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!
[00:10] Alyssa: Good afternoon 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, October 27th, and you’re hearing from Alyssa Badger, Vice President of HighGround Dairy and Cara Murphy, our Dairy Market Intelligence Manager. We enjoyed seeing some of you in Madison, Wisconsin this week attending the National Workshop for Dairy Economists and Policy Analysts. We are also excited for this coming week where you can see us around the CME/ADPI Risk Conference in Chicago on November 1st and 2nd. HighGround will be cohosting a reception on November 1 and you won’t want to miss it.
[00:51] We released a press release on Monday, announcing the newest member of our team, Alex Gambonini. I just wanted to recap that here in case you missed it. Originally hailing from Petaluma, California, Alex was raised on her family’s dairy farm, fostering her love for the industry from a young age. She pursued her education at Cal Poly, where she earned her bachelor’s degree in Dairy Science and Agricultural Business. Later, she furthered her studies at the University of Minnesota-Twin Cities, obtaining a master’s degree in Applied Economics. During her time in Minnesota, Alex conducted research focused on dairy farm profitability, showcasing her dedication to understanding the economic aspects of the industry. With her strong background and industry knowledge, Alex is eager to collaborate with dairy producers and engage with stakeholders across the entire dairy value chain. Her expertise will undoubtedly contribute the HighGround mission of delivering exceptional dairy solutions and supporting the success of our valued partners.
If you are in Chicago next week for the risk conference, you will be able to meet her there. With that, let’s get into the CME market recap of the week.
[02:02] Cara: Dry whey lost a bit of ground at the beginning of the week but climbed back to reach $0.40 per pound and traded a total of 11 times. In contrast, cheese prices rolled back with block cheddar dropping every day except Friday to end at $1.7300 with 12 trades. Barrel cheese also dipped, falling back below the $1.70 per pound mark with 9 trades. After finding some support in the past couple of weeks, the spot spot butter price closed today at $3.1925 with 12 trades. Lastly, nonfat dry milk lost some steam after reaching $1.2400 on Monday and fell back to close this Friday to $1.1975 with 9 trades in total.
[02:43] Alyssa: Also in the domestic market, the big news this week was the September Cold Storage Report. Can you break that down for us, Cara?
[02:50] Cara: Absolutely. While September butter stocks did decline from the previous month and followed the seasonal pattern, the 16 million pound decrease was not as steep as the 20 million pound five-year average decrease. Given the climb to set a new record high price of $3.50 per pound, we expected a larger decrease in inventories to justify the current market. The smaller drop in warehouse stores would suggest that fundamentals did not fully support 2023’s price rally and indicates that the culprit is more likely a physical squeeze, product mix, or a combination of the two.
[03:24] On the cheese side, inventories were neutral to our expectations. Total cheese stocks fell 23 million pounds month-over-month, counter to the seasonal build of 4.4 million pounds over the past five years. Other-than-American cheese stocks fell by 20.7 million pounds, the largest fall between August and September since 2013, while natural American cheese stocks dropped by 2.4 million pounds, bucking the typical gain of 5 million. Even so, total cheese warehouse levels were up compared to the prior year and the high total for the month suggests that cheese stores are ample ahead of the holiday season. With reports of more available product as of late and milk production seasonally declining at a slower clip, there is more milk available for cheese making at the moment.
[04:08] Speaking of more milk floating around, there was some noteworthy news that came out of New Zealand this week regarding their milking season. Alyssa, can you recap what’s going on across the Pacific?
[04:19] Alyssa: Sure thing, Cara. Pasture conditions in the North Island improved sharply in September, changing from a wet, cold, and tough spring to almost perfect growing conditions in the latter weeks of September. Milk production across most key dairy regions managed to outperform prior year levels at the halfway mark of September. Overall, milksolids ended up being up 1.3% from prior year during the month. It is very important to note that even though the national herd has reduced this season versus last, there is still milk price expectation pressure on farmer’s budgets and the level of supplemental feed this season will be much smaller than last. This increase in milk production is a result of very favorable weather for key milk-producing regions. Into October, weather was prime for pasture production once again across the entire country, with pastures outgrowing herd’s intake requirements, allowing farmers to conserve silage. We should see a rather strong figure for this month as well.
[05:22] Dairy Australia also released their September milk production figures showing a 1.5% gain over prior year. Similar to New Zealand, though, we are comparing against a weak prior year so the growth figures should be taken with a grain of salt.
[05:38] Data releases were pretty slow otherwise but there are two other regions I’d like to recap quickly. The combination of a seasonal slowdown in milk from the European Union along with a pullback in incremental growth from key regions such as the Netherlands and Germany, are resulting in a stronger-than-expected consolidation in available commodities in the region. Tighter milk solids are supporting cheese, fat, and powder prices into this week, especially as the calendar approaches the holiday season. Recent consumer confidence reports from the eurozone would have you believe that sales would be lackluster but instead, anecdotalal reports continue to highlight the strong desire for dairy products at the retail level.
[06:22] Lastly, we started digging into our monthly Asia Trade Flow Report. While we are still waiting on numbers from Japan before publishing, here were a few interesting takeaways in the data:
First of all, there is a lot of red within these tables with demand for a majority of commodities well below prior year. What was interesting, though, was protein products garnered all the attention in Indonesia’s August import data, with caseinate imports the largest on record, with the bulk of this volumes coming from New Zealand. in the Philippines, skim milk powder imports continue to post figures well below the prior three years—a trend that has been in play since March. Malaysia’s powder demand has also remained lackluster but there was a data point that stuck out quite a bit and that was strong cheese imports to South Korea. There has been a strong shift away from the US and toward European and New Zealand cheese withing Soth Korea. In fact, their September import data saw record volumes of cheese coming in from the European Union. That was primarily in the form of German cheese, but growth was also shown from Denmark and the Netherlands.
That does it for this week’s market roundup! Thanks for tuning in and we look forward to seeing some of you next week. Cheers.
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