Let’s Chat Markets – 3 November 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! 

Subscribe on Spotify | Subscribe on Apple Podcasts | Subscribe on Amazon Music


[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, November 3rd, and you’re hearing from Alyssa Badger, Vice President of HighGround Dairy and Cara Murphy, our Dairy Market Intelligence Manager. Thanks to everyone who attended our opening reception cohosted with Nui markets for the CME/ADPI Dairy Purchasing & Risk Management Seminar in Chicago this week. It was great to catch up with our time-honored friends in the industry and meet some new ones—always good to see fresh faces at these conferences. The dairy world is definitely continuing to grow and thrive. Outside the Conference excitement, the week has been a bit quiet on the report and data-release side but let’s take a look at what happened starting with the CME spot market weekly recap, Cara?

[01:03] Cara: There were some interesting moves in the butter market this week. We climbed by $0.1075 on Monday to $3.3000 but dipped back down $0.1375 on Wednesday. The prices continued to decline the rest of the week to close at $3.1075 with just 6 trades. Block Cheddar briefly rallied back to the $1.7000 mark on Thursday but closed the week at $1.6900 with 16 trades, while barrel cheese fell to $1.6400 by Friday’s close with 22 trades. Nonfat dry milk has been trending lower from the $1.2400 mark we saw in October, down to $1.1850 with 2 trades on the week. Lastly, dry whey has come off the $0.40 per pound mark from last Friday to now sit at $0.3875 and 47 trades, 19 of those occurring today.

[01:53] Alyssa: Some interesting numbers came through on US slaughter rates this week, didn’t it?

[01:58] Cara: Absolutely. Slaughter rates across the US have been moving southward for some time now after dipping below the prior year in September and remaining there ever since. Data released for the week ending October 21 saw total US dairy cow slaughter recording the largest year-over-year decline since February 2022 with all major dairy-producing regions marking a decline in slaughter compared to the prior year. While this outcome is notable, it’s not surprising given the improvement of on-farm margins compared to the summer months when cattle liquidation rates spiked. Old and low-producing animals have been culled by this point and it’s not economical to sell a high-value animal even when prices remain this attractive.

[02:40] That being said, Announced Class and Component prices for October did see the Class III milk price slip back $1.55 from the previous $18.38 mark we saw last month. The result of lower cheese prices, block cheddar was down $0.1851 and barrel cheese was down $0.2114 from September. On the flip side, Class IV milk came in at $21.49, a $2.40 jump from the last month and the highest price since December 2022. While the nonfat dry milk price rose by four cents, the butter price was up $0.48 cents on the month, at $3.2387. It set the record for the highest announced butter price on record.

[03:20] Alyssa: Speaking of class prices, those October numbers confirmed that Class III milk continues to hold a wide discount to Class IV. It was the sixth consecutive month that this has occurred. In fact, Class III milk has only settled above Class IV two times over the last two years. The October discount was $4.65/cwt—the steepest since last September. More cheese capacity to come online into 2024 suggests that this spread will remain at a discount for the foreseeable future. What else happened this week?

[03:53] Cara: We did have a GDT Pulse event and put out our expectations ahead of next week’s larger auction.

[03:58] Alyssa: That’s right, GDT held their 36th Pulse Auction with both whole and skim milk powder trending lower again. C2 whole milk powder settled at $2,930/MT and skim milk powder settled at $2,480/MT. Peak milk production in New Zealand is currently in play, creating a bit of pressure on Fonterra’s commodity prices. It would seem that the market assumes New Zealand milk supply is not as curtailed as previously expected and the desire to secure product is no longer as aggressive as it once was—a trend that is likely to reverse when and if El Nino impacts start to heavily impact milk production in the second half of the season, during the summer months within New Zealand. Into the next week, the market is expecting Oceania prices to keep moving higher. However, we expect this physical result to be a little lighter than the previous auction, at odds with what the SGX futures expectations are showing (view our Pre-GDT Forecast Volume Analysis here).

[04:56] Otherwise, we did push out our monthly Asia Trade Flow Report so be sure to dig into that on the dashboard as it breaks down demand trends to key nations such as Japan, South Korea, Vietnam, Malaysia, the Philippines, and Indonesia.

That does it for this week’s market roundup! Thanks for tuning in. Wishing you and yours a lovely weekend, cheers.

Be sure to subscribe so that you never miss an episode. And if you’re interested in receiving more information, as well as our analysis, please visit highgrounddairy.com to request a free 30-day trial today. Futures and options trading involves substantial risk and is not suitable for all investors.