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, November 10th, and you’re hearing from Alyssa Badger, Vice President of HighGround Dairy and Cara Murphy, our Dairy Market Intelligence Manager. We had a wealth of new data hitting the marketplace this week to discuss so let’s kick things off with our CME recap of the week, Cara.
[00:37] Cara: Well, when the rocket to the moon runs out of steam, all that’s left is to plummet back to earth and we saw that this week in the butter market, falling by a whopping 50 cents since last Friday’ close to now sit at $2.60 today with 31 trades. There was also some drama in the cheese market this week with the first block and barrel inversion since June 30th, observed on Thursday. As of today’s close, Block Cheddar is at $1.60 per pound with 15 trades while barrels sit at $1.65 per pound with a total of 20 trades. Things were a bit quieter in the nonfat dry milk market climbing back to sit above $1.20 per pound, seeing 5 trades over the week and in the dry whey space, where we hovered within a 1-cent range all week, closing at $0.3975 with 12 trades.
[01:25] Alyssa: Boy, those cheese prices are cheap versus what we’re seeing from Europe and New Zealand and the same can be said for our powder prices here. Though, even with the seasonal correction on butter, the US is still priced well above the rest of the world—anywhere from 20-60 cents per pound higher than our international competitors. The USDA released September Dairy Product Production data and Export volumes this week, why don’t you give us a summary of what that production report said, Cara?
[01:53] Cara: Absolutely. Nonfat Dry Milk (NFDM) and Skim Milk Powder (SMP) productions really stood out as it registered the smallest combined volume since September 2015, while stocks dropped to their lowest figure in almost four years. Cheese and butter output were neutral to our expectations. Total cheese saw a modest year-over-year gain from higher natural American cheese output which was barely offset by lower Italian cheese volumes. More butter was made in September compared to 2022, notching the second-highest September on record. There was also a bit of divergence going on in the whey complex. High stocks of WPC 34 suggest a bearish outlook and plentiful dry whey inventories overcame dwindling production for a neutral one. In contrast, WPC 80 was bullish to our expectations, with output rising and stocks depleting driven by greater consumer demand for high-protein foods.
[02:47] Shifting dynamics in the whey space is not only driven by the domestic market, however. September export data marked higher volumes of WPC >80% moving to Japan and China and smaller sailings of dry whey and WPC <80% going to Indonesia and Malaysia.
[03:05] Alyssa: Very impressive numbers there for WPC >80% as we actually stretched to an all-time high. What else did the export numbers say, Cara?
[03:15] Cara: Skim milk powder shipments also plummeted to the lowest level since August 2019 as sales to Mexico dropped to 28,000MT, the smallest volume since July 2022. But to end on a positive note, cheese exports rose above the prior year for the second consecutive month driven by more robust shipments to Mexico, China, and Canada of “grated and powdered cheese” than processed cheese.
What else happened this week in the international market, Alyssa?
[03:42] Alyssa: Well, I think the big one this week was the Global Dairy Trade Auction that took place on Tuesday and that ended up being pretty bullish for Fonterra-sourced SMP, cheddar cheese, and lactose. It was netural WMP, Anhydrous Milk Fat (AMF) and Buttermilk Powder (BMP), while it was bearish European-sourced SMPs and butter. Even though the overall GDT Index printed negative, there were some bullish undertones reverberating within the data.
[04:11] This auction was somewhat controlled by North Asian buyers (read China), of course, with this region securing #1 share by a large margin. North Asia consumed half of the WMP, slightly more than 50% of total SMP and well over half of the butter volumes on offer, encouraging news for the argument that China’s demand should remain firm as the season progresses, but we also think that maybe Chinese buyers are responding to weaker New Zealand milk supply expectations into the latter half of the dairy season.
[04:46] And just a quick recap on what we’re seeing in Europe this week: milk production stats that are flowing in are getting ugly. Germany’s weekly figures into October are down nearly 1% from prior year, France continues to show large reductions in milk, the UK is struggling, Ireland has turned negative, and The Netherlands remains negative. It’s just a really interesting supply side here and things could really tighten up quick into the new year so keep that on your radar, especially as Oceania milk starts to slow as well.
I think that just about wraps it up here but before we go, on behalf of everyone at HighGround we’d like to take a moment to thank the men and women of the United States Armed Forces for their service and wish everyone a Happy Veterans Day. We will see you again next week on Let’s Chat Markets. Cheers!
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