutely as we have seen record shipments moving south so far this year with total exports to Mexico up 21% from prior year. While it was a shortened holiday trading week due to the celebration of Labor Day on Monday so the week actually started on Tuesday for us here in Chicago, kicking off the day with a surprisingly supportive Global Dairy Trade Auction after seven negative events. However, it is not clear yet if this is a trend-setting auction or if buyers are just swooping in to take advantage of discounted commodity prices. Though even with the strong rise on whole milk powder, it is still at the lowest level that buyers have seen for this time of year in eight years. China’s demand was stronger than last year’s disappointing volumes but still remains historically light. Southeast Asia’s market share outpaced North Asia when it comes to whole milk powder, but the most impressive gains came from Latin America and the Middle East on a historical basis. Skim Milk Powder prices slid, however, and as with the last handful of auctions, values stepped backward during the first round of bidding across contracts one through four, inherent of how weak demand was at the outset of this auction. Anhydrous milk fat was the star of this event, boasting the strongest demand from the beginning of the event and reported the second largest price increase. Butter prices managed to keep instep, also posting a positive move. GDT Cheddar prices posted an almost flat result which was impressive considering the leap achieved at the last event. So in general, a nice auction for the bulls but ultimately the overall winning price remains historically low still.

[05:11] Well, it’s September which means two things: Milk is on the rise from Oceania and the holidays are quickly approaching. It will continue to be a battle of the fundamentals into the end of the year and tighter supplies is going to combat disappointing demand globally due to struggling macroeconomic factors. Here in the US and in Europe, spot milk looks to be tight versus where we were just a month ago so the market will be watching New Zealand’s weather developments very closely this spring.

That’s a wrap this week! We wish you all a wonderful weekend and look forward to catching up next week on Let’s Chat Markets! Cheers!

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